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FMLP Reference Materials COMPLETE 060421

The document serves as reference materials for the Facility Manager Leaders Program, detailing various federal policies and guidelines related to the performance of commercial activities by government agencies. It includes a table of contents listing significant documents and circulars, such as Circular No. A-76, which outlines the policies for determining whether commercial activities should be performed in-house or contracted out. The document emphasizes the importance of competition and cost comparisons in enhancing productivity and efficiency in government operations.

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0% found this document useful (0 votes)

17 views523 pages

FMLP Reference Materials COMPLETE 060421

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Shahzad Bhatti

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Reference Materials for the

Facility Manager Leaders

Program

Stephen W. Hastings Elizabeth A. Dodson

Training Manager Training Manager
WASO-Training and Development WASO-PFMD

May 2006
Completed in accordance with Sub Agreement 41 of the National Park Service-
Indiana University Cooperative Agreement CA 2670-97-001

Stephen A. Wolter
Executive Director

Christy McCormick Christie Wahlert

Project Team Project Team

Eppley Institute for Parks & Public Lands

Indiana University Research Park
501 N. Morton Street, Suite 100
Bloomington, IN 47404
812.855.3095
Acknowledgements

Matthew Berry
Laura Seifert
Darchelle Switzky

Portions of this document were reprinted with permission from Committing to the Cost of
Ownership: Maintenance and Repair of Public Buildings © 1990 and Deferred Maintenance
Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards
Advisory Board Standard Number 6, as Amended © 2001 by the National Academy of Sciences,
courtesy of the National Academies Press, Washington, D.C.

This document may not be duplicated without the permission of the Eppley Institute for Parks and
Public Lands, acting on behalf of Indiana University. The National Park Service and federal
agencies may duplicate it for training and administrative purposes, provided that appropriate
written acknowledgement is given. No other state or local agency, university, contractor, or
individual shall duplicate this document without the permission of Indiana University.

Copyright 2005, the Trustees of Indiana University

on behalf of the Eppley Institute for Parks and Public Lands
Facility Manager Leaders Program (FMLP) Reference Materials
TABLE OF CONTENTS

Tab Document Name

#1 Circular No. A-76
#2 Committing to the Cost of Ownership: Maintenance and Repair of Public
Buildings
#3 Deferred Maintenance Reporting for Federal Facilities: Meeting the
Requirements of Federal Accounting Standards Advisory Board Standard
Number 6
#4 Department of the Interior Asset Management Plan, Version 1.2
#5 Department of the Interior Site-Specific Asset Business Plan (ABP) Model
Format Guidance
#6 Director’s Order #80: Asset Management
#7 Executive Order 13327: Federal Real Property Asset Management
#8 Facility Management for the 21st Century
#9 Federal Real Property: Executive and Legislative Actions Needed to Address
Long-standing and Complex Problems
#10 Government Performance Results Act (GPRA) of 1993
#11 Investments in Federal Facilities: Asset Management Strategies for the 21st
Century
#12 National Park Service Organic Act
#13 The President’s Commission on Americans Outdoors
#14 Procedures for the Accountability of Capital Assets
National Park Service
U.S. Department of the Interior
Facility Manager Leaders Program

Circular No. A-76

(Revised 1999)

August 4, 1983
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Performance of Commercial Activities
1. Purpose. This Circular establishes Federal policy regarding the performance of commercial
activities and implements the statutory requirements of the Federal Activities Inventory Reform
Act of 1998, Public Law 105-270. The Supplement to this Circular sets forth the procedures for
determining whether commercial activities should be performed under contract with commercial
sources or in-house using Government facilities and personnel.
2. Rescission. OMB Circular No. A-76 (Revised), dated March 29, 1979; and Transmittal
Memoranda 1 through 14 and 16 through 18.
3. Authority. The Budget and Accounting Act of 1921 (31 U.S.C. 1 et seq.), The Office of Federal
Procurement Policy Act Amendments of 1979. (41 U.S.C. 401 et seq.), and The Federal
Activities Inventory Reform Act of 1998. (P. L. 105-270).
4. Background.
a. In the process of governing, the Government should not compete with its citizens. The
competitive enterprise system, characterized by individual freedom and initiative, is the
primary source of national economic strength. In recognition of this principle, it has been
and continues to be the general policy of the Government to rely on commercial sources
to supply the products and services the Government needs.
b. This national policy was promulgated through Bureau of the Budget Bulletins issued in
1955, 1957 and 1960. OMB Circular No. A-76 was issued in 1966. The Circular was
previously revised in 1967, 1979, and 1983. The Supplement (Revised Supplemental
Handbook) was previously revised in March 1996 (Transmittal Memorandum 15).
5. Policy. It is the policy of the United States Government to:
a. Achieve Economy and Enhance Productivity. Competition enhances quality, economy,
and productivity. Whenever commercial sector performance of a Government operated
commercial activity is permissible, in accordance with this Circular and its Supplement,
comparison of the cost of contracting and the cost of in-house performance shall be
performed to determine who will do the work. When conducting cost comparisons,
agencies must ensure that all costs are considered and that these costs are realistic and
fair.
b. Retain Governmental Functions In-House. Certain functions are inherently Governmental
in nature, being so intimately related to the public interest as to mandate performance
only by Federal employees. These functions are not in competition with the commercial
sector. Therefore, these functions shall be performed by Government employees.
c. Rely on the Commercial Sector. The Federal Government shall rely on commercially
available sources to provide commercial products and services. In accordance with the
provisions of this Circular and its Supplement, the Government shall not start or carry on
any activity to provide a commercial product or service if the product or service can be
procured more economically from a commercial source.
6. Definitions. For purposes of this Circular:
a. A commercial activity is one which is operated by a Federal executive agency and which
provides a product or service that could be obtained from a commercial source. Activities
that meet the definition of an inherently Governmental function provided below are not
commercial activities. A representative list of commercial activities is provided in
Attachment A. A commercial activity also may be part of an organization or a type of
work that is separable from other functions or activities and is suitable for performance
by contract.
b. A conversion to contract is the changeover of an activity from Government performance
to performance under contract by a commercial source.
c. A conversion to in-house is the changeover of an activity from performance under
contract to Government performance.
d. A commercial source is a business or other non-Federal activity located in the United
States, its territories and possessions, the District of Columbia or the Commonwealth of
Puerto Rico, which provides a commercial product or service.
e. An inherently Governmental function is a function which is so intimately related to the
public interest as to mandate performance by Government employees. Consistent with the
definitions provided in the Federal Activities Inventory Reform Act of 1998 and OFPP
Policy Letter 92-1, these functions include those activities which require either the
exercise of discretion in applying Government authority or the use of value judgment in
making decisions for the Government. Services or products in support of inherently
Governmental functions, such as those listed in Attachment A, are commercial activities
and are normally subject to this Circular. Inherently Governmental functions normally
fall into two categories:
(1) The act of governing; i.e., the discretionary exercise of Government authority.
Examples include criminal investigations, prosecutions and other judicial functions;
management of Government programs requiring value judgments, as in direction of the
national defense; management and direction of the Armed Services; activities performed
exclusively by military personnel who are subject to deployment in a combat, combat
support or combat service support role; conduct of foreign relations; selection of program
priorities; direction of Federal employees; regulation of the use of space, oceans,
navigable rivers and other natural resources; direction of intelligence and counter-
intelligence operations; and regulation of industry and commerce, including food and
drugs.
(2) Monetary transactions and entitlements, such as tax collection and revenue
disbursements; control of the Treasury accounts and money supply; and the
administration of public trusts.
f. A cost comparison is the process of developing an estimate of the cost of Government
performance of a commercial activity and comparing it, in accordance with the
requirements of the Supplement, to the cost to the Government for contract performance
of the activity.
g. Directly affected parties are Federal employees and their representative organizations and
bidders or offerors on the instant solicitation.
h. Interested parties for purposes of challenging the contents of an agency's Commercial
Activities Inventory under the Federal Activities Inventory Reform Act of 1998 are:
(1) A private sector source that (A) is an actual or prospective offeror for any contract or
other form of agreement to perform the activity; and (B) has a direct economic interest in
performing the activity that would be adversely affected by a determination not to
procure the performance of the activity from a private sector source.
(2) A representative of any business or professional association that includes within its
membership private sector sources referred to in (1) above.
(3) An officer or employee of an organization within an executive agency that is an actual
or prospective offeror to perform the activity.
(4) The head of any labor organization referred to in section 7103(a) (4) of Title 5, United
States Code that includes within its membership officers or employees of an organization
referred to in (3) above.
7. Scope.
a. Unless otherwise provided by law, this Circular and its Supplement shall apply to all
executive agencies and shall provide administrative direction to heads of agencies.
b. This Circular and its Supplement apply to printing and binding only in those agencies or
departments which are exempted by law from the provisions of Title 44 of the U.S. Code.
c. This Circular and its Supplement shall not:
(1) Be applicable when contrary to law, Executive Orders, or any treaty or international
agreement;
(2) Apply to inherently Governmental functions as defined in paragraph 6.e.;
(3) Apply to the Department of Defense in times of a declared war or military mobilization;
(4) Provide authority to enter into contracts;
(5) Authorize contracts which establish an employer-employee relationship between the
Government and contractor employees. An employer-employee relationship involves close,
continual supervision of individual contractor employees by Government employees, as
distinguished from general oversight of contractor operations. However, limited and necessary
interaction between Government employees and contractor employees, particularly during the
transition period of conversion to contract, does not establish an employer-employee
relationship.
(6) Be used to justify conversion to contract solely to avoid personnel ceilings or salary
limitations;
(7) Apply to the conduct of research and development. However, severable in-house commercial
activities in support of research and development, such as those listed in Attachment A, are
normally subject to this Circular and its Supplement; or
(8) Establish and shall not be construed to create any substantive or procedural basis for anyone
to challenge any agency action or inaction on the basis that such action or inaction was not in
accordance with this Circular, except as specifically set forth in Part 1, Chapter 3, paragraph K of
the Supplement, "Appeals of Cost Comparison Decisions" and as set forth in Appendix 2,
Paragraph G, consistent with Section 3 of the Federal Activities Inventory Reform Act of 1998.
d. The requirements of the Federal Activities Inventory Reform Act of 1998 apply to the
following executive agencies:
(1) an executive department named in 5 USC 101,
(2) a military department named in 5 USC 102, and
(3) an independent establishment as defined in 5 USC 104.
e. The requirements of the Federal Activities Inventory Reform Act of 1998 do not apply to
the following entities or activities:
(1) the General Accounting Office,
(2) a Government corporation or a Government controlled corporation as defined in 5 USC 103,
(3) a non-appropriated funds instrumentality if all of its employees are referred to in 5 USC
2105(c), or
(4) Depot-level maintenance and repair of the Department of Defense as defined in 10 USC
2460.
8. Government Performance of a Commercial Activity. Government performance ofa
commercial activity is authorized under any of the following conditions:
a. No Satisfactory Commercial Source Available. Either no commercial source is capable of
providing the needed product or service, or use of such a source would cause
unacceptable delay or disruption of an essential program. Findings shall be supported as
follows:
(1) If the finding is that no commercial source is capable of providing the needed product
or service, the efforts made to find commercial sources must be documented and made
available to the public upon request. These efforts shall include, in addition to
consideration of preferential procurement programs (see Part I, Chapter 1, paragraph C of
the Supplement) at least three notices describing the requirement in the Commerce
Business Daily over a 90-day period or, in cases of bona fide urgency, two notices over a
30-day period. Specifications and requirements in the solicitation shall not be unduly
restrictive and shall not exceed those required of in-house Government personnel or
operations.
(2) If the finding is that a commercial source would cause unacceptable delay or
disruption of an agency program, a written explanation, approved by the assistant
secretary or designee in paragraph 9.a. of the Circular, must show the specific impact on
an agency mission in terms of cost and performance. Urgency alone is not adequate
reason to continue in-house operation of a commercial activity. Temporary disruption
resulting from conversion to contract is not sufficient support for such a finding, nor is
the possibility of a strike by contract employees. If the commercial activity has ever been
performed by contract, an explanation of how the instant circumstances differ must be
documented. These decisions must be made available to the public upon request.
(3) Activities may not be justified for in-house performance solely on the basis that the
activity involves or supports a classified program or the activity is required to perform an
agency's basic mission.
b. National Defense.
(1) The Secretary of Defense shall establish criteria for determining when Government
performance of a commercial activity is required for national defense reasons. Such
criteria shall be furnished to OMB, upon request.
(2) Only the Secretary of Defense or his designee has the authority to exempt commercial
activities for national defense reasons.
c. Patient Care. Commercial activities performed at hospitals operated by the Government
shall be retained in-house if the agency head, in consultation with the agency's chief
medical director, determines that in-house performance would be in the best interests of
direct patient care.
d. Lower cost. Government performance of a commercial activity is authorized if a cost
comparison prepared in accordance with the Supplement demonstrates that the
Government is operating or can operate the activity on an ongoing basis at an estimated
lower cost than a qualified commercial source.
9. Action Requirements. To ensure that the provisions of this Circular and its Supplement are
followed, each agency head shall:
a. Designate an official at the assistant secretary or equivalent level and officials at a
comparable level in major component organizations to have responsibility for
implementation of this Circular and its Supplement within the agency.
b. Establish one or more offices as central points of contact to carry out implementation.
These offices shall have access to all documents and data pertinent to actions taken under
the Circular and its Supplement and will respond in a timely manner to all requests
concerning inventories, schedules, reviews, results of cost comparisons and cost
comparison data.
c. Be guided by Federal Acquisition Regulation (FAR) Subpart 24.2 (Freedom of
Information Act) in considering requests for information.
d. Implement this Circular and its Supplement with a minimum of internal instructions. Cost
comparisons shall not be delayed pending issuance of such instructions.
e. Ensure the reviews of all existing in-house commercial activities are completed within a
reasonable time in accordance with the Federal Activities Inventory Reform Act of 1998
and the Supplement.
10. Annual Reporting Requirement. As required by the Federal Activities Inventory Reform Act
of 1998 and Appendix 2 of the Supplement, no later than June 30 of each year, agencies shall
submit to OMB a Commercial Activities Inventory and any supplemental information requested
by OMB. After review and consultation by OMB, agencies will transmit a copy of the
Commercial Activities Inventory to Congress and make the contents of the Inventory available to
the public. Agencies will follow the process provided in the Supplement for interested parties to
challenge (and appeal) the contents of the inventory.
11. OMB Responsibility and Contact Point. All questions or inquiries should be submitted to the
Office of Management and Budget, Room 6002 NEOB, Washington, DC 20503. Telephone
number (202) 395-6104, FAX (202) 395-7230.
12. Effective Date. This Circular and the changes to its Supplement are effective immediately.

Attachment A
OMB Circular No. A-76
EXAMPLES OF COMMERCIAL ACTIVITIES
Audiovisual Products and Services
Photography (still, movie, aerial, etc.)
Photographic processing (developing, printing, enlarging, etc.)
Film and videotape production (script writing, direction, animation, editing, acting, etc.)
Microfilming and other microforms
Art and graphics services
Distribution of audiovisual materials
Reproduction and duplication of audiovisual products
Audiovisual facility management and operation
Maintenance of audiovisual equipment
Automatic Data Processing
ADP services - batch processing, time-sharing, facility management, etc.
Programming and systems analysis, design, development, and simulation
Key punching, data entry, transmission, and teleprocessing services
Systems engineering and installation
Equipment installation, operation, and maintenance
Food Services
Operation of cafeterias, mess halls, kitchens, bakeries, dairies, and commissaries
Vending machines
Ice and water
Health Services
Surgical, medical, dental, and psychiatric care
Hospitalization, outpatient, and nursing care
Physical examinations
Eye and hearing examinations and manufacturing and fitting glasses and hearing aids
Medical and dental laboratories
Dispensaries
Preventive medicine
Dietary services
Veterinary services
Industrial Shops and Services
Machine, carpentry, electrical, plumbing, painting, and other shops
Industrial gas production and recharging
Equipment and instrument fabrication, repair and calibration
Plumbing, heating, electrical, and air conditioning services, including repair
Fire protection and prevention services
Custodial and janitorial services
Refuse collection and processing
Maintenance, Overhaul, Repair, and Testing
Aircraft and aircraft components
Ships, boats, and components
Motor vehicles
Combat vehicles
Railway systems
Electronic equipment and systems
Weapons and weapon systems
Medical and dental equipment
Office furniture and equipment
Industrial plant equipment
Photographic equipment
Space systems
Management Support Services
Advertising and public relations services
Financial and payroll services
Debt collection
Manufacturing, Fabrication, Processing, Testing, and Packaging
Ordnance equipment
Clothing and fabric products
Liquid, gaseous, and chemical products
Lumber products
Communications and electronics equipment
Rubber and plastic products
Optical and related products
Sheet metal and foundry products
Machined products
Construction materials
Test and instrumentation equipment
Office and Administrative Services
Library operations
Stenographic recording and transcribing
Word processing/data entry/typing services
Mail/messenger
Translation
Management information systems, products and distribution
Financial auditing and services
Compliance auditing
Court reporting
Material management
Supply services
Other Services
Laundry and dry cleaning
Mapping and charting
Architect and engineer services
Geological surveys
Cataloging
Training -- academic, technical, vocational, and specialized Operation of utility systems (power,
gas, water steam, and sewage)
Laboratory testing services
Printing and Reproduction
Facility management and operation
Printing and binding -- where the agency or department is exempted from the provisions of Title
44 of the U.S. Code
Reproduction, copying, and duplication
Blueprinting
Real Property
Design, engineering, construction, modification, repair, and maintenance of buildings and
structures; building mechanical and electrical equipment and systems; elevators; escalators;
moving walks
Construction, alteration, repair, and maintenance of roads and other surfaced areas
Landscaping, drainage, mowing and care of grounds
Dredging of waterways
Security
Guard and protective services
Systems engineering, installation, and maintenance of security systems and individual privacy
systems
Forensic laboratories
Special Studies and Analyses
Cost benefit analyses
Statistical analyses
Scientific data studies
Regulatory studies
Defense, education, energy studies
Legal/litigation studies
Management studies
Systems Engineering, Installation, Operation, Maintenance, and Testing
Communications systems - voice, message, data, radio, wire, microwave, and satellite
Missile ranges
Satellite tracking and data acquisition
Radar detection and tracking
Television systems - studio and transmission equipment, distribution systems, receivers,
antennas, etc.
Recreational areas
Bulk storage facilities
Transportation
Operation of motor pools
Bus service
Vehicle operation and maintenance
Air, water, and land transportation of people and things
Trucking and hauling

Source: Office of Management and Budget

Circular No. A-76
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Deferred Maintenance Reporting for Federal

Facilities: Meeting the Requirements of Federal
Accounting Standards Advisory Board Standard
Federal
NumberFacilities Council Standing Committee on
6, as Amended
Operations and Maintenance
ISBN: 0-309-56339-9, 66 pages, 8 1/2 x 11, (2001)
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DEFERRED MAINTENANCE
REPORTING FOR FEDERAL
FACILITIES
Meeting the Requirements of Federal Accounting Standards Advisory Board
Standard Number 6, as Amended

Federal Facilities Council Standing Committee on Operations and Maintenance

Federal Facilities Council Technical Report # 141

use the print version of this publication as the authoritative version for attribution.

NATIONAL ACADEMY PRESS

Washington, D.C.

Copyright © National Academy of Sciences. All rights reserved.

Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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NOTICE
The Federal Facilities Council (FFC), formerly the Federal Construction Council, is a continuing activity of the Board on Infrastructure and
the Constructed Environment of the National Research Council (NRC). The purpose of the FFC is to promote continuing cooperation among
the sponsoring federal agencies and between the agencies and other elements of the building community in order to advance building science
and technology, particularly with regard to the design, construction, acquisition, evaluation, and operation of federal facilities. The following
FFC sponsor agencies provided funding for this report:
Department of the Air Force, Office of the Civil Engineer
Department of the Air Force, Air National Guard
Department of the Army, Assistant Chief of Staff for Installation Management
Department of Energy
Department of the Interior, Office of Managing Risk and Public Safety
Department of the Navy, Naval Facilities Engineering Command
Department of State, Office of Foreign Buildings Operations
Department of Veterans Affairs, Office of Facilities Management
Federal Bureau of Prisons
Food and Drug Administration
General Services Administration, Public Buildings Service
Indian Health Service
Internal Revenue Service
National Aeronautics and Space Administration, Facilities Engineering Division
National Institutes of Health, Division of Engineering Services
National Institute of Standards and Technology, Building and Fire Research Laboratory
National Science Foundation
Office of Secretary of Defense, Federal Facilities Directorate
Smithsonian Institution, Office of Facilities Services
U.S. Postal Service, Engineering Division
As part of its activities, the FFC periodically publishes reports that have been prepared by committees of government employees. Since these
committees are not appointed by the NRC, they do not make recommendations, and their reports are considered FFC publications rather than
NRC publications.
For additional information on the FFC program or FFC reports, please visit the website at http://www4.nationalacademies.org/cets/ffc.nsf or
write to Director, Federal Facilities Council, Board on Infrastructure and the Constructed Environment, HA-274, 2101 Constitution Avenue,
N.W., Washington, D.C. 20418, or call 202-334-3374.
Printed in the United States of America 2001
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

iii

Federal Facilities Council Standing Committee On Operations And Maintenance

COMMITTEE CHAIR
Richard McCrone, Engineer, Engineering Management and Field Support Office, U.S. Department of Veterans
Affairs

COMMITTEE VICE CHAIR

Charles B. Pittinger, Jr., P.E., Senior Program Manager, Facilities Maintenance, National Aeronautics and
Space Administration

MEMBERS
Ken Baker, Office of Contract and Resource Management, Office of Management and Administration, U.S.
Department of Energy
William Brodt, Senior Facilities Engineer Consultant, Division of Engineering Services, National Institutes of
Health
Tom Bullman, Civil Engineer, Structures Branch, Engineering Division, Air National Guard
Judie Cooper, Assistant Director, Office of Physical Plant, Smithsonian Institution
Captain Jose Cuzme, P.E., Chief, Health Care Facilities Engineering Branch, Indian Health Service
Fred Drummond, Assistant Director for Maintenance Management, Office of Management and Administration,
U.S. Department of Energy
Thomas Duchesne, Engineering, Maintenance Policies and Programs, U.S. Postal Service
Geoffrey Frohnsdorff, Chief, Building Materials Division, Building and Fire Research Laboratory, National
Institute of Standards and Technology
William Graham, Acting Director, Engineering Management and Field Support Office, U.S. Department of
Veterans Affairs
Larry Grauberger, Program Manager, Office of Foreign Buildings Operations, U.S. Department of State
Mark Kleinwichs, R.A., Facilities Engineering, Naval Facilities Engineering Command
Gregory P. Krisanda, Branch Chief, Office of Foreign Buildings Operations, U.S. Department of State
Ben Lawless, P.E., Mechanical Engineer,
Kenneth E. Olmsted, P.E., C.P.E., Deputy Director, Office of Physical Plant, Smithsonian Institution
use the print version of this publication as the authoritative version for attribution.

Harry Singh, Head, Facilities Engineering, Naval Facilities Engineering Command

Curt Smith, Office of Portfolio Management, Public Buildings Service, General Services Administration

Copyright © National Academy of Sciences. All rights reserved.

Stanley K. Thurber, Architect, Office of Managing Risk and Public Safety, U.S. Department of the Interior
Jeanne Trelogan, Office of Business Performance, Public Buildings Service, General Services Administration
Terry Watson, Pentagon Energy Office, U.S. Department of Defense
Howard L. Wink, Jr., PE, Assistant Director, Office of Physical Plant, Smithsonian Institution

OTHER CONTRIBUTORS TO THE STUDY

James Padgett, PE, Forest Service, U.S. Department of Agriculture
Michael Burke, Office of the Secretary of Defense
Jay Janke, Chief Analyst, Directorate of Analysis and Investment, Office of the Deputy Under Secretary of
Defense for Installations
Gregory Spencer, P.E., Chief, Maintenance, Operations, and Logistics Branch, NASA-Dryden Flight Research
Center

NONGOVERNMENT LIAISON MEMBERS

Werner Baath, representing the American Public Works Association

STAFF
Lynda Stanley, Director, Federal Facilities Council
Gail Kelly, Research Aide, Board on Infrastructure and the Constructed Environment
Nicole Longshore, Project Assistant, Board on Infrastructure and the Constructed Environment
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

Federal Facilities Council

CHAIR
Jack Buffington, USN CEC (Retired), Director, Mack-Blackwell National Rural Transportation Study Center,
Department of Civil Engineering, University of Arkansas

VICE CHAIR
William Brubaker, Director, Facilities Engineering Division, National Aeronautics and Space Administration

MEMBERS
Edward Ayscue, Chief, Facilities Management Branch, Federal Bureau of Prisons
Roger Bell, Chief, Structures Branch, Facilities Division, Air National Guard
John Bower, MILCON Program Manager, U.S. Air Force
Bruce Chelikowsky, Acting Director, Office of Environmental Health and Engineering, Indian Health Service
Tony Clifford, Director, Division of Engineering Services, National Institutes of Health
Thomas Duchesne, Maintenance and Policies Programs, Engineering Division, U.S. Postal Service
David Eakin, Chief Engineer, Design Programs Center, Public Buildings Service, General Services
Administration
John Scalzi, Program Director, Division of Civil and Mechanical Systems, National Science Foundation
Peter Gurvin, Director, Building Design and Engineering, Office of Foreign Buildings Operations, Department
of State
James Hill, Deputy Director, Building and Fire Research Laboratory, National Institute of Standards and
Technology
John Irby, Director, Federal Facilities Directorate, Office of the Secretary of Defense
L. Michael Kaas, Director, Office of Managing Risk and Public Safety, U.S. Department of the Interior
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

Michael Karau, Chief, Facilities Policy Branch, Internal Revenue Service

Get Moy, Chief Engineer, Director, Planning and Engineering Support, Naval Facilities Engineering Command,
U.S. Navy
Robert Neary, Jr., Associate Facilities Management Officer, Office of Facilities Management, Department of
Veterans Affairs
Stan Nickell, Chief, Construction Division, Assistant Chief of Staff for Installation Management, U.S. Army
Richard Rice, Jr., Senior Facilities Services Officer, Smithsonian Institution
William Stamper, Senior Program Manager, Facilities Engineering Division, National Aeronautics and Space
Administration
John Yates, Director, Laboratory Infrastructure Division, Office of Science, U.S. Department of Energy

STAFF
Richard Little, Director, Board on Infrastructure and the Constructed Environment (BICE)
Lynda Stanley, Director, Federal Facilities Council
Michael Cohn, Program Officer, BICE
Kimberly Goldberg, Administrative Associate, BICE
Gail Kelly, Research Aide, BICE
Nicole Longshore, Project Assistant, BICE
use the print version of this publication as the authoritative version for attribution.

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CONTENTS vii

Contents

Executive Summary 1

1 Introduction 7
Background, 7
Facilities Maintenance and Repair Programs, 8
Reasons for Deferring Maintenance and Repairs, 9
Other Standards in Effect, 11
Federal Financial Accounting, 12
FASAB Standard Number 6, as Amended, 12
Study Origin, 14
Study Objectives, 15
Study Method, 15
Report Organization, 16
References, 16

2 Definitional Issues and Potential Revisions 19

Issues, 19
Potential Revisions, 22
References, 22

3 Methodological Issues and Alternative Approaches for Calculating Deferred Maintenance for 23
Facilities
Condition Assessment Surveys, 24
Total Life-Cycle Cost Method, 25
Other Potential Approaches to Deferred Maintenance Reporting for Facilities, 26
use the print version of this publication as the authoritative version for attribution.

Summary, 38
References, 38

4 Deferred Maintenance and Repairs as an Indicator of Facility Condition 41

References, 43

Appendixes

A— Excerpts from Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's
Public Assets

B— Excerpts from FASAB Standard Number 6

C— Excerpts from Amendments to FASAB Standard Number 6

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CONTENTS
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viii
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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EXECUTIVE SUMMARY 1

Executive Summary

BACKGROUND
The federal government owns approximately 500,000 facilities and associated infrastructure worldwide.
Facilities are complex structures with numerous separate but interrelated systems and components. Inevitably,
over time the performance of facilities declines due to aging, wear and tear of systems and components,
functional changes, and a variety of other factors. The life of facilities can be optimized, however, through
adequate and timely maintenance and repair. Conversely, delaying or deferring maintenance and repairs can, in
the short term, diminish the quality of services and, in the long term, lead to shortened facility life and reduced
asset value. The existence of deferred maintenance is significant because it implies the quality and reliability of
service provided by infrastructure on which maintenance has been deferred is lower than it should be, and thus
the infrastructure is not, or will not later be, adequately serving the public (The Urban Institute, 1994).
In 1996 the Federal Accounting Standards Advisory Board (FASAB)1 enacted Standard Number 6,
Accounting for Property, Plant, and Equipment (PP&E), the first government-wide initiative requiring federal
agencies to report dollar amounts of deferred maintenance annually. The FASAB has identified four overall
objectives in federal financial reporting: budgetary integrity, operating performance, stewardship, and systems
and control. FASAB Standard Number 6, as amended, focuses on operating performance and stewardship.

STUDY ORIGIN
The FASAB has determined that information about deferred maintenance is of importance to users of
federal financial reports and for measuring an agency's efficiency and effectiveness in managing property, plant
and equipment. Recognizing that this is a
use the print version of this publication as the authoritative version for attribution.

1 The Federal Accounting Standards Advisory Board was established in October 1990 by the Secretary of the Treasury, the

Director of the Office of Management and Budget, and the Comptroller General of the United States. The board was created
to consider and recommend accounting standards and principles for the federal government to improve the usefulness of
federal financial reports.

Copyright © National Academy of Sciences. All rights reserved.

EXECUTIVE SUMMARY 2

new standard, the FASAB believed that a period of experimentation was desirable to determine the best methods
to report deferred maintenance.
The implementation experience to date with FASAB Standard Number 6, as amended, has raised concerns
with both agencies and auditors regarding the number of different interpretations of the standard, as well as cost-
benefit and audit issues. For these reasons, in the summer of 1999 the Chief Financial Officers (CFO) Council 2
initiated an interagency effort led by the Department of Defense (DoD) to review deferred maintenance reporting
for real and personal property, national defense PP&E, heritage assets, and stewardship land. The Federal
Facilities Council (FFC) 3 Standing Committee on Operations and Maintenance, supplemented by staff from
other agencies, provided technical assistance for the interagency effort by identifying and reviewing issues
arising from FASAB Standard Number 6, as amended, as it related to deferred maintenance reporting for
facilities (real property).

STUDY OBJECTIVES
The work of the FFC Standing Committee on Operations and Maintenance and this report focused on
fulfilling two primary objectives. The first is to identify issues related to the reporting of deferred maintenance
for facilities as required by FASAB Standard Number 6, as amended. The second objective is to identify for
consideration potential approaches for reporting deferred maintenance for facilities that (a) will have credibility
in the facilities community, federal agencies, and Congress; (b) can be used to track trends within and across
agencies; and (c) do not require an inordinate investment of time and resources to implement.
The FFC Standing Committee on Operations and Maintenance has prepared this report to identify potential
issues that should be considered in any future amendments to the standard and to suggest approaches for
resolving them. The committee's intent is to assist the CFO Council, federal agencies, the FASAB, and others as
they consider how best to meet the objectives of federal financial reporting for facilities. It is important to note
that the FFC Standing Committee on Operations and Maintenance has not made
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2 The Chief Financial Officers Council is comprised of chief financial officers and deputy chief financial officers of the

largest federal agencies and senior officials of the Office of Management and Budget and the Department of the Treasury.
Members work collaboratively to improve financial management in the U.S. government.
3 The FFC is a cooperative association of federal agencies, each of which requires the acquisition, maintenance, and

operation of a significant inventory of buildings and other constructed facilities in support of its mission. The federal agencies
that sponsored this study through the FFC are the U.S. Air Force, Air National Guard, U.S. Army, U.S. Department of
Energy, U.S. Department of the Interior, U.S. Navy, U.S. Department of State, U.S. Department of Veterans Affairs, Federal
Bureau of Prisons, Food and Drug Administration, General Services Administration, Indian Health Service, Internal Revenue
Service, National Aeronautics and Space Administration, National Institutes of Health, National Institute of Standards and
Technology, National Science Foundation, Office of the Secretary of Defense, Smithsonian Institution, and the U.S. Postal
Service. (See Internet site at http://www4.nationalacademies.org/cets/ffc.nsf for additional information.)

Copyright © National Academy of Sciences. All rights reserved.

EXECUTIVE SUMMARY 3

any recommendations for reporting deferred maintenance for facilities or advocated specific positions. 4

ISSUES RELATED TO DEFINITIONS

One of the difficulties that federal agencies have found in complying with Standard Number 6, as amended,
as it relates to facilities, has been the use of terms that are not typically used in the facilities management field,
that are loosely defined, and/or that do not accurately reflect facility maintenance and repair practices. Of
specific concern were the FASAB (1996) definitions for maintenance and deferred maintenance, which are:
maintenance—the act of keeping fixed assets in acceptable condition. It includes preventive maintenance, normal
repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it
continues to provide acceptable services and achieves its expected life. Maintenance excludes activities aimed at
expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater
than, those originally intended.
deferred maintenance—maintenance that was not performed when it should have been or was scheduled to be and
which, therefore, is put off or delayed for a future period.
These definitions are intended to apply to a broad class of assets, including facilities, vehicles, weapons
system, and other types of property, plant, and equipment. These classes of assets have life cycles ranging from a
few to 50 or more years and substantial variations in characteristics, complexity, and uses. In the case of
facilities, some of these assets may be historic in nature. When applying these general definitions to specific
classes of assets, problems arise. For facilities the treatment of repairs as a subset of maintenance, the use of the
term “expected life,” and references to “originally intended uses” were identified as problematic.
The committee has proposed for consideration the following revised definitions that it believes better reflect
current facility management practices for maintenance and repair:
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4 The NRC was organized by the National Academy of Sciences in 1916 to associate the broad community of science and

technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in
accordance with the general policies determined by the Academy, the Council has become the principal operating agency of
both the National Academy of Sciences and the National Academy of Engineering in providing services to the federal
government, the public, and the scientific and engineering communities. Under operating procedures approved by the
National Research Council, the FFC conducts activities carried out by standing committees composed primarily of federal
employees to address issues of common interest. Because FFC standing committees are not appointed by the NRC and are
not required to meet NRC requirements for committee composition and balance, bias, and conflict of interest, or report
review, FFC reports cannot contain specific recommendations and are published under the aegis of the FFC, not the NRC.

Copyright © National Academy of Sciences. All rights reserved.

EXECUTIVE SUMMARY 4

maintenance and repairs—activities directed toward keeping fixed assets in a condition to effectively support the
mission. Activities include preventive maintenance, repairs, replacement of parts and structural components, and
other activities needed to preserve the asset so that it continues to support the mission. Maintenance and repairs
exclude activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different
from, or significantly greater than its current use. 5
deferred maintenance and repairs—maintenance and repairs that were not performed when they should have been
or were scheduled to be and which, therefore, were put off or delayed for a future period.

ISSUES AND POTENTIAL APPROACHES RELATED TO METHODOLOGIES FOR

DEFERRED MAINTENANCE REPORTING
FASAB Standard Number 6, as amended, specifies that federal agencies report dollar amounts of deferred
maintenance based on methodologies that use condition assessment surveys, a total life-cycle cost method 6 , or
their equivalent. Applying explicit methodologies (or their equivalent) to a broad class of assets again can be
problematic in the case of a specific class. For example, the data elements for the total life-cycle cost method
required by FASAB Standard Number 6 are not reflective of facilities management practices.
Condition assessment surveys are a recognized, valid, facilities management tool for identifying and
reporting maintenance and repair needs. However, concerns were raised that the standard implies or could be
interpreted to imply that condition assessment information should be available for all facilities in an inventory
and that such information should be updated annually. In practice, the availability of condition assessment data
varies widely from agency to agency. For those agencies that have instituted inventory-wide condition
assessment programs, facilities are typically inspected on a cycle of every three to five years or longer.
In Chapter 3 of this report, the committee identifies a number of alternative methodologies that are similar
to condition assessment surveys or the total life-cycle cost method or combine elements of the two. Allowing
agencies greater flexibility in choosing methodologies, including statistical sampling, to report deferred
maintenance and repairs for facilities may help to better align the objectives and methodologies of federal
financial reporting and FASAB Standard Number 6, as amended.
use the print version of this publication as the authoritative version for attribution.

5 During the review process, alternative wording was suggested. The alternatives are noted in Chapter 2.
6 Throughout FASAB Standard Number 6, life cycle costing is described or defined using several terms. The terms life
cycle cost plans, life cycle cost forecasts, life cycle costing and total life cycle cost method are used interchangeably. In order
to remain consistent, this report uses one term, total life cycle cost method.

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EXECUTIVE SUMMARY 5

DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY

CONDITION
FASAB Standard Number 6, as amended, implies that the dollar value of deferred maintenance is a
surrogate (estimate) for management's ability to maintain facilities. Although the existence of deferred
maintenance may indicate that the quality and reliability of services are substandard, calculating a dollar figure
for deferred maintenance and repairs does not indicate how well facilities are performing or their overall
condition (operating performance). Because of the variations in size, composition, and value of facility
inventories, a dollar amount alone does not place the number in context with the size or value of an individual
agency's facilities inventory and it does not allow for comparisons across agencies. A single dollar amount also
does not indicate whether agencies are using their available maintenance and repair funds efficiently or
effectively or provide an indication of whether the government's financial situation has improved or deteriorated
(stewardship). In the committee's opinion, deferred maintenance and repairs would be a more meaningful
indicator if it is (1) used in conjunction with other indicators, (2) derived by each agency in a consistent manner
over time and (3) tracked over a period of time so that trends can be observed. In Chapter 4, the committee
identifies some potential indicators that might be used in conjunction with deferred maintenance and repairs.
This issue, however, requires further study.

REFERENCE
The Urban Institute. 1994. Issues in Deferred Maintenance: The Federal Infrastructure Strategy Program. Alexandria, VA: Institute for Water
Resources Publications.
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EXECUTIVE SUMMARY

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6
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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INTRODUCTION 7

1
Introduction

BACKGROUND
The approximately 500,000 facilities and associated infrastructure owned by the federal government
constitute a portfolio of significant durable public assets that reflect the investment of more than 300 billion tax
dollars (NRC, 1998). Ownership of facilities by the federal government carries with it an obligation to act
responsibly and to ensure that resources are allocated effectively to sustain that investment.
Buildings, or facilities, are complex structures with a number of separate but interrelated components,
including walls, roofs, windows/doors, and critical servicing systems such as mechanical, electrical, plumbing,
heating, air conditioning, ventilation, communication, and fire safety, among others. Components and systems
must perform well individually and in combination with others to optimize the performance of facilities.
Inevitably, over time the performance of facilities declines due to aging and wear and tear of components
and systems, functional changes, and a variety of other factors. The life of facilities can be optimized, however,
through adequate and timely maintenance and repairs. Conversely, delaying or deferring maintenance and repairs
can, in the short term, diminish the quality of building services and, in the long term, lead to shortened building
life and reduced asset value (APWA, 1992). This concept is illustrated in Figure 1.1 .
Deferring needed maintenance indefinitely may ultimately result in significantly higher costs. For example,
the steel cladding on a warehouse needs to be painted at scheduled intervals. If the painting, a relatively minor
cost, is deferred continually, the cladding will eventually rust and deteriorate, necessitating significant repairs or
replacement, at many times the cost of having painted it on schedule.
Apart from Federal Accounting Standards Advisory Board (FASAB) Standard Number 6, as amended,
deferred maintenance 1 has been defined by the Urban Institute (1994) as “the extent of maintenance, repair,
rehabilitation, etc., that is needed to bring capital assets from a sub-par condition to needed service levels”.
Generally it can be
use the print version of this publication as the authoritative version for attribution.

1 Deferred maintenance is also known as unfunded maintenance, backlog of maintenance and repair, or unaccomplished

maintenance.

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INTRODUCTION 8

quantified as the estimated cost of the maintenance and repairs needed to bring a facility up to a minimum
acceptable condition (NRC, 1998). The existence of deferred maintenance is significant in that it implies that the
quality and reliability of service provided by infrastructure on which maintenance has been deferred are lower
than they should be, and thus the infrastructure is not, or will not later be, adequately serving the public (The
Urban Institute, 1994).

Figure 1.1 Effect of adequate and timely maintenance and repairs on the service life of a building. Source: NRC
(1993).
use the print version of this publication as the authoritative version for attribution.

FACILITIES MAINTENANCE AND REPAIR PROGRAMS

The appropriate level of maintenance and repairs expenditures for facilities can be influenced by many
factors, including building size and complexity; types of finishes; current age and condition; mechanical and
electrical system technologies; historic or community value; types of occupants or users; climate; tenancy
turnover rates; criticality of role or function; labor, energy, and materials prices; and distances between buildings
in inventories (NRC, 1990). An effective program for facilities maintenance and repair employs a combination
of strategies and approaches. These include preventive maintenance, programmed major maintenance, predictive
testing and inspection, routine repairs, service calls, and run-to-failure (FFC, 1996).

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 9

Preventive maintenance has been defined as the planned scheduled periodic inspection, adjustment,
cleaning, lubrication, parts replacement, and minor repair of equipment and systems for which a specific operator
is not assigned (FFC, 1996). It consists of many checkpoint activities on items that, if disabled, would interfere
with an essential installation operation, endanger life or property, or involve high cost or long lead time for
replacement.
Programmed major maintenance includes those maintenance tasks that are planned to occur on a multiyear
cycle, such as every three or five years. Examples include painting, roof maintenance, road and parking lot
maintenance, and utility system maintenance.
Predictive testing and inspection refers to activities that involve the use of specialized tests, such as
ultrasonic testing, infrared thermography, vibration analysis, and lubricant and wear particle analysis, to identify
maintenance requirements (FFC, 1996).
Routine repairs and replacements include actions taken to restore a system or component to its original
capacity. The need to replace an item or system may arise from obsolescence, cumulative effects of wear and
tear, premature service failure, or destruction by fire and other hazards (NRC, 1990). Replacements do not
significantly increase the capacity of the item involved and would be considered routine repairs if they are
required for the continued operation of a facility (FFC, 1996). Service calls include requests for system or
equipment repairs that are unscheduled and unanticipated. They are generally received when a system or
component has failed.
Systems or components not included in a preventive maintenance program are candidates for run-to-failure
repair (unplanned), programmed major maintenance (planned), or planned maintenance and repair based on
condition and need. Typically, components included in a run-to-failure strategy are small noncritical components
that can be repaired or replaced on a service call (FFC, 1996).

REASONS FOR DEFERRING MAINTENANCE AND REPAIRS

Maintenance and repairs for federal facilities are deferred for many reasons. These issues have been
documented in the report Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's
Public Assets (NRC, 1998). They include:

• A focus on design and construction costs, the so-called first costs of facilities ownership, as opposed to
life-cycle costs, in the federal budget process.
• Inadequate funding for maintenance and repairs.
• Aging facilities that require increased levels of maintenance and repair to keep them operating effectively.
• Lack of information that would assist facilities program managers in making compelling arguments for
maintenance and repair budgets to decision makers.
use the print version of this publication as the authoritative version for attribution.

• Lack of accountability for stewardship. 2

2 See Appendix A for excerpts from the Stewardship of Federal Facilities report.

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 10

As of 1998, the cost to substantially reduce total deferred maintenance for federal facilities was estimated to
be in the tens of billions of dollars. 3
In the past, public officials have called into question the methodologies that federal agencies used to define
building deficiencies and to calculate the costs involved in repairing them. Officials have also expressed concern
that agencies included inappropriate items in the maintenance backlog to increase the overall estimate and argue
for larger budget appropriations (NRC, 1998).
Several causes have been noted for these concerns. First, prior to 1996, there was no government-wide
requirement to report deferred maintenance. Thus, the responsibility for developing methodologies fell to
individual agencies. FASAB Standard Number 6, as amended, seeks to address this issue. Second, fundamental
differences exist among accounting structures used to track expenditures for maintenance and repairs from
agency to agency. These differences influence maintenance and repair practices and how deferred maintenance is
quantified. For example, the General Services Administration (GSA) uses two accounts: Operations and
Maintenance and Repairs and Alterations. GSA's Operations and Maintenance account includes operations,
maintenance, and maintenance repairs (up to a certain dollar threshold), and the Repairs and Alterations account
includes all repairs, replacements, improvements, and alterations in excess of a certain dollar threshold with no
upper limit.
At the National Institutes of Health (NIH), the various institutes are assessed a given amount each year to
cover the cost of maintenance by government personnel and minor repairs by contractors. NIH also receives a
direct appropriation from Congress as part of the Building and Facilities Budget to cover major repairs and
improvements by contractors. The Smithsonian Institution has three categories of maintenance and repair
accounts, the State Department has four. The National Aeronautics and Space Administration (NASA) is funded
for human space flight, science and technology, and mission support; major programs in the agency fund field
installation activities, including maintenance and repair (FFC, 1996; NRC, 1998).
An example from the University of Virginia (UVA) illustrates how accounting structures can influence
facilities maintenance and repair practices. Prior to 1996, if a UVA facility had a malfunctioning sprinkler
system it could be identified as a deficiency, and maintenance funds could be used to repair it. However, if a
facility had no sprinkler system yet needed one, it could not be paid for from maintenance funds and therefore
could not be identified as a deficiency, an “all-to-common scenario [which] made for a dramatically inaccurate
backlog total and campuswide FCI [facilities condition index]” (Syme and Oschrin, 1996). Similar scenarios
arise in federal agencies and can lead to substantial differences in calculating dollar amounts of deferred
maintenance for facilities.
Third, there are no government-wide standards for determining items that are appropriately included in
maintenance and repair budgets/accounts. This stems in part from the accounting systems and from overlaps and
gray areas of maintenance and repair work, operations, and alteration projects. For example, some government
facilities
use the print version of this publication as the authoritative version for attribution.

3 FFC sponsor agencies reported in their 1998 accountability reports the following deferred maintenance amounts:

Department of Energy, $927 million; Department of the Interior, $7 billion to $16 billion; Department of State, $155 million;
NASA, $1.4 billion; Department of Defense, $37 billion; Indian Health Service, $438 million.

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 11

include a central utility plant that is staffed 24 hours a day, 365 days per year. Staff at these facilities ordinarily
perform maintenance as a routine part of operations. Agencies must decide if any portion of the operations
funding will be included in the maintenance and repair budget. These amounts are not trivial when multiplied
over hundreds or even thousands of facilities. The Federal Facilities Council (1996) report Budgeting for
Facilities Maintenance and Repair Activities and the NRC (1998) report, Stewardship of Federal Facilities: A
Proactive Strategy for Managing the Nation's Public Assets both address items that are appropriately included in
maintenance and repair budgets and those that are related to operations, alterations, and capital improvements.

OTHER STANDARDS IN EFFECT

Some agencies need to meet other standards that may be in conflict with or raise other issues for complying
with FASAB Standard Number 6, as amended, for deferred maintenance reporting for facilities.
Agencies that operate hospitals, medical centers, or other health care organizations must be accredited by
the Joint Commission for Accreditation of Healthcare Organizations (JCAHO) or the Health Care Finance
Administration as a requirement to receive federal payments or by federal policy as is the case for federal health
care providers. Both organizations require rigorous maintenance programs and accomplish onsite inspection as
well as review of maintenance records. Agencies subject to these standards include the Department of Veterans
Affairs, NIH, and several defense organizations.
The JCAHO standards lead health care organizations to include building systems in a larger category of
utility systems and to determine their criticality to the organization's mission. The organization inventories each
utility system's components, analyzes each components' maintenance needs, and develops a maintenance
program including scheduling, documentation, and review of their maintenance. Utility systems considered
critical to a health care organization's mission must be maintained and must operate reliably to meet
accreditation standards.
The power marketing administrations (PMAs) of the Department of Energy (i.e., Bonneville PMA,
Southwestern PMA, Western PMA, and Southeastern PMA) are regulated to industry standards by regional
utility commissions. The condition of the physical assets must meet specific criteria related to safety and
reliability of operations. In meeting these standards the PMAs are not permitted to defer any maintenance.
Although all government agencies may not have to submit to the rigor of specific standards developed by
accrediting agencies, mission requirements involving continuous 24 hours per day, 7 days per week, 365 days
per year use, such as that found in operations centers, emergency response facilities, and air traffic control
centers, may require a more rigorous standard, set by statute or by the responsible agency, that will not permit
the facility to operate unless operations and maintenance are fully funded.
To meet accreditation or other standards, federal agencies may find it necessary to invest a significant
portion of maintenance and repair budgets into specific types of facilities and to defer needed maintenance and
use the print version of this publication as the authoritative version for attribution.

repair at other facilities not subject to such standards. When considering any modifications to the reporting
requirements of FASAB

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 12

Standard Number 6, it is important to recognize that some, if not all, federal agencies must meet other internal
and external regulations and statutes that directly influence how maintenance and repair funds are to be expended.

FEDERAL FINANCIAL ACCOUNTING

Since 1990 a number of laws and regulations have been enacted with the general objectives of providing
greater accountability by the federal government to its citizens. 4 One such measure is FASAB Standard Number
6, Accounting for Property, Plant, and Equipment. Enacted in 1996, Standard Number 6, as amended, is the first
government-wide initiative requiring federal agencies to report on deferred maintenance as part of their annual
financial reporting statements.
The FASAB is responsible for developing accounting standards to enhance the financial information
reported by the federal government, wherein “federal financial reporting helps to fulfill the government's duty to
manage programs economically, efficiently, and effectively and to be publicly accountable” (FASAB, 1993).
The FASAB has identified four objectives of federal financial reporting:

• budgetary integrity, providing information on the status of budgetary resources, including how
budgetary resources have been obtained and used;
• operating performance, addressing the costs of providing specific programs, the efficiency and
effectiveness of the government's management of its assets, and the efforts associated with federal
programs;
• stewardship, identifying if the government's financial position improved or deteriorated over the period,
if future budgetary resources will be sufficient to sustain public services and meet obligations, and if the
government's operations have contributed to the nation's current and future well-being;
• systems and control, providing information on whether transactions are executed in accordance with
budgetary and financial laws and requirements, if assets are properly safeguarded to deter waste, fraud,
and abuse, and that performance measurement information is adequately supported (FASAB, 1993).

FASAB STANDARD NUMBER 6, AS AMENDED

The FASAB has established standards for federal agencies to follow to meet the objectives of federal
financial reporting. FASAB Standard Number 6 5 is designed to meet objectives for operating performance and
stewardship. To meet operating performance objectives, the FASAB has provided accounting standards intended
to result in “relevant and reliable cost information for decision-making by internal users (e.g., program
use the print version of this publication as the authoritative version for attribution.

4 These include the Chief Financial Officers Act of 1990, the Government Performance and Results Act of 1993, and the

Government Management Reform Act of 1994, which incorporates the Federal Financial Management Act of 1994.
5 Excerpts from FASAB Standard Number 6 are contained in Appendix B. Appendix C contains amendments to Standard

Number 6.

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INTRODUCTION 13

managers, budget examiners, and officials); comprehensive, comparable cost information for decision-making
and program evaluation by Congress and the public; and information to help assess the efficiency and
effectiveness of asset management (e.g., condition of assets including deferred maintenance)” (FASAB, 1996).
The standard also establishes accounting standards that seek to meet the stewardship objectives by requiring
information on asset condition; changes in the amount and service potential of PP&E; the cost of PP&E, where
applicable; and spending for acquisition of PP&E versus noncapital spending (FASAB, 1996).
Standard Number 6 seeks to provide information on asset condition by requiring agencies to report on
deferred maintenance. The standard (FASAB, 1996) defines maintenance as:
the act of keeping fixed assets in acceptable condition. It includes preventive maintenance, normal repairs,
replacement of parts and structural components, and other activities needed to preserve the asset so that it continues
to provide acceptable services and achieves its expected life. Maintenance excludes activities aimed at expanding
the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those
originally intended.
Deferred maintenance is defined by FASAB as “maintenance that was not performed when it should have
been or was scheduled to be and which, therefore, is put off or delayed for a future period” (FASAB, 1996).
Standard Number 6, as amended, acknowledges that facilities may differ as to the level of acceptable
condition and that this level may vary across and within agencies; therefore, the standard allows facility
management to determine the condition rating. Under the standard, management may estimate the amount of
deferred maintenance for its agency through condition assessment surveys, a total life cycle cost method or other
methods that are similar or identical to condition assessment surveys or total life-cycle cost.
To comply with FASAB Standard Number 6, as amended, federal agencies must include the following as
required supplementary information for all PP&E in their annual financial reports:

1. Each major class of asset for which maintenance has been deferred. The standard states that major
classes of assets are to be determined by the agency. Examples of major classes of assets are
buildings and structures, furniture and fixtures, equipment, vehicles, and land.
2. The method by which the agency measured the deferred maintenance for each class of PP&E. If the
agency has chosen to measure its deferred maintenance by using a condition assessment survey, it
should present for each major class of PP&E:

a. a description of the requirements or standards for acceptable operating condition.

b. any changes in the condition requirements or standards.
c. asset condition and a range or point estimate of the dollar amount of maintenance needed to return it
to its acceptable operating condition.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 14

Examples of condition information are averages of standardized condition rating codes; percentage
of assets above, at, or below acceptable condition; or narrative information.

If the agency chooses to use the total life-cycle cost method, it should include the following for each major
class of PP&E:

a. the original date of the maintenance forecast and an explanation for any changes to the forecast.
b. prior-year balance of the cumulative deferred maintenance amount.
c. the dollar amount of maintenance that was defined by the professionals who designed, built, or
manage the PP&E as required maintenance for the reporting period.
d. the dollar amount of maintenance actually performed during the period.
e. difference between the forecast and actual maintenance.
f. any adjustments to the scheduled amounts deemed necessary by the managers of the PP&E.
g. the ending cumulative balance for the reporting period for each major class of asset experiencing
deferred maintenance.

The standard states that agencies may provide as optional information the stratification between critical and
noncritical amounts of maintenance needed to return each major class of asset to its acceptable operating
condition. If management elects to report this information, management's definitions of critical and noncritical
maintenance must be included; Standard Number 6, as amended, does not provide definitions for critical or
noncritical maintenance.

STUDY ORIGIN
The FASAB, 6 the entity that created Standard Number 6, has determined that information about deferred
maintenance is of importance to users of federal financial reports and for measuring an agency's effectiveness
and efficiency in managing PP&E. Recognizing that this is a new standard, specifically with regard to deferred
maintenance reporting, the FASAB believed that a period of experimentation was desirable to determine the best
methods to report deferred maintenance. Experience to date with implementing the standard has raised concerns
by both agencies and auditors regarding the number of different interpretations of the standard, as well as cost-
benefit and audit issues. The FASAB and the Office of Management and Budget (OMB) suggested that an
interagency project be initiated to suggest government-wide methods to calculate
use the print version of this publication as the authoritative version for attribution.

6 State and local government agencies are held accountable to accounting standards and principles established by the

Governmental Accounting Standards Board. Its mission is to establish and improve standards of state and local governmental
accounting and financial reporting that will result in useful information for users of financial reports and guide and educate
the public, including issuers, auditors, and users of those financial reports.

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 15

deferred maintenance as well as more detailed guidance on the preparation of deferred maintenance estimates.
In January 1999 the Federal Facilities Council (FFC) Standing Committee on Operations and Maintenance
began discussing and reviewing issues of deferred maintenance reporting for facilities to meet FASAB Standard
Number 6, as amended. In the summer of 1999 the Chief Financial Officers (CFO) Council initiated an
interagency effort led by the Department of Defense (DoD) to review deferred maintenance reporting for real
and personal property, national defense PP&E, heritage assets, and stewardship land. Because the efforts of the
FFC Operations and Maintenance Committee and the CFO Council/DoD shared some common objectives, it was
determined that the FFC Operations and Maintenance Committee, supplemented by staff from other federal
agencies and supported by the DoD, would provide technical assistance for the interagency effort as it relates to
deferred maintenance reporting for facilities (real property) and FASAB Standard Number 6, as amended.

STUDY OBJECTIVES
The work of the FFC Standing Committee on Operations and Maintenance and this report focused on
fulfilling two primary objectives. The first is to identify issues related to the reporting of deferred maintenance
for facilities as required by FASAB Standard Number 6, as amended. The second objective is to identify for
consideration potential approaches to reporting deferred maintenance for facilities that (a) will have credibility
within the facilities community, federal agencies, and Congress; (b) can be used to track trends within and across
agencies; and (c) do not require an inordinate investment of time and resources to implement.
The FFC Standing Committee on Operations and Maintenance has prepared this report to identify potential
issues that should be considered in any future amendments to the standard and to suggest approaches for
resolving them. The committee's intent is to assist the CFO Council, federal agencies, the FASAB, and others as
they consider how best to meet the objectives of federal financial reporting for facilities. It is important to note
that the FFC Standing Committee on Operations and Maintenance has not made any recommendations for
reporting deferred maintenance for facilities or advocated specific positions.

STUDY METHOD
The sponsor agencies of the FFC approved the study in September 1999 as a high-priority item for the
calendar year 2000 Technical Activities Program. The committee met 10 times between September 1999 and
September 2000. Incorporated into the study was information obtained from FFC Operations and Maintenance
Committee agencies' facilities managers and personnel. Additional information was compiled from facilities
management literature.
Norwood Jackson, formerly of the FASAB, met with the committee to discuss FASAB Standard Number 6,
as amended, and to clarify issues that were of importance to the committee and to the completion of this study.
use the print version of this publication as the authoritative version for attribution.

Jay Janke, Office of the Secretary of

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INTRODUCTION 16

Defense (Installations), met with the committee to present and discuss the DoD Facilities Sustainment Model.
The final draft of the report was reviewed by the FFC Operations and Maintenance Committee, other participants
in the study, and the senior representatives of the FFC sponsor agencies.

REPORT ORGANIZATION
Chapter 2 identifies issues related to definitions and some potential revisions for consideration. Chapter 3
discusses issues related to the methodologies specified in FASAB Standard Number 6 for reporting deferred
maintenance as they relate to facilities and identifies other valid approaches that could be used. Chapter 4
identifies issues related to the use of deferred maintenance as an indicator of facility condition and potential
approaches for increasing its utility.
Appendix A contains excerpts from the report Stewardship of Federal Facilities: A Proactive Strategy for
Managing the Nation's Public Assets. Excerpts from FASAB Standard Number 6, and the amendments to
FASAB Standard Number 6, are contained in Appendix B and Appendix C, respectively.

REFERENCES
APWA (American Public Works Association). 1992. Plan. Predict. Prevent. How to Reinvest in Public Buildings. Special Report #62.
Chicago: APWA.
FASAB (Federal Accounting Standards Advisory Board). 1993. Objectives of Federal Financial Reporting. Statement of Federal Financial
Accounting Concepts, Number 1. Online: www.financenet.gov/financenet/fed/fasab/pdf/sffac-1.pdf.
FASAB. 1996. Accounting for Property, Plant, and Equipment. Statement of Recommended Accounting Standards, Number 6. Online: http://
www.financenet.gov/financenet/fed/fasab/concepts.htm.
FFC (Federal Facilities Council). 1996. Budgeting for Facilities Maintenance and Repair Activities. Washington, D.C.: National Academy
Press.
NRC (National Research Council). 1990. Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings. Building
Research Board. Washington, D.C.: National Academy Press.
NRC. 1993. The Fourth Dimension in Building: Strategies for Minimizing Obsolescence. Building Research Board. Washington, D.C.:
National Academy Press.
NRC. 1998. Stewardship of Federal Facilities. A Proactive Strategy for Managing the Nation's Public Assets. Board on Infrastructure and the
Constructed Environment. Washington, D.C.: National Academy Press.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

INTRODUCTION 17

Syme, Preston T., and Jay Oschrin. 1996. How to Inspect Your Facilities and Still Have Money Left to Repair Them. Alexandria, VA:
Association of Higher Education Facilities Officers (APPA).
The Urban Institute. 1994. Issues in Deferred Maintenance: The Federal Infrastructure Strategy Program. Alexandria, VA: Institute for Water
Resources Publications.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

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INTRODUCTION
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18
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 19

2
Definitional Issues and Potential Revisions

FASAB Standard Number 6, as amended, is intended to apply to a broad class of property, plant, and
equipment, including buildings, vehicles, weapons systems, and stewardship land. These classes of assets have
life cycles ranging from a few to 50 or more years and substantial variations in characteristics, complexity, and
uses. In the case of facilities, some of these assets may be historic in nature. By developing definitions intended
to apply to several classes of assets, difficulties arise in applying them to specific categories. Thus, one difficulty
for agencies in complying with FASAB Standard Number 6, as amended, as it applies to facilities (real property)
has been the use of terms that are not widely used in the facilities management field, that are defined very
broadly, or that do not reflect how facility maintenance and repair programs and practices are implemented in
federal agencies.

ISSUES

Maintenance
Maintenance is defined by FASAB Standard Number 6, as amended, as:
the act of keeping fixed assets in acceptable condition. It includes preventive maintenance, normal repairs,
replacement of parts and structural components, and other activities needed to preserve the asset so that it continues
to provide acceptable services and achieves its expected life. Maintenance excludes activities aimed at expanding
the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those
originally intended (FASAB, 1996).
This definition of maintenance treats repairs as a subset of maintenance. In facilities management literature
and general practice, maintenance and repairs are treated as separate activities with different objectives. For
example, maintenance has been
use the print version of this publication as the authoritative version for attribution.

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 20

defined as the “upkeep of property and equipment, i.e., work necessary to realize the originally anticipated useful
life of a fixed asset.” In contrast, repair involves “work to restore damaged or worn-out property to a normal
operating condition” (NRC, 1998). Thus, the continuing deferral of routine maintenance may lead to more
serious deficiencies and the need for repairs.
As noted in Chapter 1, an effective and proactive facilities management program combines several
strategies that address different aspects and components of maintenance and repair and have different objectives.
These strategies may include preventive maintenance, programmed or planned major maintenance, predictive
testing and inspection, routine repairs and replacements, emergency service calls, and run-to-failure (FFC, 1996;
NRC, 1998).

Deferred Maintenance
FASAB Standard Number 6, as amended, defines deferred maintenance as “maintenance that was not
performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a
future period”. The reader must go back to the definition of maintenance to see that repairs are included as a
subset of maintenance. This structure sets up the possibility that agencies would account for deferred
maintenance but not deferred repairs. The intent of the standard would be clearer if this definition were amended
to refer specifically to repairs.

Acceptable or Useable Condition

FASAB Standard Number 6, as amended, contains some minor inconsistencies in its definitions. For
example, in the text, maintenance is described as the “act of keeping fixed assets in acceptable condition.” In the
glossary of terms, maintenance is described the “act of keeping fixed assets in useable condition.” The terms
acceptable or useable condition are not defined because the standard allows agencies the flexibility to establish
their own standards for what constitutes acceptable or useable condition based on a facility's use, type, and its
relationship to mission.

Economic Life, Useful Life, Expected Life

FASAB Standard Number 6, as amended, defines economic life as “the period during which a fixed asset is
capable of yielding services of value to its owner (see ‘useful life').” Useful life is defined as “the normal
operating life in terms of utility to the owner.” Standard Number 6, as amended, also uses the term expected life
in the definition of maintenance but does not define it.
Facilities managers refer to the economic life or service life (or lives) of buildings and their major systems,
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for example, mechanical, electrical, heating, ventilating, air conditioning, depending on the context. Looking at
facilities as an aggregation of components is important because different elements (walls, roofs, foundations,
windows,

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 21

plumbing, and so forth) wear out at different rates and require different levels of maintenance and repair.
Elsewhere, economic life has been defined as “the period of time over which costs are incurred and benefits
or disbenefits are delivered to an owner; an assumed value sometimes established by tax regulations or other
legal requirements or accounting standards and not necessarily related to the likely service life of a facility or
[its] subsystems” (NRC, 1991). Service life, in contrast, has been defined as “the period of time over which a
building, component, or subsystem provides adequate performance; a technical parameter that depends on
design, construction quality, operations and maintenance practices, use, and environmental factors” (NRC,
1991). The term expected life did not appear in the facilities management literature reviewed for this study.
Using a descriptive term such as expected, useful, service, or economic life, or a phrase such as “achieves
its expected life” implies a timeframe of finite duration, such as 30 years. Using a finite time period may be
appropriate for tax depreciation purposes for privately owned buildings. However, in the federal government,
facilities are routinely used for many years beyond their economic or useful life, a practice that results in higher
maintenance and repair costs. A significant proportion of the existing facilities inventory is more than 40 to 50
years old; many buildings are still in use 100 or more years after they were constructed with no expectation of
replacement or disposal. Budget procedures, lack of funding, and other factors make it difficult to replace or
dispose of buildings. As a consequence, some federal facilities are surplus and others are used long after any
standard projections of expected, service, economic, or useful life, even if they are obsolete and are more costly
to operate than a new one would be.
Federal facilities are also routinely renovated to serve new functions, which may be quite different than
their original use. (In these cases, the projection of economic or useful life would be recalculated.) In practice,
federal facilities usually receive some level of maintenance and repair as long as they are being used for some
function, whether or not it is the original function and whether or not the facility is functionally obsolete.
Inadequate funding for facilities maintenance and repair programs is a long-standing, well-documented
issue (NRC, 1998). Federal agencies do not receive the funding required to keep all facilities in acceptable
operating condition. Consequently, they must prioritize the investment of the maintenance and repair funds they
do receive. Because facilities are generally used in support of a particular program or mission of an agency,
maintenance and repair activities are directed toward keeping a facility in a condition to effectively support the
mission rather than achieving a specific number of years of use. An exception might be historical assets that are
being kept as a public trust but which have no direct impact on the performance of an agency's mission.
In reviewing FASAB Standard Number 6 as it relates to deferred maintenance reporting for facilities (not
necessarily to vehicles, land, or weapons systems), the committee concluded that it is important to recognize that
maintenance and repair funds are limited. They are typically invested in facilities on a priority basis to
effectively support agency programs and missions rather than to achieve a specific number of years of use or life.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 22

POTENTIAL REVISIONS
FASAB Standard Number 6, as amended, is intended to address both maintenance and repair programs for
facilities and other classes of assets, with significantly different characteristics, uses, and life cycles. As noted
above, the committee has suggested potential revisions for consideration that would more closely reflect current
federal practices as they relate to facilities. They would also provide facilities managers with the flexibility
necessary to apply a government-wide standard to agencies having a wide variety of missions, different
accounting systems, and different maintenance and repair practices. Suggested revisions to the definitions that
would address the noted deficiencies could read as follows:
Maintenance and repairs. Maintenance and repairs are activities directed toward keeping fixed assets in a
condition to effectively support the mission. Activities include preventive maintenance, repairs, replacement of
parts and structural components, and other activities needed to preserve the asset so that it continues to support the
mission. Maintenance and repairs exclude activities aimed at expanding the capacity of an asset or otherwise
upgrading it to serve needs different from or significantly greater than its current use. 1
Deferred maintenance and repairs. Maintenance and repairs that were not performed when they should have
been or were scheduled to be and which, therefore, were put off or delayed for a future period.

REFERENCES
FASAB (Federal Accounting Standards Advisory Board). 1996. Accounting for Property, Plant, and Equipment. Statement of Recommended
Accounting Standards, Number 6. Online: http://www.financenet.gov/financenet/fed/fasab/concepts.htm.
FFC (Federal Facilities Council). 1996. Budgeting for Facilities Maintenance and Repair Activities. Washington, D.C.: National Academy
Press.
NRC (National Research Council). 1991. Pay Now or Pay Later: Controlling Cost of Ownership from Design Throughout the Service Life of
Public Buildings. Building Research Board. Washington, D.C. : National Academy Press.
NRC. 1998. Stewardship of Federal Facilities. A Proactive Strategy for Managing the Nation's Public Assets. Board on Infrastructure and the
Constructed Environment. Washington, D.C.: National Academy Press.
use the print version of this publication as the authoritative version for attribution.

1 One reviewer of this report took issue with the change to “effectively support the mission.” The concern was that it would

be difficult to compute maintenance and repair requirements without reference to the life of a building and its components. A
second reviewer suggested that the last sentence read “maintenance and repairs exclude activities aimed at materially
changing capability, capacity, or extending its useful life.”

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 23

3
Methodological Issues and Alternative Approaches for
Calculating Deferred Maintenance for Facilities

FASAB Standard Number 6, as amended, specifies two methods that can be used to calculate deferred
maintenance for all classes of property, plant, and equipment: condition assessment surveys or a total life-cycle
cost method. The standard states that “other methods” may be used but stipulates that the other methods must be
identical or similar to the total life-cycle cost method or condition assessment surveys (FASAB, 1996). It is the
federal agency management's discretion to determine which method to use.
As noted in Chapter 2, developing definitions to apply to classes of assets with substantial variations in
character, life cycle, complexity, and use can be problematic when applying them to a particular class of asset.
Similarly, specifying methodologies for deferred maintenance reporting for different classes of assets can be
problematic. An additional consideration is the level of resources required to implement these methodologies
that will depend, in part, on the methodology itself and also on the availability of data. When data are available,
the costs of implementation can be minimized. However, when the specified data are not available, the cost of
gathering the data can be high, and this raises cost-benefit issues.
Methodologies based on condition assessment surveys and total life-cycle cost are appropriate and valid for
deferred maintenance reporting for facilities. However, several concerns were raised by the committee regarding
specific aspects of FASAB Standard Number 6, as amended. One concern was that the standard implies or could
be interpreted to imply that condition assessment survey data should be available for all facilities in an agency's
inventory and that such data should be updated annually. In practice, the availability of condition assessment
data varies from agency to agency. Data collection procedures also vary; typically, those agencies that have
instituted comprehensive condition assessment survey programs reinspect facilities on a cycle of every 3 to 5
years or longer. A second concern was that the data elements required by the standard for the total life-cycle cost
method are not reflective of facilities management practices and limit the use of this methodology for deferred
maintenance reporting for facilities.
This chapter focuses on issues related to methodologies for deferred maintenance reporting for facilities and
describes additional approaches that are similar to condition
use the print version of this publication as the authoritative version for attribution.

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 24

assessment surveys and the total life-cycle cost method that could be used to meet federal financial accounting
objectives for operating performance and stewardship.

CONDITION ASSESSMENT SURVEYS

FASAB Standard Number 6, as amended, defines condition assessments as “periodic inspections of PP&E
to determine their current condition and estimated cost to correct any deficiencies.” Elsewhere, condition
assessments have been defined as the “process of systematically evaluating an organization's capital assets in
order to project repair, renewal, or replacement needs that will support the mission or activities they were
designed to serve” (Rugless, 1993).
Condition assessment surveys, as the name implies, are effective for determining the current condition of a
facility and its components and in identifying deficiencies. Condition assessment surveys generally utilize
trained personnel who inspect each facility and make a determination regarding the facilities' physical condition,
how the facility is performing, and if any maintenance and/or repair deficiencies are present (NRC, 1998). The
trained personnel may be government employees, private-sector personnel under contract to the agency, or a
combination of both.
The use of condition assessment survey (CAS) programs by federal agencies is reviewed in Stewardship of
Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets (NRC, 1998). In the early
1990s the Department of Energy (DOE) and later the Department of Defense (DoD) undertook programs to
develop and implement CAS programs across their infrastructures. Both departments focused on developing
comprehensive processes that included detailed inspection standards, inspector training programs, automated
data collection devices, and the ability to aggregate information at multiple levels based on location and
organization. The DOE CAS was designed as an industry-based system of standards to develop deficiency-based
capital maintenance and repair costs for use in managing DOE assets.
The DoD program was originally intended to be implemented department wide. However, after pilot testing
of a system, the implementation costs were determined to be too high to deploy it across all services. Within
DoD individual services developed their own systems. The Air Force Commanders' Facility Assessment
Program was designed to link facility condition to mission requirements to ensure that resources for
maintenance, repair, and minor construction are allocated to the most critical mission needs of field commanders.
The U.S. Army's Installation Status Report system was designed to assist installations in articulating their
infrastructure needs to the Department of the Army and to allow the department to develop funding requests to
Congress (NRC, 1998). For these agencies and for others that may have implemented comprehensive condition
assessment survey programs, the necessary data may be available to meet the requirements of FASAB Standard
Number 6, as amended.
In reviewing condition assessment practices, the committee that authored the Stewardship study noted that
use the print version of this publication as the authoritative version for attribution.

the use of condition assessments by federal agencies is increasing. Federal agencies with such programs have
generally developed them independently to meet their specific needs within financial and staff constraints;
consequently, the level of sophistication varies widely. However, one of the committee's findings was that, based
on available information, “condition assessment programs, as currently practiced in federal agencies, are labor
intensive, expensive to maintain, and time consuming. In theory, condition assessment surveys provide

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 25

excellent information as a basis for facilities management practices and maintenance and repair budget requests.
In practice, the data are usually not provided in a time frame or format that is useful for cost-effective facilities
management” (NRC, 1998).
There are several reasons for this finding. Federal agencies can have hundreds or even thousands of
facilities. The costs incurred in conducting condition assessment surveys will vary significantly, depending on
the complexity, the depth and breath, and the level of the inspection. For example, an inspection could be a
relatively simple walk through of a facility to identify deficiencies that are easily visible. Or an inspection could
be a detailed diagnostic inspection by specialized personnel who look at the performance of mechanical,
electrical and other internal systems.
Information obtained from Federal Facilities Council (FFC) sponsor agencies participating in this study
indicates that the costs of condition assessments can range from 3¢ to 35¢ or more per square foot, depending on
the type and location of the facility, type of inspection, and qualifications of the inspectors, among other factors.
Thus, assessing the condition of a 200,000 square foot facility could range from $6,000 to $70,000 or more,
depending on building type (warehouse versus research facility), system complexity, location, level of
inspection, and other factors. Multiplied over hundreds or thousands of buildings, the costs can quickly outstrip
agency budgets for maintenance and repair. Thus, “tradeoffs occur between the amount of data collected, the
frequency at which it is collected, the quality of the data, and the cost of the entire process, including data entry
and storage” (Sanford and McNeil, 1997). In practice, therefore, when federal agencies conduct condition
assessment surveys for an entire inventory of facilities it is typically done on a cycle of every 3 to 5 years or
longer. Federal agencies may also conduct condition assessment surveys for specific facilities in specific
circumstances, for example, when looking to acquire or dispose of a facility, change tenants, or take on a new
program or mission.

TOTAL LIFE-CYCLE COST METHOD

The second method specifically identified by FASAB Standard Number 6, as amended, to calculate
deferred maintenance is total life-cycle cost. This method is defined by the standard as an acquisition or
procurement technique that considers operating, maintenance, and other costs in addition to the acquisition cost
of assets (FASAB, 1996). Standard Number 6, as amended, states that since life-cycle costing results in a
forecast of maintenance expense, these forecasts may serve as a basis against which to compare actual
maintenance expenses and estimate deferred maintenance (FASAB, 1996). Required data elements for this
methodology include the original date of maintenance forecast, the dollar amount of maintenance defined by the
professionals who designed, built, or manage property, plant, and equipment as required maintenance for the
reporting period, and the dollar amount of maintenance activity performed, among others.
Life-cycle costing for facilities is most commonly used early in the acquisition process to facilitate decision
use the print version of this publication as the authoritative version for attribution.

making about the types of materials, systems, and other components to be incorporated and to estimate total
operation and maintenance costs over the life cycle of the building. Given the age of many federal facilities, it is
unlikely that agencies could identify the original date of maintenance forecast (if one was ever done) or any
changes to the forecast. Other data required by the FASAB standard, in particular the amount of maintenance
performed, would

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 26

also be difficult to provide with any level of accuracy or consistency because this type of information is not
typically tracked for facilities. However, variations on life-cycle costing methodologies have been developed.
Some of these are described below as potential alternative approaches that could be used by federal agencies to
meet the objectives of FASAB Standard #6, as amended.

OTHER POTENTIAL APPROACHES TO DEFERRED MAINTENANCE REPORTING FOR

FACILITIES
One of the overall objectives of federal financial accounting is to “provide a framework for assessing the
existing financial reporting systems of the federal government and for considering how new accounting
standards might help to enhance accountability and decision-making in a cost-effective manner” (FASAB,
1993). Alternative approaches for reporting deferred maintenance and repairs for facilities are described below.
All involve some form of life-cycle costing, condition assessment survey data, or a combination of the two. For
those agencies that do not have comprehensive condition assessment survey information available, one or more
of these approaches may provide a cost-effective method for calculating deferred maintenance and repairs to
comply with FASAB Standard Number 6, as amended.

Alabama Commission on Higher Education Model

A 1986 article by Cushing Phillips, Jr., “Facilities Renewal: The Formula Approach,” describes a method
for estimating the amount of money required for facilities renewal for a college or university or other type of
facilities inventory. Facilities renewal is defined as “the complete reworking of a building (or facility), including
the expected useful life equal to that of a new facility.” The primary interest of the agency developing the
methodology was to generate values for total renewal allowance and total renewal backlog as the basis for
budget recommendations for annual operating budgets and capital budgets.
At the time the formula was developed, the author was working for the Alabama Commission on Higher
Education. Alabama's public colleges and universities had a “heavy backlog of deferred maintenance,” due in
part to “rapid expansion and short operating and maintenance appropriations” (Phillips, 1986). Most of the
institutions had “less than adequate data as to the actual amounts and the projects making up this backlog” and
“had not made recent or complete maintenance inspections or evaluations of their plants” (Phillips, 1986). The
author notes that:
Even if we were able to obtain valid and certifiable estimates of the amount and cost of needed repair and
renovation on each campus, we still would have only a “snap-shot” of our problem. It is entirely possible that
mechanical failures or unanticipated roof problems next year would invalidate our conclusions. In short, unless we
were able to obtain annual (or at the least biennial) reports from each campus showing current inspection results,
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we would have difficulty presenting a current and defensible statement of needs to the Governor and the
Legislature. (Phillips, 1986)

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 27

In this environment the author developed a methodology to “recognize the aging of our facilities by
reserving some part of their replacement value each year against their future need for renewal.” This approach
produces an estimate of the annual renewal allowance, defined as the amount of funding to be earmarked each
year to offset the aging during that year. An overall renewal backlog is defined as “the value of the unmet
renewal requirement represented in the present plant in current dollars” (Phillips, 1986).
In this methodology, facilities are categorized by type, and major systems are categorized as either 25- or
50-year systems. 1 Systems or elements that require reworking at intervals of substantially less than 25 years are
excluded “as being more suitable for renewal using maintenance and operation funds” (Phillips, 1986).
Estimated replacement costs in dollars per gross square foot, adjusted for regional price differentials, are
determined and totaled for all 25-and 50-year systems by category of facility. To recognize that the effects of
aging “increase the likelihood of expensive (even terminal) breakdowns,” the distribution of renewal estimates is
skewed in the direction of the older facilities. This is done by apportioning to each year of the age of a building a
fraction of the system replacement cost, which is determined by dividing the age by the sum of the years of its
maximum age: 325 for the 25-year systems and 1,275 for the 50-year systems. “Thus, the annual facility renewal
allowance, i.e., the amount which should be set aside each year for facility renewal, for a 10-year old building, is
the sum of 10/325 of the replacement cost of the 25-year systems and 10/1275 of the replacement costs of the 50-
year systems” (Phillips, 1986).
The total facility renewal backlog is the sum of each year's renewal allowance from the time of completion
of the building to the present. The total facility renewal backlog is determined by multiplying the replacement
costs of the 25-year systems by the sum of the years from 1 to the current age of the building, dividing it by 325,
multiplying the replacement costs of the 50-year systems by the sum of the years and dividing it by 1,275 and
then adding the two numbers. The same types of calculations are performed for individual facilities and then
totaled for the entire inventory (Phillips, 1986). A separate methodology is applied to buildings in which some or
all of the major systems have been partly or completely renovated.

Stanford University Model

A different approach for estimating facility renewal needs was developed at Stanford University in 1980
and described in a paper entitled “Before the Roof Caves In: A Predictive Model for Physical Plant Renewal”
(APPA, 1982). It is a mathematical approach that predicts the cost and time of facilities renewal based on
building subsystem life cycles and costs.
In the Stanford University model, facilities are first analyzed in terms of their subsystems, defined as major
components or systems such as mechanical, plumbing, electrical, elevators, roofs, and so forth, that have a
significant impact on facility wear-out and resulting replacement/renewal costs. An estimate of the life cycle is
then made for each subsystem. Buildings with similar uses and subsystems are grouped into categories such as
use the print version of this publication as the authoritative version for attribution.

laboratories, housing, offices, and so forth. Average replacement costs are then estimated for each subsystem in
dollars per square foot for each category of facility. Facilities are then further classified into 5-

1 Fifty-year systems include exterior walls, partitions, conveying systems, specialties, fixed equipment, plumbing and fire

protection, and electrical; 25-year systems include roofing, heating, air conditioning and ventilation (Phillips, 1986).

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 28

year cohorts by the date of construction or most recent major renovation. For each cohort the total square footage
of the buildings is identified. Projections are then developed for each 5-year cohort of each facilities type as to
when specific subsystems will require replacement and the associated cost. The projected replacement costs are
then summed across all subsystems and facility categories to estimate the total facility renewal needs during each
5-year period. Because the projections generally show a highly cyclical pattern of expenditures, a moving
average is used. “According to the basic theory of the model, the difference between actual expenditures made
and facilities renewal needs (over any period of time) should be approximately equal to the increase in deferred
maintenance needs over that same period of time” (Biedenweg and Cummings, 1997). This approach is not
unlike the total life-cycle cost method defined in FASAB Standard Number 6, as amended, in which forecasts of
maintenance may serve as the basis to compare actual maintenance expenses and to estimate deferred
maintenance.
To determine the validity of this model for predicting facilities renewal needs, in 1995 Stanford University
tested the original published predictions in two ways. First, the forecast for annual facilities renewal expenditures
was compared with actual budgeted expenditures for facilities renewal over a 10-year period. Second, “the
accumulated shortfall between the predicted and actual expenditures over that period was then compared with
cost estimates of deferred maintenance prepared by the building-by-building inspection performed by an
independent contractor” (Biedenweg and Cummings, 1997).
The initial testing resulted in only a 2 percent difference between the numbers. The degree of similarity was
so high, in fact, that the authors of the paper believed it to be “an anomaly and differences of ten to twenty
percent are more likely outcomes. However, the similarity did support the reasonableness of the approach and
the viability of the model as a forecasting tool, and further analysis, by subsystem, was performed.” The analysis
identified a number of adjustments that could improve the model's performance, including modifications/
additions of certain subsystem categories and “an acknowledgement that facility obsolescence due to program
reasons also needs to be considered.”
In this review the authors concluded that the experience at Stanford University demonstrates the “model can
provide accurate estimates of both deferred maintenance and future plant renewal needs.” Key features of the
approach include:

• An executive-level view of facilities renewal that is grounded in sound theory and industry standards.
This statistical approach accurately predicts both current deferred maintenance and future facilities
renewal needs.
• Recognition that renewal expenditures must vary from year to year based on the actual construction
history of campus buildings.
• The ability to distinguish between different types of buildings and the systems that support those
buildings.
use the print version of this publication as the authoritative version for attribution.

• Identification of individual facilities and subsystems that are likely to be most in need of renewal.
• The capability of including facility obsolescence (due to program reasons) in long-range planning.
• A model that is tailored to individual circumstances and that is relatively easy to maintain (Biedenweg
and Cummings, 1997).

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 29

Applied Management Engineering Model

Management of the Facilities Portfolio: A Practical Approach to Institutional Facility Renewal and
Deferred Maintenance describes a time- and condition-based approach to deferred maintenance reporting
developed by Applied Management Engineering (AME, 1991). The approach provides a comprehensive process
of identification, costing, and prioritization of short-and long-range facility maintenance and repair requirements,
recommended critical management indicators and reporting tools, and a detailed approach to capital planning
and budgeting. The goal is to achieve a clearly defined equilibrium for all facility assets and maintenance of their
functional and financial value over the long term through steady and predictable reinvestment based on facility
condition, age and complexity (EMR, 2000).
The AME approach requires a comprehensive condition assessment of all assets that identifies long- and
short-term maintenance and repair requirements, their estimated costs, and their relative priorities for
accomplishment. The priority ranking is based on assigned condition codes and an indication of when the
deficiency should be corrected. The study provides formulas for the projection of maintenance and repair
backlogs and for the funding required to eliminate the backlog. The backlog projection uses the current backlog,
the current replacement value and inflation rate, factors for backlog and physical deterioration, and average
inventory growth and planned funding to project the backlog for any future year (EMR, 2000). The methodology
involves a combination of time- and condition-related data; it is complex, and requires a significant amount of
data and continuous condition assessment surveys.

University of Virginia Model

A condition-based approach used by the University of Virginia (UVA) is described in “How to Inspect
Your Facilities and Still Have Money Left to Repair Them” (Syme and Oschrin, 1996). UVA began its program
in 1980 as a formal assessment inspection program to document the condition of each of its 600 buildings, of
which 390 were at least 30 years old, 235 were at least 50 years old, and 57 were 100 or more years old. One of
the primary purposes of the program was to identify the dollar value of the maintenance backlog. Initially,
inspections focused only on maintenance deficiencies as defined by the budget process, that is, deficiencies that
could be funded out of maintenance accounts. Deficiencies were defined as “the repair of an existing building, or
any of its permanent components or systems, back to their original condition.” Inspections were done on a four-
to-six-year cycle for the majority of facilities, and over time the inspection data were entered into a computerized
database. Annual reports were published that showed “the replacement value of each of our [UVA's] buildings,
the estimated dollar value of the deficiencies we [inspectors] found, and the resulting Facilities Condition Index
(deficiency value divided by replacement value)” (Syme and Oschrin, 1996). This system became the model for
an effort to produce similar data on all the institutions of higher education in the Commonwealth of Virginia.
use the print version of this publication as the authoritative version for attribution.

In time the model evolved such that inspectors are looking not only at deficiencies that are strictly
maintenance items but also “renewal deficiencies” related to modernization, code compliance, and hazardous
material abatement.
As noted in the article:

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 30

The true cost of maintaining the physical plant is not only replacing ceiling tile, painting and replacing mechanical
systems. Our experience has shown that the renovation of an older facility or the replacement of an HVAC
[heating, ventilation, and air conditioning] system in a 40-year-old facility will always lead to costs over and above
those originally anticipated. Whether any grandfather clauses are tripped or not, prudent facilities managers will
take those opportunities to perform additional upgrades such as the installation of a sprinkler system, smoke alarm
system, or telecommunications cabling. Additionally, they will be required to comply with newer code issues such
as ADA [Americans with Disabilities Act] or will be required to remove asbestos or lead from their facility.
Including these additional items as deficiencies gives a more accurate accounting of the condition of the physical
plant than the FCI [Facility Condition Index] by itself (Syme and Oschrin, 1996).
In the modified system, deficiencies are separated into maintenance and renewal deficiencies, each with its
own index. The FCI (maintenance deficiencies divided by current replacement value) and the Facility Renewal
Index (FRI) (renewal deficiencies divided by current replacement value) are added together to produce the
Facility Assessment Index (FAI).
FCI + FRI = FAI
The inspection process has three parts: data collection, data entry, and report generation. Inspections include
a review of previous inspection reports, plans, work orders, and warranties; visual inspection of the facility;
consultations with building occupants, users, and facilities management personnel. Data are entered into the
database. Each record in the database is tagged with a year from 0 to 100 representing the estimated year in
which a repair should be made. A tag of 0 means the repair should be done within the year. Tagging the repairs
allows for managers to plan for and prioritize maintenance and repairs.
The database automatically calculates estimated costs based on user-defined costs and cost factors.
Facilities managers can tell whether current funding will satisfy their need to maintain their physical plant in
good condition (Syme and Oschrin, 1996).

DoD Facilities Sustainment Model

The Facilities Sustainment Model (FSM), prepared by DoD's Office of the Deputy Under Secretary
(Installations), is designed to forecast the funding requirements for sustainment of an inventory of facilities
(Janke, 2000). As a life-cycle cost model, FSM generates an annual funding requirement to sustain an inventory
over a normal life cycle. FSM is grounded in standard facility-specific benchmarks, is tied to the inventory that
must be sustained, and is applicable throughout DoD.
The FSM identifies the cost to “sustain” facilities, the outcome of regular maintenance and repair activities.
Facilities sustainment under FSM means “maintenance and repair activities necessary to keep an inventory of
facilities in good working order.” The full definition 2 used by
use the print version of this publication as the authoritative version for attribution.

2 Facilities sustainment: maintenance and repair activities necessary to keep an inventory of facilities in good working

order. It includes regularly scheduled inspections, preventive maintenance tasks, and service calls and emergency responses.
Activities also include major repairs or replacement of facility components (usually accomplished by contract) that are
expected to occur periodically throughout the life cycle of facilities. This includes such work as regular roof replacement,
refinishing of wall surfaces, ceilings and flooring, and repairing and replacement of heating and cooling systems. It does not
include certain restoration, modernization, and environmental compliance costs, which are funded elsewhere. Other tasks
associated with facilities operations (such as custodial services, grass cutting, landscaping, waste disposal, and the provision
of central utilities) also are not included.

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 31

DoD excludes activities that are sometimes considered “maintenance” (such as grass cutting) as well as some
repair activities that go beyond sustainment (such as restoration of a facility destroyed by fire or repairs done
solely to implement a new standard).
To use FSM the following are needed: a standard classification of facilities into categories with common
units of measure; a standard per-unit sustainment cost for each category of facility; a real property inventory with
accurate unit quantities, locations, and projections; and an area cost factor and inflation table. For per-unit
sustainment cost factors, DoD obtained standard, off-the-shelf, commercial cost factors wherever possible.3
Computation of a sustainment requirement is as follows:
Requirement = Facility Quantity × Unit Cost Factor × Area Cost Factor × Inflation Factor
The sustainment requirement formula is run for each category of facility at each location, and the results are
summed to the desired level (or view) of the data. For DoD, FSM can provide a sustainment cost by installation,
major command, state or country, military service, or for the department as a whole.
To determine whether sustainment requirements are being met, two additional tools are necessary: (1) a
“table of responsibilities” that allocates responsibility for sustainment to a suborganization and funding source
and (2) a budget category that matches the sustainment definition for each responsible organization and funding
source combination.

Table of Responsibilities
Facility quantities (and hence sustainment requirements) must be allocated to the subcomponent
organization and funding source that has sustainment responsibility. This process produces a matrix like the one
below, where the columns represent funding sources, the rows represent responsible organizations, and the cells
are filled in with facility sustainment requirements generated by FSM:
Funding Sources Responsible Organization
1 2 3 4 n
A
B
C
n
use the print version of this publication as the authoritative version for attribution.

3 DoD Facilities Cost Factor Handbook, April 2000, Office of the Deputy Under Secretary (Installations).

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 32

Budget Categories
Ideally, for each cell in the responsibilities matrix there is a budget line item to which the FSM requirement
can be compared. The difference between FSM-generated requirements and annual sustainment funding
represents deferred sustainment of facilities. There are two limitations to consider: (1) FSM addresses only
deferral of work that meets the definition of sustainment and (2) FSM does not assist in calculating a pre-existing
“compounded” backlog.
FSM can be used to compute the amount of sustainment deferred annually but cannot be used to compute
deferral of costs outside the definition of sustainment. DoD has created a second budget category—termed
Facilities Restoration and Modernization—which complements Facilities Sustainment by identifying “beyond
sustainment” requirements. Typically these are modernization projects, minor construction projects, or large
repair projects that restore a facility to acceptable status.
FSM provides a method to compute annual deferral but does not attempt to provide a way to compound
successive deferrals into a multiyear backlog. Although FSM could be used to compute deferral over a 3-year
period, for example, it does not assist in determining how much of what was deferred remains in the backlog at
the end of 3 years.
When sustainment is not accomplished, sustainment activities do not automatically roll over to become
repair backlogs—if this year's oil change is not done, it doesn't need to be done twice next year. The incremental
loss of facility life for delaying the sustainment will eventually show up in a restoration requirement, perhaps
sooner than expected. But it is not automatic unless the lack of sustainment results in an immediate failure and
new restoration requirement.
To be comprehensive, two separate accounting entries are required. The first entry would be “deferred
sustainment” and would be the annual amount of regular maintenance and repairs (i.e., sustainment) not funded.
FSM provides a way to compute this number.
The second entry would reflect unfunded restoration requirements, most (but not all) of which result from
deferred sustainment. The unfunded restoration requirement is generated separately and is not a direct rollover
from deferred sustainment. As an option, unfunded “modernization” projects could be added if desired. To be
clear, this entry might be labeled “Backlog of Restoration and Modernization” rather than “Backlog of Repair”
since not all projects in this backlog would be repairs.

NASA Backlog of Maintenance and Repair Model

A potential approach to reporting deferred maintenance is called the National Aeronautics and Space
Administration (NASA) Backlog of Maintenance and Repair (BMAR) Model for purposes of this report. It is
based on a white paper developed by Mr. Charles B. Pittinger, Jr., P.E., in NASA's headquarters office. The
use the print version of this publication as the authoritative version for attribution.

BMAR Model is based on parametric estimates and is intended to produce a macro-level estimate of deferred
maintenance. The model is based on the following premises: (1) condition assessment surveys performed for
systems (not individual components) and for the entire facility (overall system average); (2) generalized
condition levels; (3) limited number of systems to assess; and (4) parametric estimating based on current
replacement value (CRV).

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 33

In this approach, personnel knowledgeable in facility assessment would evaluate a building's condition
using an inspection process that entailed, at a minimum, a walk through of a facility. The BMAR Model could be
applied over an entire inventory of facilities by sampling of general type of building (i.e., office, warehouse) not
on a building-by-building basis. Condition assessment levels and repair costs as a percentage of CRV could be
applied as outlined below:
Generalized Condition Level 17 Repair Cost
5 New; only normal preventive maintenance required. 1% of CRV
4 Some repairs needed; overall system generally functional. 20% of CRV
3 Many repairs needed; limited functionality or availability. 50% of CRV
2 May be functional but obsolete or does not meet codes. 100% of CRV
1 Not operational or unsafe. 100% of CRV

Major Systems Percentage of Facility CRV

Architectural 5
Roof 10
Electrical 15
Plumbing 15
HVAC 25
Structural 30
100
Site 100
Utility systems 100
The site and utility systems represent features outside the building line, that is, parking lots, curbs, and
utilities, and would therefore be considered as separate systems.
To determine a dollar amount for maintenance and repair backlog, the major system percentage CRV is
multiplied by the repair cost (as a percentage of CRV) as designated by the generalized condition level. These
amounts are then summed, and the total is multiplied by the CRV of the building. Facility management can use
this figure and may choose to include costs
use the print version of this publication as the authoritative version for attribution.

17 The condition levels and percentage of repair costs and the percentage of CRV would be determined on an agency-by-

agency basis. This example is not intended to represent any system or industry standard now in use and is just an assumption
for illustrative purposes. Development of standards around distribution of estimated costs would require further study. The
standards would also vary by general class of facility, such as hospitals, office buildings, or warehouses.

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 34

for the site and utility system numbers in calculating the total amount of deferred maintenance and repair.
If the site and utility system numbers are not included, the following formula may apply:
BMAR = [Sum (MS%)*(RC%)] CRV
Where: MS% = major system percentage of CRV; RC% = repair cost percentage of CRV, as designated by
the generalized condition level; and CRV = current replacement value of the building.
If site and utility system numbers are included, the site percentage of facility CRV is multiplied by the
repair cost (as a percentage of CRV), as designated by the generalized condition level. This number is then
multiplied by the CRV of the site work. The utility system percentage of facility CRV is multiplied by the repair
cost (as a percentage of CRV), as designated by the general condition level. This number is then multiplied by
the CRV. The amounts for systems, site, and utility systems are summed. The final number is the dollar amount
of deferred maintenance.
BMAR = [(Sum (MS%)*(RC%)) CRV] + [(RCS%)*(SWCRV)] + [(RCUS%)*(RCUSCRV)]
Where: MS% = major system percentage of CRV; RC% = repair cost percentage of CRV, as designated by
the generalized condition level; CRV = CRV of the building; RCS% = repair cost percentage of CRV, as
designated by the generalized condition level of the site work; SWCRV= CRV of the site work; RCUS% =
repair cost percentage of CRV, as designated by the generalized condition level of the utility systems; and
USCRV = CRV of the utility systems.

Hypothetical Example for One Facility

Office and laboratory facility – 15 years old. The building has a new roof and excellent interior finishes.
The electrical systems, plumbing systems, and structure are adequate. The airconditioning and heating systems
have been problematic since new, and the occupants are unhappy with the temperatures and air changes.
CRV= $4,500,000 for the building
Exterior utility systems are considered as a separate facility.
Condition Assessment:
System Level % CRV % Facility
Architectural 5 (0.01) (0.05) 0.0005
Roof 5 (0.01) (0.10) 0.0010
Electrical 4 (0.20) (0.15) 0.0300
Plumbing 4 (0.20) (0.15) 0.0300
HVAC 3 (0.50) (0.25) 0.1250
Structural 4 (0.20) (0.30) 0.0600
0.2465
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 35

Site 4 (0.20) (1) 0.2000

Utility systems (exterior) Not Applicable in this Example
% CRV
Systems 0.2465 * $4,500,000 = $1,109,250
Site 0.2000 * $250,000 = $50,000
$1,159,250 for deferred maintenance
In this methodology, condition levels are tied to a fixed percentage of a facility's current replacement value.
Facility systems values are tied to a fixed percentage of the overall facility CRV, which would not exceed 100
percent. The intent is to provide a model for quickly generating information for deferred maintenance reporting.

NASA Dryden Flight Research Center Statistical Model

This approach is based on a procedure developed by Mr. Gregory Spencer, Chief of the Maintenance,
Operation and Logistics Branch at NASA's Dryden Flight Research Center in California (EMR, 2000). The
methodology uses an updated facilities inventory and a recently completed baseline condition assessment of all
facilities and equipment to develop simplified condition codes and current replacement costs for all inventory
items. Condition information for all equipment is kept up-to-date during the scheduled maintenance process that
requires technicians to annotate work orders with the condition observed during execution of the maintenance
tasks. Because recurring maintenance is scheduled on a one year interval, or less, the status of equipment is
considered “real time”.
Implementation of a computerized maintenance management system (CMMS) is a requirement for this
methodology. The CMMS database identifies all equipment and includes job plans, frequencies of maintenance,
replacement costs, and condition data (a code from 1-5 is used identifying condition ranging from failed to
excellent).
A random sample of inventory items in each of five standard condition codes is selected. A detailed
estimate of repair costs is determined for each item; this cost is then divided by the item's replacement cost,
providing a weighted factor for each item. The factors are then averaged for all selected inventory items in each
condition code, and the average is multiplied by the total replacement cost for all inventory items in that
condition code. This figure provides an approximation of the backlog of maintenance and repair (BMAR) costs
for all items in that condition code; the figures for each condition code are then summed to give a total BMAR
estimate for the entire physical plant.
For agencies with large inventories, using random sampling and extrapolation may be helpful in generating
an approximation of the cost of the backlog of maintenance and repair. To use this method effectively, however,
an agency's facilities condition inventory must be kept up to date; to do so in a efficient manner is resolved by
use the print version of this publication as the authoritative version for attribution.

noting condition by technicians performing maintenance versus the traditional “end to end” condition assessment.

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 36

BMAR Algorithm
For every condition code a statistical weight is assigned based on random sampling. BMAR is equal to the
sum of all equipment replacement costs multiplied by respective statistical weights.
BMAR=SUMj=1,5{SUMk=1,n{(CCF)j (RC)k}}
where: SUM is the summation function
CCF is the condition code factor (weight)
RC is the replacement cost
n = the total pieces of equipment for the condition code

Example Calculation of BMAR

Parameters: Assume a 300 item inventory; total replacement cost = $1,000,000; 4 item statistical sample.
Inventory # Repair Cost Replace Cost Repair/Replace
7 100 10000 0.10
43 500 2000 0.25
115 300 4000 0.075
267 200 3000 0.066
Total replacement cost = $1,000,000
Condition Code Factor (CCF)= (0.1+0.25+0.075+0.066)/4=0.123
BMAR = (Total Replacement Cost)(CCF)= ($1,000,000)(0.123)=$123,000

NASA Simplified BMAR Model Using Real Property Data

The Dryden Flight Research Center has proposed a less complex model that does not require the use of a
CMMS. Instead, it uses real property records common to all agencies. In this model, statistical sampling by
facility type is used to determine the backlog of maintenance and repair. The backlog is determined by using a
random sample of facilities in an agency's inventory and concentrating on a specified number of major systems,
for example, structural, mechanical, and electrical. A weighted average is calculated for the net condition code,
and the backlog is then assumed to be an exponential function of condition.

Simplified BMAR Algorithm

A statistical weight (CCF) is assigned based on random facility sampling. BMAR is equal to the sum of all
use the print version of this publication as the authoritative version for attribution.

facility replacement costs multiplied by the CCF.

BMAR={SUM k=1,n{(CCF) (CRV)k}
where: SUM is the summation function

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 37

CCF is the condition code factor

CRV is the replacement cost of the facility
n = the number of facilities in the real property database

Condition Code 18

5 Excellent; no work required.

4 Good; less than 10 percent of components need repair.
3 Fair; more than 30 percent of components need repair.
2 Poor; greater than 30 percent of components need repair.
1 Unserviceable; failed system overall.

System Weights 19
40% Structural
30% Mechanical
30% Electrical
The condition code factor is assumed to be a decaying exponential function as the cost to repair increases
dramatically with deteriorating condition:
CCF = k1e { [k2 (1 ` NCC)]}
Where: k1, k2 = constants, assumed to be 1; exp = “e” or 2.718.
and
NCC= Net Condition Code (sum of condition codes times system weights for each sample facility averaged
for sample size)

Sample Calculation
Parameters: Assume an inventory of 100 facilities, $100M total current replacement value, and a 1 building
sample.
Mechanical assessment: Failing heating units, aging unreliable chillers. Condition Code = 3
Electrical assessment: 2 systems need replacement. Condition Code = 4
Net Condition Code (NCC)=((3 × 0.4)+(4 × 0.3)+(3 × 0.3))/1=3.3
CCF=exp(1-3.3)=0.10 (10%)
Where: k1, k2 are assumed 1 for this example
BMAR=($100M)(0.10)=$10M
use the print version of this publication as the authoritative version for attribution.

18 The condition code factors and parametric weights are provided for illustrative purposes only. Each agency would need

to develop its own set of condition code factors/parametric weights.

19 The condition codes for system weights are provided for illustrative purposes only. Each agency would need to develop

its own set of conditions codes.

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 38

SUMMARY
One objective of federal financial reporting is to produce uniform and consistent information that will be
valuable to Congress, decision makers, agency officials and the public and to produce that information cost
effectively. FASAB Standard Number 6, as amended, is intended to provide uniform and consistent information
on property, plant, and equipment, including dollar amounts of deferred maintenance and repairs. The standard
allows agency management some flexibility in determining how to calculate and report deferred maintenance by
specifying that agencies can use condition assessment surveys, a total life-cycle cost method or other methods
identical or similar to condition assessment surveys and total life-cycle costing.
Condition assessment surveys are recognized as a valid method for identifying and reporting maintenance
and repair needs for facilities. The committee supports the inclusion of this methodology in FASAB Standard #6,
as amended. However, concerns were raised that the standard implies or could be interpreted to imply that
condition assessment survey information should be available for all facilities in an inventory and that such
information should be updated annually. In practice, the availability of condition assessment survey data varies
from agency to agency. Some agencies conduct condition assessments on a limited basis or for specific buildings
in specific circumstances. Agencies that have instituted inventory-wide condition assessment programs typically
reinspect facilities on cycle of every 3 to 5 years or longer.
Chapter 3 describes a number of methodologies for reporting deferred maintenance and repairs that are
similar to condition assessment surveys and the total life-cycle cost method or combine elements of the two.
Statistical approaches or methodologies for facilities renewal like those described for the Alabama Commission
on Higher Education, Stanford University, the University of Virginia, and the Department of Defense are
typically developed for planning and budgeting purposes. Dollar amounts for deferred maintenance are
extrapolated by comparing forecasts for needed maintenance and repairs and actual expenditures; deferred
maintenance is estimated as the difference between the two. As such, the methodologies are based on a time
standard, not on specifically identified deficiencies. Backlog of maintenance and repair becomes a dollar figure
that is the difference between a benchmark budget for maintenance and repair activities based on the projected
life of systems and facilities and actual expenditures for maintenance and repair activities. However, as shown by
the Stanford University model test, these types of methodologies can be effective in generating an estimated
dollar amount for deferred maintenance and repairs. Allowing federal agencies greater flexibility in choosing
methodologies, including statistical sampling, to report deferred maintenance for facilities may help to better
align the objectives and methodologies of federal financial reporting.

REFERENCES
AME (Applied Management Engineering). 1991. Managing the Facilities Portfolio: A Practical Approach to Institutional Facility Renewal
and Deferred Maintenance. Washington, D.C.: National Association of College and University Business Officers.
use the print version of this publication as the authoritative version for attribution.

Biedenweg, R. 1982. Before the Roof Caves In: A Predictive Model for Physical Plant Renewal. APPA Newsletter, Association of Physical
Plant Administrators, Part 1 (July 1982), Part 2 (August 1982). Alexandria, VA: Association of Physical Plant Administrators
(APPA).

Copyright © National Academy of Sciences. All rights reserved.

DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 39

Biedenweg, R., and Alan Cummings. 1997. Before the Roof Caves In, Part II: A Predictive Model for Physical Plant Renewal. Alexandria,
VA: Association of Higher Education Facilities Officers (APPA).
EMR (Enviro-Management & Research, Inc.). 2000. Final Summary Report. Survey of NASA Backlog of Maintenance and Repair.
Arlington, VA: EMR.
FASAB (Federal Accounting Standards Advisory Board. 1993. Objectives of Federal Financial Reporting. Statement of Federal Financial
Accounting Concepts, Number 1. Online: www.financenet.gov/financenet/fed/fasab/pdg/sffac-1.pdf.
FASAB. 1996. Accounting for Property Plant, and Equipment. Statement of Recommended Accounting Standards, Number 6. Online: http://
www.financenet.gov/financenet/fed/fasab/concepts.htm.
Janke, J. 2000. Presentation on the Department of Defense Facilities Sustainment Model by Jay Janke, Office of the Secretary of Defense
(Installations) before the Federal Facilities Council Standing Committee on Operations and Maintenance, National Research
Council, Washington, D.C., January 19.
NRC (National Research Council). 1998. Stewardship of Federal Facilities. A Proactive Strategy for Managing the Nation's Public Assets.
Board on Infrastructure and the Constructed Environment. Washington, D.C.: National Academy Press.
Phillips, Cushing, Jr. 1986. Facilities Renewal: The Formula Approach. Alexandria, VA: Association of Physical Plant Administrators.
Rugless, J. 1993. Condition assessment surveys. Facilities Engineering Journal 21(3): 11-13.
Sanford, K., and Sue McNeil. 1997. Data Modeling for Improved Condition Assessment. p. 287-296 in Infrastructure Condition Assessment:
Art, Science, and Practice. Mitsuru Saito, ed. New York: American Society of Civil Engineers.
Syme, Preston T., and Jay Oschrin. 1996. How to Inspect Your Facilities and Still Have Money Left to Repair Them. Alexandria, VA:
Association of Higher Education Facilities Officers (APPA).
use the print version of this publication as the authoritative version for attribution.

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS

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DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION 41

4
Deferred Maintenance and Repairs as an Indicator of Facility
Condition

FASAB Standard Number 6, as amended, is intended to help fulfill federal financial accounting standards
for operating performance and stewardship. These objectives include addressing the efficiency and effectiveness
of the government's management of its assets and identifying if the government's financial position improved or
deteriorated over the period, among others. The accounting standards established to meet these objectives are
intended to provide information to help assess the efficiency and effectiveness of asset management and report
on asset condition.
FASAB Standard Number 6, as amended, implies that the dollar value of deferred maintenance is a
surrogate (estimate) for management's ability to maintain facilities. As noted in Chapter 1, the significance of the
existence of deferred maintenance and repairs is that it may indicate that the quality and reliability of service
provided by infrastructure are lower than they should be and that the infrastructure is not, or will not later be,
adequately serving the public. However, a dollar figure alone does not indicate overall condition of facilities; it
does not place the number in context with the size or value of an agency's facilities inventory; it does not allow
comparisons across agencies because of the variation in size and composition of the inventories. For example,
the Department of Defense (DoD) has reported $37 billion in deferred maintenance and repairs, while the
National Aeronautics and Space Administration (NASA) has reported $1.4 billion. 20 Looking at these numbers,
it is not possible to determine the overall condition of either agency's facilities inventory, whether DoD or NASA
has a larger backlog in relation to the size of their respective inventories, whether the size of the backlog actually
constitutes a problem or if it is of a size that might be expected given the number of facilities. A total dollar
amount of deferred maintenance and repairs also does not indicate whether agencies are using the funds allocated
to them efficiently or effectively. Finally, reporting a single annual number for deferred maintenance gives no
indication whether the government's financial position has improved or deteriorated. To be meaningful, deferred
maintenance and repair amounts need to be (1) used in conjunction
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20 Deferred maintenance amounts reported in DoD and NASA 1998 accountability reports.

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DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION 42

with other indicators, (2) derived by each agency in a consistent manner over time, and (3) tracked over a period
of time so that trends can be observed.
Performance measures are critical elements of a comprehensive management system for facility
maintenance and repairs. Determining how well the maintenance function is being performed or how effectively
maintenance funds are being spent requires well-defined measures (NRC, 1998). A study by the National
Research Council, Measuring and Improving Infrastructure Performance, found that “no adequate, single
measure of performance has been identified, nor should there be an expectation that one will emerge.
Infrastructure systems are built and operated to meet basic social needs, but those needs are varied and complex”
(NRC, 1995). Therefore, the measures used to evaluate facilities and infrastructure performance should vary. The
report goes on to state that “infrastructure performance is the degree to which infrastructure provides the services
that the community expects of that infrastructure, and communities may choose to measure performance in terms
of specific indicators reflecting their own objectives.”
The report concluded that these indicators generally fall into three broad categories, measuring performance
as a function of effectiveness, reliability, and cost. “Infrastructure that reliably meets or exceeds broad
community expectations, at an acceptably low cost is performing well.” Although this was a study of
infrastructure systems at the community level, the principle that the performance of facilities maintenance and
management functions can and should be measured by the condition of the facilities inventory as measured
against cost and effect on agency mission is also applicable to the maintenance and repair of federal facilities
(NRC, 1998).
The Department of Energy (DOE), in addition to dollar amounts for deferred maintenance, also collects at
the assets level “annual required maintenance” and “annual actual maintenance,” and will be collecting “failure
rate” and “availability.” The DOE uses replacement plant value with these other data elements, to calculate a
Facility Condition Index to produce a more useful indicator of the health/status of a building or the agency's
aggregate facilities inventory. These indicators will be tracked over time to help evaluate whether the condition
of the entire inventory is improving or deteriorating.
NASA also tracks a series of measures related to facilities maintenance. These include backlog of
maintenance and repairs as defined in NASA's facilities maintenance performance metrics. They also include
unconstrained annual maintenance and repair requirement, initial operating plan for maintenance and repair,
annual maintenance and repair funding, cost of scheduled work, number of predictive testing and inspection
“finds,” preventive maintenance and predictive testing and inspection completed versus scheduled, breakdown
repair costs versus total maintenance and repair costs, significant facilities and systems failure costs due to
constrained resources, and significant facilities and systems failure costs avoided by using predictive testing and
inspection.
Another indicator that might be used in conjunction with a dollar amount for deferred maintenance and
repairs is deferred maintenance and repair as a percentage of current (or plant) replacement value of an agency's
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facilities inventory. This could be tracked over time to observe trends as long as an agency used a consistent
methodology for calculating deferred maintenance and repair and current (or plant) replacement value. For
example, using hypothetical numbers, if the current replacement value of DoD's facilities inventory is $740
billion and the deferred maintenance backlog is $37 billion, deferred maintenance would be equal to 5 percent of
the current replacement value. If the

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DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION 43

current replacement value were, instead, $370 billion, deferred maintenance would equal 10 percent of current
replacement value, which could indicate a more deteriorated condition. Similarly, using hypothetical numbers, if
the current replacement value of NASA's inventory were $18 billion, a backlog of $1.4 billion would be equal to
7.8 percent of current replacement value and would appear to indicate that NASA's facilities might be in better
overall condition that DoD's. However, these types of comparisons would still not be particularly meaningful
unless and until they were tracked over time using consistent methodologies for calculating both deferred
maintenance and repairs and current replacement value at each agency (i.e., the agencies would not have to use
the same methodology). Over a 5-year period, if DoD's backlog of maintenance and repair as a percentage of
current replacement value decreased while NASA's increased, it could indicate that the overall condition of
DoD's inventory was improving while NASA's was declining. The factors underlying these trends could then be
investigated.
Some federal agencies, such as the U.S. Army, track the condition of their facilities using a rating system
(i.e., excellent, good, fair, unsatisfactory) and a computerized database. From the rating information contained in
the database, agencies could generate a report identifying the percentage of their facilities falling into the lowest
category—for example, 15 percent of facilities have been rated unsatisfactory. This information would provide
the percentage of an agency's facilities that are below a satisfactory condition and may be another approach for
providing information regarding the condition of federal facilities. This approach could be useful for tracking
trends over time and to review whether the condition of an agency's facilities has improved or declined.
The Federal Facilities Council Standing Committee on Operations and Maintenance was not tasked with
determining what combination of measures might best fulfill the objectives of federal financial accounting.
Additional study and consideration of potential measures that could be used in conjunction with deferred
maintenance and repairs to help evaluate the condition of federal assets are needed.

REFERENCES
NRC (National Research Council). 1995. Measuring and Improving Infrastructure Performance. Board on Infrastructure and the Constructed
Environment. Washington, D.C.: National Academy Press.
NRC. 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets. Board on Infrastructure and the
Constructed Environment. Washington, D.C.: National Academy Press.
use the print version of this publication as the authoritative version for attribution.

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44
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APPENDIX A 45

APPENDIX A
Excerpts from Stewardship of Federal Facilities: A Proactive
Strategy for Managing the Nation's Public Assets (pp. 13-18)

FACTORS CONTRIBUTING TO THE DETERIORATING CONDITION OF FEDERAL

FACILITIES
Despite the historic, cultural, and architectural importance of, and economic investment in, federal facilities,
evidence is mounting that the physical condition, functionality, and quality of the federal facilities portfolio is
deteriorating. In response to Congressional inquiries, the General Accounting Office (GAO) has published a
number of reports documenting the deterioration of federal facilities since 1990. These include NASA
Maintenance: Stronger Commitment Needed to Curb Facility Deterioration (GAO, 1990), Federal Buildings:
Actions Needed to Prevent Further Deterioration and Obsolescence (GAO, 1991), Federal Research: Aging
Federal Laboratories Need Repairs and Upgrades (GAO, 1993), and National Parks: Difficult Choices Need to
be Made About the Future of the Parks (GAO, 1995b). To cite only two examples from these reports, “at Ellis
Island in New York, the nation's only museum devoted exclusively to immigration, 32 of 36 historic buildings
have seriously deteriorated, and, according to park officials, about two-thirds of these buildings could be lost
within 5 years if not stabilized.” In one building used for storing cultural artifacts, “much of the collection is
covered with dirt and debris from crumbling walls and peeling paint, and leaky roofs have caused water damage
to many artifacts” (GAO, 1995a). A number of factors that contribute to the deteriorating condition of federal
facilities, are described below.

Focus on First Costs

The deteriorating condition of federal facilities is attributable, in part, to the federal government's failure to
recognize the total costs of facility ownership. Although the “costs to operate and maintain a facility vary
between 60 to 85 percent of its total ownership cost” (Christian and Pandeya, 1997), government budgeting
practices have focused on the design and construction costs, or 5 to 10 percent of the total costs of
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Copyright © National Academy of Sciences. All rights reserved.

APPENDIX A 46

ownership, the so-called “first” costs. (The remaining 5 to 35 percent of the costs of ownership include land
acquisition, planning, renewal/revitalization, and disposal.)
The full life cycle costs of new facilities are not considered in the current federal budget process. Instead,
only the projected design and construction costs appear as a separate line item for congressional consideration.
The costs of operating and maintaining the new facility are not considered separately but become part of the
agency's total operations and maintenance budget request, which includes funding for all existing facilities. The
costs of designing and constructing a new facility, then, may receive considerable scrutiny during budget
hearings, but the budget process is so structured that the 60 to 85 percent of the total costs, the costs of operating
and maintaining the facility, do not receive the same scrutiny. Thus, the federal budget process is not structured
to consider the total costs of facilities ownership.

Inadequate Funding for Maintenance and Repair

Inadequate funding for the maintenance and repair of public buildings at all levels of government and
academia is a long-standing and well-documented problem. A report by the National Research Council in 1990,
Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings, found that “Underfunding is
a widespread and persistent problem that undermines maintenance and repair of public buildings” (NRC, 1990).
A 1996 study by the Civil Engineering Research Foundation reconfirmed this finding, noting that “underfunding
of facilities maintenance and repair projects appear to be a widespread problem in both the public and private
sectors” (CERF, 1996). On the subject of federal facilities, GAO has reported that, “mounting evidence shows
that the federal government must also face up to the long-term consequences of inadequate capital investment in
existing federal buildings” (GAO, 1991). More recently, GAO has found that “despite reductions in DoD's [ U.S.
Department of Defense] basing infrastructure, various DoD and service officials have continued to indicate that
they still have excess, aging facilities and insufficient funding to maintain, repair, and update them” (GAO, 1997).
There is no single, agreed-upon guideline to determine how much money is adequate to maintain public
buildings effectively. However, Committing to the Cost of Ownership: Maintenance and Repair of Public
Buildings did recommend that, “An appropriate budget allocation for routine M&R [maintenance and repair] for
a substantial inventory of facilities will typically be in the range of 2 to 4 percent of the aggregate current
replacement value of those facilities” (NRC, 1990). This guideline has been widely quoted in the facilities
management literature. During the course of this study, federal agency representatives who briefed the
committee or completed questionnaires indicated that the funding they received annually for maintenance and
repair was less than 2 percent of the aggregate current replacement value of their agencies' facilities inventories
1 . The National Aeronautics and Space Administration (NASA), for example,
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1 Agencies responding to the questionnaire included the U.S. Department of Energy, the Department of the Army/

Installations, the International Broadcasting Bureau, the National Institute of Standards and Technology, the National
Aeronautics and Space Administration, and the Office of the Air Force Civil Engineer.

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX A 47

reported the maintenance and repair funding it currently receives to be about 1.3 percent of the current
replacement value of all its facilities, and the Architect of the Capitol's Office reported funding at a level of
about 1.7 percent.

Deferred Maintenance
If funds are not available to address identified maintenance and repair needs, these projects may be deferred
or delayed indefinitely. Deferred maintenance, is defined in the Statement of Federal Financial Accounting
Standards Number 6, Accounting for Property, Plant, and Equipment, as “maintenance that was not performed
when it should have been or was scheduled to be, and which, therefore, is put off or delayed for a future period
(GAO, 1998). Deferred maintenance, also called unfunded maintenance, backlog of maintenance and repair, or
unaccomplished maintenance, is generally quantified as the estimated cost of the maintenance and repair needed
to bring a facility up to a minimum acceptable condition. The significance of the existence of deferred
maintenance is that it “implies that the quality and/or reliability of service provided by infrastructure on which
maintenance has been deferred is lower than it should be and thus the infrastructure is not or will not later be
adequately serving the public” (Urban Institute, 1994). A report by the American Public Works Association,
Plan. Predict. Prevent. How to Reinvest in Public Buildings, found that “in the short-term, deferring maintenance
will diminish the quality of building services. In the long-term, deferred maintenance can lead to shortened
building life and reduced asset value” (APWA, 1992). In a series of reports, the GAO came to the following
conclusions about the deferred maintenance of federal facilities:
The Pentagon is a classic example of the federal government's failure to invest adequately in federal
buildings...Needed structural repairs and upgrades to the Pentagon were deferred for more than a decade, and the
General Services Administration (GSA) now estimates that its renovation will cost more than $1 billion and take at
least 13 years to complete (GAO, 1991).
Other federal buildings have been neglected ... and now need major repairs and alterations to bring them up to
acceptable quality, health and safety standards. The total number of federal buildings with deferred major repair
and alteration requirements is unknown but our work suggests that the number may be substantial. Continuing to
defer needed repairs and alterations accelerates deterioration and obsolescence and results in higher eventual costs
to the government...(GAO, 1991).
Most federal research laboratories are experiencing common problems with aging facilities--leaking roofs and
gutters, drafty window frames, power outages, and poor ventilating systems that do not meet industry standards for
air circulation...the eight agencies GAO reviewed reported backlogs of more than $3.8 billion in needed laboratory
repairs (GAO, 1993).
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APPENDIX A 48

The overall level of visitor services offered by the National Park Service is deteriorating. Visitor services are being
cut back and the condition of many trails, campgrounds, exhibits, and other facilities is declining. The Park Service
estimates that since 1988, the backlog of deferred maintenance has more than doubled to $4 billion (GAO, 1995b).
The magnitude of the numbers cited by agencies indicates that significant needed maintenance and repairs
have been deferred because of underfunding or other factors. Historically, public officials have not often found
the arguments for maintenance and repair funding compelling and have called into question the methodologies
used to define building deficiencies and to calculate the costs involved in repairing them 2 . One reason for this
skepticism is that although “the amount of deferred maintenance is important in itself, without also including
information on the implications of deferral, public officials and the public will have considerable difficulty in
interpreting the deferred maintenance figures” (Urban Institute, 1994). A second reason relates to the lack of a
standard methodology for defining and quantifying deferred maintenance. The concern has been that
inappropriate items have been included in the maintenance backlog to increase the overall estimate and argue for
larger budget appropriations.
Agencies have also used different formulas or standards to compute the costs of eliminating the backlog.
This situation may not be improved significantly by new reporting requirements of Federal Financial Accounting
Standard Number 6 because under this standard “it is management's responsibility to ...establish methods to
estimate and report any material amounts of deferred maintenance” (GAO, 1998).

Aging of Facilities
The federal facilities portfolio includes structures that span centuries of different planning, design,
construction, maintenance, management, and mission requirements. The average age of the federal facilities
portfolio by square footage or by current replacement value is not known because accurate data are not available.
However, it is safe to say that a large proportion of the facilities in the federal portfolio are already 40 to 50 years
old. More than half of the 8,000 office buildings managed by the General Services Administration are more than
50 years old, and the U.S. State Department estimates the average age of facilities to be 39 years. Even in a
“space age” agency like NASA, the average age of the facilities inventory is approximately 40 years. As
facilities age, wear and tear on building components increases, and electrical, mechanical, and other systems,
begin to break down. The rate and onset of breakdowns increases if maintenance has been implemented
haphazardly or not at all, and the operating condition deteriorates. Aging facilities require more, not less,
maintenance and repair to keep them operating effectively.
use the print version of this publication as the authoritative version for attribution.

2 Fiscal year 1998 is the first year in which federal agencies are required to report periodically on deferred maintenance by

disclosing deferred maintenance in agency financial statements. Previously, some but not all federal agencies kept inventories
of building deficiencies and the funding required to eliminate them; others provided maintenance needs estimates for
budgetary purposes and ad hoc reports.

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX A 49

Lack of Information to Justify Maintenance and Repair Budgets

In the federal budget and operations environment, facilities maintenance and repair is often deemed to be a
low priority issue because facilities program managers do not have the information they need to present their
case for funding to senior managers and public officials. “Interviews indicate that public officials, such as elected
officials and chief administrative officers, find the most convincing and compelling information to be the future
costs that can be avoided by undertaking early, preventive, or corrective maintenance activities” (Urban Institute,
1994). However, there is “very little study of the costs and implications of deferring maintenance... and cost
avoidance information is lacking” (Urban Institute, 1994). Estimates of the implications of deferred maintenance
on cost and quality of service are also lacking even though public officials “appear to believe such information to
be of considerable use” (Urban Institute, 1994). Because information on maintenance and repair issues most
convincing to public officials, particularly avoiding future costs, is not available, and because the information
that is available, such as the backlog of deferred maintenance, is not compelling, facilities program managers
have found it difficult to justify their maintenance and repair budget requests to senior executives and public
officials.

Lack of Accountability for Stewardship

Buildings are durable assets constructed to last at least 30 years; but they are composed of a number of
components with service lives of less than 10 years. Buildings themselves seldom fail in an obvious, catastrophic
sense. The deterioration of individual components generally occurs over time and may not be readily apparent:
detecting the incipient deterioration of roofs, mechanical and electrical systems, pipes, and foundations requires
regular inspections by trained personnel. Once detected through regular inspections or condition assessments,
relatively small problems can be repaired before they develop into much more serious problems through an
adequately planned and funded maintenance program.
Because facility deterioration occurs over a long period of time, it may appear to senior executives and
public officials that the maintenance and repair of facilities can always be deferred one more year without
serious consequences in favor of more urgent operations that have greater visibility. Unless a roof actually falls
in, senior managers are not likely to be held accountable for the condition of a facility in any given year. Yet
they are held accountable for current operations. Consequently, public officials and senior executives have few
incentives to practice effective stewardship of the federal facilities portfolio and are subject to few penalties if
they do not.
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APPENDIX A
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APPENDIX B 51

APPENDIX B
Excerpts from FASAB Standard Number 6

Executive Summary

a This statement contains accounting standards for Federally owned property, plant, and equipment
(PP&E); deferred maintenance on PP&E; and cleanup costs. Each standard is summarized below.

Property, Plant, And Equipment

b The Federal Government's investment in PP&E exceeds $1 trillion [NOTE 1 Department of the
Treasury, Financial Management Service, Consolidated Financial Statements of the United States
Government prototype 1993, p. 23. The prototype statements provide gross historical cost
investment amounts for all PP&E recorded by government entities. These amounts have not been
audited.] PP&E used for many different purposes. “PP&E” is defined as follows:
Tangible assets that (1) have an estimated useful life of 2 or more years, (2) are not intended for
sale in the ordinary course of business, and (3) are intended to be used or available for use by the
entity.
c The diversity among Federal PP&E creates a need for meaningful categories of PP&E with different
accounting standards for each category. The Board identifies four categories of PP&E. The
categories are:

- general PP&E are PP&E used to provide general government services or goods;
- Federal mission PP&E are PP&E exhibiting specific characteristics set by the Board;
- heritage assets are those assets possessing significant educational, cultural, or natural characteristics; and
- stewardship land [NOTE 2 Land acquired for or in connection with general PP&E would be included in that
category. Land not associated
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APPENDIX B 52

with general PP&E would be subject to supplementary stewardship reporting and is referred to
throughout this document as stewardship land.] (i.e., land other than that included in general PP&E).

d Complete accounting standards for general PP&E are included in this document.
e Federal mission PP&E, heritage assets, and stewardship land are the subject of a project on
“Supplementary Stewardship Reporting.” An exposure draft (ED) on this topic was issued in August
1995. The Supplementary Stewardship Reporting ED proposes accounting standards for these assets
after their acquisition. The accounting standards in this document address (1) classification of PP&E
in the categories, (2) accounting for the acquisition cost of PP&E falling into one of these three
categories, and (3) implementation of these standards where it affects the basic financial statements.
Because Federal mission PP&E, heritage assets, and stewardship land would be subject to
supplementary stewardship reporting, they are referred to collectively as stewardship PP&E. This
term is used for convenience only since each category has its own definition.

Deferred Maintenance

x The deferred maintenance standard requires disclosures related to the condition and the estimated
cost to remedy deferred maintenance of PP&E. These disclosures are made as a note to a line item
on the statement of net costs--no dollar amount shall be recognized on the statement.
y The standards recognize that there are many variables in estimating deferred maintenance amounts.
The standards acknowledge that condition rating is a management function since different
conditions might be considered acceptable by different entities as well as for different items of
PP&E held by the same entity. In addition, management may use condition assessment surveys or
life cycle cost plans to estimate the amount of deferred maintenance.
z The deferred maintenance standard applies to all PP&E whether reported on the balance sheet or
through supplementary stewardship reporting.

Chapter 3: Accounting Standard – Deferred Maintenance

Definition

77 “Deferred maintenance” is maintenance that was not performed when it should have been or was
scheduled to be and which, therefore, is put off or delayed for a future period.
78 For purposes of this standard, maintenance is described as the act of keeping fixed assets in
acceptable condition. It includes preventive maintenance, normal repairs, replacement of parts and
structural components, and other activities needed to preserve the asset so that it continues to
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provide acceptable services and achieves its expected life. [NOTE 58 Acceptable services and
condition may vary both

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APPENDIX B 53

between entities and among sites within the same entity. Management shall determine what level of
service and condition is acceptable.] Maintenance excludes activities aimed at expanding the
capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater
than, those originally intended.

Recognition

79 A line item for “deferred maintenance amounts” [NOTE 59 This requirement applies to all four
categories of PP&E.] shall be presented on the statement of net cost with a note reference in lieu of a
dollar amount. [NOTE 60 If management determines that there are no material amounts of deferred
maintenance, this line item need not appear.] No amounts shall be recognized for deferred
maintenance.

Disclosure Requirements - Measurement

80 Amounts disclosed for deferred maintenance may be measured using: - condition assessment
surveys, or - life-cycle cost forecasts. [NOTE 61 Other methods may be used which are similar or
identical to condition assessment survey or life-cycle costing. These methods would also be
acceptable sources of information on deferred maintenance.]
81 Condition assessment surveys are periodic inspections of PP&E to determine their current condition
and estimated cost to correct any deficiencies. It is desirable that condition assessment surveys be
based on generally accepted methods and standards consistently applied. [NOTE 62 Management
shall determine what methods and standards to apply. Once determined, it is desirable but not
required that methods and standards be applied consistently from period to period.]
82 Life-cycle costing is an acquisition or procurement technique that considers operating, maintenance,
and other costs in addition to the acquisition cost of assets. Since it results in a forecast of
maintenance expense, these forecasts may serve as a basis against which to compare actual
maintenance expense and estimate deferred maintenance.

Disclosures

83 At a minimum, the following information shall be presented for all PP&E (each of the four
categories established in the PP&E standard should be included). - Identification of each major class
[NOTE 63 “Major classes” of general PP&E shall be determined by the entity. Examples of major
class include, among others, buildings and structures, furniture and fixtures, equipment, vehicles,
use the print version of this publication as the authoritative version for attribution.

and land.] of asset for which maintenance has been deferred.

- Method of measuring deferred maintenance for each major class of PP&E.

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX B 54

- If the condition assessment survey method of measuring deferred maintenance is used, the following should
be presented for each major class of PP&E:

* description of requirements or standards for acceptable operating condition,

* any changes in the condition requirements or standards, and
* asset condition [NOTE 64 Examples of condition information include, among others, (1) averages of
standardized condition rating codes, (2) percentage of assets above, at or below acceptable
condition, or (3) narrative information.] and a range estimate of the dollar amount of maintenance
needed to return it to its acceptable operating condition.

- If the total life-cycle cost method is used the following should be presented for each major class of PP&E:

* the original date of the maintenance forecast and an explanation for any changes to the forecast,
* prior year balance of the cumulative deferred maintenance amount,
* the dollar amount of maintenance that was defined by the professionals who designed, built or manage the
PP&E as required maintenance for the reporting period,
* the dollar amount of maintenance actually performed during the period,
* the difference between the forecast and actual maintenance,
* any adjustments to the scheduled amounts deemed necessary by the managers of the PP&E, [NOTE 65
Adjustments may be necessary because the cost of maintenance foregone may not be cumulative.
For example, if periodic painting is skipped twice it is not necessarily true that the cost would be
double the scheduled amount.] and
* the ending cumulative balance for the reporting period for each major class of asset experiencing deferred
maintenance.

Optional Disclosures

84 Stratification between critical and noncritical amounts of maintenance needed to return each major
class of asset to its acceptable operating condition. If management elects to disclose critical and
noncritical amounts, the disclosure shall include management's definition of these categories. The
provisions of this statement need not be applied to immaterial items.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX C 55

APPENDIX C
Excerpts from Amendments to FASAB Standard Number 6

Statement of Federal Financial Accounting Standards Number 10, June 1998

Accounting for Internal Use Software
Executive Summary
This statement provides recommended accounting standards for internal use software. Under the provisions
of this statement, internal use software is classified as “general property, plant, and equipment” (PP&E) as
defined in Statement of Federal Financial Accounting Standards (SFFAS) No. 6, Accounting for Property, Plant,
and Equipment. This statement includes software used to operate a federal entity's programs (e.g., financial and
administrative software, including that used for project management) and software used to produce the entity's
goods and services (e.g., air traffic control and loan servicing).
Internal use software can be purchased off-the-shelf from commercial vendors and can be developed by
contractors with little technical supervision by the federal entity or developed internally by the federal entity.
SFFAS No. 6 specified treatment for internally developed software different from that for commercial off-the-
shelf (COTS) software and contractor-developed software. SFFAS No. 6 addressed COTS and contractor-
developed software generally, providing that they were “subject to its provisions.” On the other hand, specific
provision was made for internally developed software.
SFFAS No. 6 prohibited the capitalization of the cost of internally developed software unless management
intended to recover the cost through user charges, and the software was to be used as general PP&E. For
capitalizable software, capitalization would begin after the entity completed all planning, designing, coding, and
testing activities that are necessary to establish that the software can meet the design specifications.
At the conclusion of the PP&E project the Federal Accounting Standards Advisory Board discussed
whether the standard for internally developed software should also apply to contractor-developed software. Also,
use the print version of this publication as the authoritative version for attribution.

some users of SFFAS No. 6 were unsure how to apply it to COTS and contractor-developed software. The Board
decided, in December 1996, to review the issue and develop a separate standard for internal use software.
This standard requires the capitalization of the cost of internal use software whether it is

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX C 56

COTS, contractor-developed, or internally developed. Such software serves the same purposes as other general
PP&E and functions as a long-lived operating asset. This standard provides guidance regarding the types of cost
elements to capitalize, the timing and thresholds of capitalization, amortization periods, accounting for
impairment, and other guidance.

Statement of Federal Financial Accounting Standards No. 11, October 1998

Amendments to Accounting for Property, Plant, and Equipment - Definitional Changes – Amending SFFAS
No. 6 and SFFAS No. 8 Accounting for Property, Plant, and Equipment And Supplementary Stewardship
Reporting
Executive Summary

a The purpose of this Statement is to amend certain standards in Statement of Federal Financial
Accounting Standards No. 6, Accounting for Property, Plant, and Equipment, (SFFAS No. 6), which
was issued in November 1995; and, Statement of Federal Financial Accounting Standards No. 8,
Supplementary Stewardship Reporting, (SFFAS No. 8), which was issued in June 1996. The
amendments specifically affect the definition in the standards for Federal mission property, plant,
and equipment (PP&E) and the classification of space exploration equipment as general PP&E in
these two Statements.
b Rather than specifying types of PP&E, the original standards defined Federal mission PP&E with a
set of criteria. PP&E items that met those criteria would be reported as Federal mission PP&E.
Those criteria, however, were subject to inconsistent interpretations and appeared to be resulting in a
broader application of Federal mission PP&E than originally intended.
c To resolve this problem, the amendments eliminated the category of Federal mission PP&E and
created a new category for national defense PP&E, which consists of: (1) the PP&E components of
weapons systems and support PP&E owned by the Department of Defense or its component entities
for use in the performance of military missions, and (2) the vessels held in a preservation status by
the Maritime Administration's National Defense Reserve Fleet. As a result space exploration
equipment shall be treated as general PP&E.

Statement of Federal Financial Accounting Standards No. 14, April 1999

Amendments To Deferred Maintenance Reporting
Amending SFFAS No. 6 Accounting for Property, Plant and Equipment and SFFAS No. 8 Supplementary
Stewardship Reporting
use the print version of this publication as the authoritative version for attribution.

Executive Summary

I. Deferred maintenance reporting is a required disclosure per Statement of Federal Financial

Accounting Standards No. 6, Accounting for Property, Plant, and Equipment (SFFAS No. 6), and is
referenced in SFFAS No. 8, Supplementary Stewardship Reporting. This amendment does not
modify the information to be provided users of

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX C 57

federal financial statements. It does, however, modify the status of that information and thus the
level of its review by financial statement auditors.
II. When SFFAS No. 6 was issued, the Board indicated that deferred maintenance reporting would
evolve as preparers gained experience. The Board provided maximum flexibility to preparers noting
that management would determine “acceptable condition” against which deferred maintenance
would be assessed. (see SFFAS No. 6, par. 78, footnote 58) In addition, the Board noted that
acceptable condition might vary between entities and between sites within the same entity. To
ensure that readers would understand the deferred maintenance disclosures, the Board required that
management's method of measuring deferred maintenance and management's requirements for
acceptable condition be disclosed with the estimated amounts.
III. After the statement became effective, questions arose about whether this flexibility was appropriate
given the status of the information as basic information (i.e., an integral part of the financial
statements). The Board agreed that a change in status was warranted.
IV. This statement amends SFFAS No. 6 and SFFAS No. 8 to define deferred maintenance information
as required supplemental information (RSI) rather than within the financial statements and the notes
thereto.
V. As required supplementary information, the deferred maintenance information will be subject to the
audit procedures prescribed in AU Section 558.07, Codification of Statements on Auditing
Standards. These procedures include inquiries to management and comparisons of the information
for consistency. In addition, the auditor should consider whether the RSI should be covered in
management's representation letter. The auditor may need to apply additional procedures required by
other guidance, and to make additional inquiries if necessary based on the outcome of the required
procedures. Readers should refer to the most current auditing standards for relevant guidance.

Statement of Recommended Accounting Standards No. 16, July 1999

Amendments to Accounting for Property, Plant, and Equipment
Measurement and Reporting for Multi-Use Heritage Assets
Amending SFFAS No. 6 and SFFAS No. 8 Accounting for Property, Plant, and Equipment And
Supplementary Stewardship Reporting
Executive Summary

a The purpose of this Statement is to amend certain standards for heritage assets in Statement of
Federal Financial Accounting Standards No. 6, Accounting for Property, Plant, and Equipment,
(SFFAS No. 6), which was issued in November 1995; and, Statement of Federal Financial
use the print version of this publication as the authoritative version for attribution.

Accounting Standards No. 8, Supplementary Stewardship Reporting, (SFFAS No. 8), which was
issued in June 1996. Specifically, the amendments affect accounting and reporting standards for
heritage assets that serve a dual purpose; that is, heritage assets that 1) have a heritage characteristic,
and 2) are used in general government operations.

Copyright © National Academy of Sciences. All rights reserved.

APPENDIX C 58

b In SFFAS No. 6 and SFFAS No. 8, these heritage assets were referred to as “multi-use heritage
assets.” To clarify the meaning of the term “multi-use heritage assets,” the amendments define
“multi-use heritage assets” as being heritage assets whose predominant use is general government
operations. Heritage assets having incidental use in general government operations are not referred
to as “multi-use heritage assets.” Rather, they are simply “heritage assets.”
c In addition, the original standards required the cost of multi-use heritage assets that did not directly
relate to operations be accounted for as an expense, while costs that directly support operations be
accounted for as general property, plant, and equipment (PP&E). This treatment would have resulted
in inconsistent cost measures between agencies using heritage office buildings and those using non-
heritage office buildings.
d To alleviate this inconsistency, the Board decided that the all acquisition, reconstruction, and
betterment costs of multi-use heritage assets (i.e., heritage assets whose predominant use is general
government operations) be capitalized as general PP&E and depreciated over their service life. This
amendment should result in consistent accounting for the cost of PP&E predominantly used in
general government operations.
use the print version of this publication as the authoritative version for attribution.

Copyright © National Academy of Sciences. All rights reserved.

D
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Department of the Interior
Asset Management Plan, Version 1.2

TABLE OF CONTENTS

TABLE OF CONTENTS....................................................................................................... 2
EXECUTIVE SUMMARY ................................................................................................... 4
1. INTRODUCTION ......................................................................................................... 6
2. SUPPORT OF AGENCY MISSIONS AND STRATEGIC GOALS............................ 7
2.1 AGENCY MISSION ................................................................................................... 7
2.1.1 Real Property Organization Mission ............................................................. 9
2.2 HUMAN CAPITAL AND ORGANIZATION INFRASTRUCTURE .................................... 11
2.3 ASSET MANAGEMENT DECISION-MAKING............................................................ 13
2.3.1 Elements of Asset Management Decision-Making....................................... 14
2.3.2 Current Decision-Making Process .............................................................. 19
2.3.3 Moving to Portfolio-based Decision-Making .............................................. 20
2.4 ASSET MANAGEMENT OBJECTIVES ....................................................................... 24
2.5 ASSET MANAGEMENT TOOLS ............................................................................... 24
2.5.1 FBMS ........................................................................................................... 25
2.5.2 FMMS .......................................................................................................... 25
2.6 ENVIRONMENTAL AUDITING AND ENVIRONMENTAL MANAGEMENT SYSTEMS .... 26
2.7 HUMAN CAPITAL, POLICY AND DECISION-MAKING INITIATIVES .......................... 26
3. PLANNING AND ACQUISITION OF REAL PROPERTY...................................... 27
3.1 CAPITAL PLAN FOR MAJOR PROJECTS .................................................................. 28
3.1.1 New Construction of Major Projects ($2 Million and above) ..................... 29
3.1.2 Repair and Alterations Major Projects ($2 Million and above).................. 31
3.1.3 Acquisition of Major Leases ........................................................................ 33
3.2 CAPITAL PLAN FOR NON-MAJOR PROJECTS .......................................................... 34
3.2.1 New Construction, Repair and Alterations of Non-Major Projects ............ 34
3.2.2 Acquisition of Non-Major Leases ................................................................ 35
3.2.3 Acquisition of Fleet (Vehicle-focused)......................................................... 36
3.3 ACQUISITION PERFORMANCE MEASURES AND CONTINUOUS MONITORING .......... 37
3.3.1 DOI Acquisition Measures........................................................................... 38
3.3.2 Agency Specific Measures............................................................................ 38
3.4 PLANNING AND ACQUISITION INITIATIVES ............................................................ 39
4. OPERATIONS OF REAL PROPERTY...................................................................... 40
4.1 INVENTORY AND DESCRIPTION OF ASSETS ........................................................... 40
4.1.1 DOI’s Real Property Inventory.................................................................... 40
4.1.2 DOI’s Inventory of Motor Vehicle Fleet...................................................... 41
4.1.3 Historic Preservation Requirements............................................................ 42
4.2 ASSET DOCUMENTATION ...................................................................................... 42
4.3 BUREAU-LEVEL ASSET MANAGEMENT PLANS ...................................................... 42
4.4 ASSET BUSINESS PLANS (SITE-SPECIFIC)............................................................... 43
4.5 PERIODIC EVALUATION OF ASSETS ....................................................................... 44
4.6 OPERATIONS AND MAINTENANCE PLAN ............................................................... 44

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4.7 PLAN FOR BASIC REPAIR AND ALTERATIONS (R&A) NEEDS ................................ 45
4.8 CAPITAL AND OPERATING RESOURCE REQUIREMENTS ......................................... 46
4.9 OPERATIONS CONTINUOUS MONITORING AND PERFORMANCE MEASURES ........... 46
4.9.1 Federal Real Property Council Measures ................................................... 46
4.9.2 DOI and Agency Specific Measures ............................................................ 47
4.10 OPERATIONS INITIATIVES ..................................................................................... 50
5. DISPOSAL OF UNNEEDED ASSETS ...................................................................... 50
5.1 DATA TOOLS TO SUPPORT DECISION-MAKING ..................................................... 56
5.2 DISPOSAL PROCESSES ........................................................................................... 56
5.3 PERFORMANCE MEASURES AND CONTINUOUS MONITORING ................................ 59
5.3.1 DOI Disposal Measures............................................................................... 59
5.3.2 Bureau Specific Measures............................................................................ 59
5.4 DISPOSAL INITIATIVES .......................................................................................... 59
6. CONCLUSION............................................................................................................ 60
7. INTERIOR’S GOVERNMENT PERFORMANCE AND RESULTS ACT (GPRA)
STRATEGIC PLAN ASSET MANAGEMENT PERFORMANCE MEASURES .... 61
8. DOI BUREAU MISSIONS ......................................................................................... 64
9. ASSET MANAGEMENT IMPLEMENTATION PLAN ........................................... 66
10. AMP SECTIONS REFERENCING FACILITY CONDITION INDEX, ASSET
PRIORITY INDEX, AND CAPITAL PLANNING AND INVESTMENT CONTROL
...................................................................................................................................... 69

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EXECUTIVE SUMMARY

The Department of the Interior’s (DOI) Asset Management Plan (AMP) presents DOI’s
strategic vision and plan of action for compliance with the President’s executive order and the
methodology of asset management for:
• Owned and leased buildings;
• Structures;
• Linear assets;
• the Motor vehicle fleet; and
• Non-Stewardship land used for administrative purposes.1

The DOI AMP embraces the principles of the Federal Real Property Council (FRPC)
established by Executive Order (E.O.) 13327 on Federal Real Property Asset Management.
The AMP is structured to meet the form, content and other FRPC requirements. It is intended
to be a tool for managers throughout DOI, providing the roadmap to continue the transition
from a project-centric to portfolio-centric management approach. This transition to a portfolio-
based approach has significantly improved the management of DOI’s constructed assets and
through the AMP will better ensure that managers:
• Make effective business and operational investment decisions in assets that contribute
to the mission and strategic goals;
• Manage assets to optimize utilization, improve effectiveness and efficiency, and
promote regulatory compliance and stewardship;
• Optimize the portfolio of owned and leased assets, including space management and
fleet composition and utilization; and
• Build on and utilize historical accomplishments and current methodology to promote
improvements in asset management.

Implementation of the AMP through a portfolio-centered approach will strengthen the

management of DOI’s vast asset inventory. This inventory includes approximately 40,000
buildings, 4,200 bridges and tunnels, 126,000 miles of highways and roads, and 2,500 dams, as
well as nearly every type of asset found in a local community. Many of these assets have
historic or cultural significance that not only support DOI’s mission, but also are part of the
core mission.

The AMP will guide DOI in the creation of a consistent, current inventory in the Financial and
Business Management System (FBMS) and in the development of a single Facility
Maintenance Management System database. Importantly, the AMP will guide DOI managers
on how to affordably and reasonably maintain and sustain the portfolio to achieve the DOI
mission and outcome goals encompassing the major responsibilities of:
• Resource protection;
• Resource use;

1
Non-stewardship land is considered to be the land associated with constructed assets such that it would be
impractical to try to separate for sale.

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• Recreation; and
• Serving communities.

The use of performance metrics is a key ingredient to managing DOI’s portfolio. The AMP
requires the continued use of common industry performance metrics, such as Facility Condition
Index (FCI), Current Replacement Value (CRV), and deployment of an approach that will
allow DOI to more systematically include the mission dependency of assets in investment
decisions by using standard scoring tools like an Asset Priority Index (API). The AMP
features:
• Development of standard policy and procedures that focuses on life-cycle costs and the
portfolio covering planning, acquisition, operation, maintenance and the disposal of
assets;
• Bureau AMPs and internal scorecards, and site-specific plans;
• A strengthened capital planning and investment control (CPIC) process and governance
of portfolio and individual projects and assets;
• Establishment of an accurate and current property inventory with data elements and
performance metrics that will be supported by FBMS and FMMS;
• A framework for accountable management of assets including reporting; and
• Identification of actions to implement the AMP.

In meeting the requirements of the AMP and the E.O., DOI’s bureaus will be able to succinctly
capture, analyze, plan, and present all of this information in a manner that facilitates using
“best practice” concepts in Federal asset management.

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1. INTRODUCTION

This Department of the Interior’s (DOI) Asset Management Plan (AMP) establishes a strategic
direction for the management of assets within the Interior portfolio. The DOI AMP addresses
the life-cycle requirements of owned and leased buildings, structures, linear assets, the motor
vehicle fleet, and non-Stewardship land used for administrative purposes2

The AMP embraces the principles of the Federal Real Property Council (FRPC) established by
Executive Order (E.O.) 13327 on Federal Real Property Asset Management. The FRPC’s ten
guiding principles, applicable to Federal asset management, include:
1. Support agency missions and strategic goals
2. Use public and commercial benchmarks and best practices
3. Employ life-cycle cost-benefit analysis
4. Promote full and appropriate utilization
5. Dispose of unneeded assets
6. Provide appropriate levels of investment
7. Accurately inventory and describe all assets
8. Employ balanced performance measures
9. Advance customer satisfaction
10. Provide for safe, secure, and healthy workplaces

The DOI AMP is comprised of the following five sections.

Section 1 – Introduction provides an introduction and describes the approach and content of
this plan.

Section 2 – Support of Agency Missions and Strategic Goals addresses human capital and
organizational structure, decision-making framework, and objectives.

Section 3 – Planning and Acquisition of Assets describes how DOI plans for and acquires
owned and leased buildings, structures, linear assets and fleet, develops its capital plan,
identifies its prioritized acquisition list each fiscal year, measures the effectiveness of its
acquisition results, and identifies key initiatives to improve financial management and
acquisition performance.

Section 4 – Operations of Assets describes how DOI operates its owned and leased buildings,
structures, linear assets and fleet, addressing its inventory system, its Operations and
Maintenance Plans, its Asset Business Plans or “Building Block” Plans and its periodic
evaluation of assets. Additionally, operational measures are described, as well as key
initiatives that are underway to improve operational performance.

2
Non-stewardship land is considered to be the land associated with constructed assets such that it would be
impractical to try to separate for sale.

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Section 5 – Disposal of Unneeded Assets describes how DOI disposes of unneeded assets,
measures the effectiveness of its redeployment actions and identifies key initiatives to improve
the pace of disposition as well as its ability to dispose of difficult, environmentally challenged
properties. Plans for disposal of assets in current and future years will be described.

The AMP also includes the:

• DOI’s Government Performance and Results Act (GPRA) Strategic Plan Asset
Management Performance Measures in Section 7;
• General description of the bureaus’ missions and programs in Section 8;
• Asset Management Implementation Plan of actions the Department and the bureaus
will pursue over the next three years with target completion dates and categorized by
the nature of the action in Section 9; and
• Listing of sections in the AMP referencing Facility Condition Index (FCI), Asset
Priority Index (API), and Capital Planning and Investment Control (CPIC) in Section
10.

The Implementation Plan in Section 9 is a compilation of the initiatives identified at the end of
Sections 2 through 5.

2. SUPPORT OF AGENCY MISSIONS AND STRATEGIC GOALS

To facilitate integrating real property asset management decisions with agency missions, two
elements are needed – a clear understanding of the agency’s mission that drives the allocation
and use of all available resources (human , physical , financial and technology/information
capital) and an effective decision-making framework. DOI’s AMP, as required by E.O. 13327
presents DOI’s strategic vision and plan of action for strengthening the management of assets.

The inter-bureau Asset Management Partnership developed this plan. It establishes a strategy
to:
• Manage and oversee Interior owned and leased assets;
• Maximize their contribution toward accomplishing the Department’s diverse missions;
and
• Support the Department’s strategic goals, maximize utilization, effectiveness, and
efficiency

2.1 Agency Mission

The Department’s 2003-2008 Strategic Plan presents Interior from an enterprise perspective, as
one entity, with a single over-arching plan driven by cross-cutting programs and multi-bureau
and multi-agency goals and objectives. DOI’s mission has been organized into four areas of
responsibility:
• Resource Protection -- Protect the Nation’s natural, cultural and heritage resources;
• Resource Use -- Manage resources to promote responsible use and sustain a dynamic
economy;
• Recreation -- Provide recreation opportunities for the public; and

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• Serving Communities -- Safeguard lives, property and assets, advance scientific

knowledge, and improve the quality of life for communities we serve.

Each of these areas has its own strategic goal, supported by several related end-outcome (i.e.,
the desired consequences of our actions) goals. Those end-outcome goals, in turn, guide a
collection of related programs and services administered by one or more of the Department’s
bureaus and offices. Likewise, each goal is supported by a broad range of quantitative
performance measures—intermediate outcome goals and performance targets. Many of the
goals of our Strategic Plan address prudent asset management. A list of these asset
management-oriented goals can be found in Section 7 of this AMP.

DOI has the responsibility for making critical resources available to support many facets of the
domestic economy while protecting our environment. DOI must serve as a dependable trustee
and fulfill our special commitments to American Indians, Alaska Natives, and affiliated Island
Communities.

Real property asset management must integrate with and enable mission work using an asset
management program and investment management process. This ensures that investments are
aligned with Departmental, bureau, program missions and strategic goals. Assets and
investments are prioritized based on the degree to which investments support mission needs
and the achievement of strategic goals.

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2.1.1 Real Property Organization Mission

DOI accomplishes its mission through eight bureaus each with a unique mission and multiple
offices with distinct responsibilities. Each bureau’s mission statement is described in Chapter
8 of this document, DOI Bureau Missions.

DOI, with more than 70,000 employees and 200,000 volunteers, operates at some 2,400
locations across the United States (U.S.) and in U.S. island territories. DOI’s geographic
presence along with the vast number and variety of assets make facilities and asset
management a challenge. Moreover, managing approximately 40,000 buildings, 4,200 bridges
and tunnels, 126,000 miles of highways and roads, and 2,500 dams, particularly those with
historic or cultural significance, does more than facilitate the support of DOI’s mission, it is
part of the Department’s critical mission. Many of DOI assets are valued for their
environmental resources, recreational and scenic values, their cultural and historical resources,
and the resources, commodities, and revenues they provide.

DOI manages nearly every type of facility found in America’s towns and cities – DOI has
dams, electric generating facilities, houses, hotels, campgrounds, roads, boat docks, wastewater
treatment plants, stables, and even landfills. Increased public visitation on public lands
including National Parks, National Wildlife Refuges, National Wilderness Areas, National
Monuments and other protected resources is placing greater demands on facilities and other
assets as well as the programs and organizations for which they are used. In addition, DOI
occupies lease space at annual cost of $300 million and maintains a fleet of 38,000 motor
vehicles of which over 2,600 are alternative fuel vehicles (AFV).

The execution of asset management varies among the bureaus. However, consistent
throughout the Department is that all facilities will be constructed, operated, and maintained in
a manner consistent with all health and safety standards and in compliance with all appropriate
codes for safety, security, and accessibility. In addition, it is DOI policy that energy efficiency
and environmentally-sound building and operating principles will be applied as we build,
operate, and maintain our facility and equipment assets.

A description of the current state of the major bureau programs are as follows:

Bureau of Land Management’s (BLM) – BLM’s asset management property program is to

ensure proper stewardship of owned constructed assets (buildings, bridges, roads, utility
systems, and other facilities and infrastructures) that enables the BLM to successfully manage
264 million acres of public lands. In addition, BLM asset managers are responsible for the
identification of space leasing requirements, the contractual compliance of the lessor, and
development of a five-year space leasing plan. BLM asset managers are also responsible for
the management of personal property assets, including GSA-provided and DOI-owned fleet
and heavy equipment assets which support the constructed assets listed above. The BLM
program ensures protection of critical resources, public and administrative access, as well as
uses ranging from recreation to commercial activities.

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Bureau of Reclamation (BOR) – BOR’s management of land and constructed assets is an

integral component and activity in the Denver Office, each region, and area office. Current and
accurate land records (rights-of-way/easements) are imperative for an organization that is
responsible for operating and maintaining its water and power infrastructure throughout the
seventeen western states.

U.S. Geological Survey (USGS) – Responsibility for facility construction and maintenance,
space acquisition, and leasing all reside within the Office of Management and Services. The
headquarters Office of Management Services sets Bureau policy for real property management;
carries out strategic facilities planning; develops 5-year plans for construction and deferred
maintenance; and allocates funds for rent, operations and maintenance, deferred maintenance,
and capital improvement. In each of the USGS's three regions, a counterpart Branch of
Management Services oversees the acquisition, disposal, and operation of owned, leased, and
GSA properties in that region. Local USGS science centers can acquire property within
threshold limits and with the advice and consent of the regional Branch of Management
Services. Major acquisitions are approved by regional investment review boards and the
bureau Investment Review Board.

Fish and Wildlife Service (FWS) – FWS has integrated its real property program with its
facility and equipment maintenance program. Property management decisions are
decentralized and normally made at the Region or Washington offices depending upon the
scope of the decision. Space management issues for larger or consolidated offices are made in
the Regional or Washington offices of contracting and facilities management. The decision-
making process is dependent upon receiving information from the condition assessment
process, the asset priority index tool, the DOI five-year plan scoring system, and issues such as
office space utilization. Major construction projects are reviewed by the Investment review
board at the Washington office.

National Park Service (NPS) – NPS responsibility for acquiring direct or GSA leases, space
management, acquisition and allocation of funds for rent is centralized at the headquarters
office. The headquarters program also oversees the disposal of improvements on real
properties identified by parks to ensure that: 1) unutilized, underutilized, excess and surplus
properties are disposed of in accordance with the appropriate policies and procedures; and 2)
the annual real property inventory certification of properties owned and/or commercially leased
by the NPS and ensuring that all GSA reporting requirements are met. All of these functions
reside under the Office of the Comptroller, Washington Property Office. Parks and Regions
initiate the planning and approval processes at the unit level. The Property Office also sets
policies and procedures pertaining to space management and the management of real
properties.

The Land Resource Division resides under the Associate Director for Park Planning, Facilities,
and Lands and is responsible for the acquisition of land (real property) and interest in land
within units of the National Park System utilizing the Land and Water Conservation Fund. The
Washington Land Resources Office establishes policies and procedures pertaining to the
acquisition of land and including the budget and coordination of the Service-wide Program.
The Land Acquisition program is executed at the regional level which includes the
establishment of priorities.

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Bureau of Indian Affairs (BIA) – BIA asset management is administered through the Office of
the Deputy Assistant Secretary for Management (DAS). This Office serves as the CIPC Bureau
Investment Review Board (BIRB). Within this office, the Chief Financial Officer directs the
Division of Real Property functions for Space Management and Vehicle Usage.

This Division provides policy guidance for both GSA leasing and direct leasing while
maintaining the integrity of the FFS-Fixed Assets inventories and disposal/transfer/sell
procedures. Also with in this Office of the DAS, the Director of the Office of Management
Support Services directs the Deputy Director, Office of Facilities Management and
Construction. This Office maintains the Facilities Management Information System (FMIS),
provides the strategic planning functions for all BIA constructed assets to the BIRB, conducts
Condition Assessments, provides facility condition index data management, develops 5-Year
construction, improvement and repair plans, develops annual and long range plans to excess
space, maintains the construction in progress data integrity and coordinates application of the
asset priority indices with major program offices as well as the Division of Property
Management.

In all DOI Bureaus, the focus of the property program is to ensure proper stewardship of assets
(buildings, bridges, roads, utility systems, and other facilities and infrastructures) that enables
Bureau missions. The programs ensure protection of critical resources, public and
administrative access, as well as uses ranging from recreation to commercial activities.

2.2 Human Capital and Organization Infrastructure

The Secretary of the Interior leads the agency and is supported by assistant secretaries, bureau
directors, and other senior officials. In 2004, the Assistant Secretary – Policy, Management
and Budget (PMB) consolidated facility and property management oversight activities and
functions to better position the Department to comply with the provisions of the E.O. 13327.
This organization, the Office of Acquisition and Property Management (PAM), reports to the
Deputy Assistant Secretary for Business Management and Wildland Fire, who is DOI’s Senior
Real Property Officer.

The Assistant Secretary – PMB, Deputy Assistant Secretary for Business Management and
Wildland Fire, and PAM provide executive level leadership for the Department in the areas of
acquisition and Federal assistance (grants and cooperative agreements); facilities, real, museum
and personal property management; government furnished quarters; space management; energy
efficiency, water conservation and renewable energy programs; motor vehicle fleet
management; alternative fuel vehicles (AFV); integrated charge card program; and electronic
commerce and related automated systems. PAM also coordinates policy development,
promotes business professionalism through program evaluation and guidance, supports capital
planning, and supports program and bureau operations in all of its functional areas.

Consistent with the designation of a Senior Real Property Officer, each bureau in DOI has
established an organization structure to manage real property assets in support of that bureau’s
mission. Each bureau has designated a senior bureau asset management officer to oversee the

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asset management program and ensure its alignment with the bureau’s unique mission and
Departmental strategic goals.

Each bureau’s unique mission, history, and management culture have influenced its respective
organizational structure, number and type of offices established at the headquarters, regional,
and local level, the functions performed in those offices, and the level of real property
management responsibility delegated to them. Although different in execution, each real
property organization is driven by a commitment to support DOI and the bureaus’ mission and
carry out the DOI Strategic Plan and AMP.

To bridge those differences and increase intra-agency efforts to work toward management
excellence including common asset management goals, DOI has established a hierarchy of
intra-agency councils to insure coordination within the Department as noted in the following
diagram. At the executive level, there is the Management Executive Council (assistant
secretaries, and bureau directors) and the Management Initiatives Team (deputy assistant
secretaries, and bureau deputy directors). The Asset Management Team, a sub-team of the
Management Initiatives Team, is comprised of the senior asset management officers from each
bureau. Its role is to preside over major real property investment decisions and initiatives. The
Asset Management Partnership, comprised of bureau mid-level asset managers, provides staff
support to DOI’s executive leadership.

Secretary
Secretary Assistant Secretaries
MEC
MEC Bureau Directors
Management
Management Excellence
Excellence Council
Council Chair: Secretary/Deputy

Major Investments/Portfolio
Deputy Assistant Secretaries
MIT
MIT Bureau Deputy Directors
Management
Management Initiatives
Initiatives Team
Team
Chair: AS - PMB

Asset
Asset Management
Management Team
Team Senior Bureau Asset
MIT
MIT Sub-Team
Sub-Team Management Officers

Asset Chair: DAS – BM&WF

Department Staff Support Asset Management
Management Partnership
Partnership (Senior Real Property
& CPIC Coordinators Officer)
Asset-Specific
Asset-Specific Partnerships/
Partnerships/
Working
Working Groups
Groups

Can have multiple boards - HQ & State/

Regional
Bureau
BureauHeads
Heads
Includes: Mission Programs, Procurement,
Human Resources, Budget, Financial
Bureau
BureauInvestment
InvestmentReview
ReviewBoards
Boards Management, IT
HQ Chair: Senior Bureau Asset Mgmt.
Major & Non-Major Investments/Portfolio Officer or above (Director/Deputy Director)

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DOI’s Strategic Human Capital Management Plan at http://www.doi.gov/pfm/human_cap_plan/

provides a framework for human capital management and development in Interior. Specifically
in support of asset management, DOI has addressed human capital needs by conducting two
Facilities and Asset Management Conferences. This was a joint effort with the U.S. Forest
Service and Indian Health Service to provide best practices in maintenance, construction,
engineering, leasing, and real property financial management and to enhance career development
and retention of employees with critical skills.

In addition, DOI has drafted a Facility Management Workforce Plan that lays out steps to
improve recruitment, retention, and training of critical facility management skills. This draft
Facility Management Workforce Plan will be expanded to be consistent with the DOI Human
Capital Management Plan. DOI University has developed a curriculum to facilitate project
management training. These steps help ensure uniform application of business practices.

DOI is continually evaluating its ability to meet new and evolving requirements for
strengthening asset management. The Department will undertake a DOI-wide mission needs
analysis or gap analysis to evaluate and compare the resource requirements, i.e., staffing,
training, contractual support, etc., necessary to implement the E.O. and DOI’s asset
management program with current available resources.

The Department will continue to identify and implement best practices and opportunities to
share resources among the bureaus and to partner with other agencies to create economies of
skill. Economies of skill stemming from common approaches, common language, and
common requirements permit the redeployment of human resources within and between
organizations to meet critical needs. The Service First program, a current partnership between
the BLM and the Forest Service of the U.S. Department of Agriculture, is an example of DOI
working with another agency to seek cost-effective solutions to common critical needs and
concerns.

2.3 Asset Management Decision-Making

The DOI’s portfolio-based approach to asset management provides managers at all levels the
tools to make wise investments, including informed choices for funding, in owned and leased
buildings, structures, linear, fleet assets and non-stewardship lands that contribute to the
mission. The goal of this portfolio-based approach is to achieve management excellence and
effective mission delivery. To accomplish this goal, our managers must be able to address the
following questions in managing the portfolio of covered assets, throughout the life-cycle of
individual assets:
• Can we ensure that assets are strategically aligned with program goals and objectives?
• Can we realign assets in response to change?
• Can we ensure the best value for investing in assets?
• Can we measure the value?
• Can we determine the future use, needs, or the replacement of assets?

Through the Management Initiatives Team, the bureau investment review boards and the
framework established to review asset investments, the Department is evaluating and
prioritizing investments, basing investment decisions on cost-benefit, and developing five-year
plans that provide a context for investment decisions and budgets.

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The Department’s initiatives for space and fleet management also establish frameworks for
making investment decisions and effective management. DOI managers will be better able to
ensure the right mix of owned and leased assets in DOI’s asset portfolio, including space and
fleet.

2.3.1 Elements of Asset Management Decision-Making

The strategy and plan of action presented in this AMP is structured around the development of
a consistent approach for five categories of asset management – 1) contribution to mission, 2)
asset inventory, 3) asset condition, 4) asset valuation, and 5) improving the condition of the
asset portfolio and properly sustaining it over time – life cycle management. DOI’s
accomplishments and actions currently underway are the building blocks for the strategies to
strengthen asset management that are presented in this section.

In recognition of the importance of managing the portfolio to support DOI’s many and diverse
missions and its strategic goals, the elements of asset management decision-making are
described below.

2.3.1.1 Contribution to Mission

The Department’s maturing asset management program and investment management process is
better ensuring that investments are aligned with Departmental, bureau, program missions and
strategic goals. This linkage results in the prioritization of constructed assets based on the
degree to which investments support mission needs and the achievement of strategic goals. For
DOI owned and leased real property assets, the Asset Priority Index (API) is one tool that helps
provide a clearer link to mission for each existing and proposed building and structural asset in
the portfolio.

The Department, through the Asset Management Partnership, will continue to refine the DOI
API framework, criteria and weighting. Standards will be developed to guide Interior and
bureau-level scoring processes that reflect the mission of each individual organization. API
scores will be based on a 0-100 point scale. Mission dependency and operations criteria
comprise 80 percent of the total weight. Asset substitutability equals 20 percent.

At this time, the Department and the bureaus have agreed to the following structure:
• Each Bureau API will have a 0-100 scale which will map to the FRPC-defined categories
for mission dependency.
• 80% of the 100 point score will be reserved for criteria that reflect the Bureau’s unique
mission. For example in the National Park Service (NPS), these include visitor satisfaction
and resource protection. In the U.S. Geological Survey, they include short and long-term
support for scientific goals. All Bureaus will include criteria that are appropriate for their
mission (education, science, land management, etc.).
• 20% of the 100 point score will be reserved for the concept of asset substitutability. Asset
substitutability encourages asset managers to consider how “substitutable” an asset may be.
For example, if an asset is unique and no comparable facility exists, the asset would receive
the maximum score for “no substitute.” If there are many similar assets in close proximity,
the asset would score lower on asset substitutability.

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This is a substantive new initiative that will be used with FRPC performance metrics and others
factors to enhance the ability of managers to make the best decisions possible on which assets
to repair, where and when to build new, when to enter and exit leases, and when to dispose of
assets, all within the context of contribution to mission. The API will be used in concert with
the existing Deferred Maintenance and Capital Improvement Five-Year Plan in which bureaus
submit a summary business case for out-year projects. One of the required elements is linking
the project to DOI strategic goals and objectives.

Given the current focus by DOI on fleet management and space utilization, the AMP provides
for a special emphasis on these functions. For vehicles, the Department will be able to
optimize utilization, consider fleet resources within a broader context and optimize the size of
its fleet by linking decisions about acquisition, leasing, replacement cycles and disposal with
strategic goals and mission needs. Based on the Department’s fleet management strategy,
bureaus are formulating fleet management plans that are a framework for improved fleet
management.

For space, the Department will develop a multi-year strategic plan that will ensure that facility
acquisitions, lease renewals and relocations are driven by mission-related needs and that
priority is placed on collocation, consolidation, and improved partnership relationships. Using
information provided by the bureaus on current and future year lease plans, anticipated lease
expirations, renewals, and relocations, the Department will identify opportunities for
collocation, consolidation and other actions to improve space utilization and mission support.

2.3.1.2 Asset Inventory

The Department presently maintains an inventory of owned and leased buildings, structures,
linear assets and fleet assets including listings of all DOI owned, occupied (through
cooperative agreement or collocation), and leased assets in a mix of bureau-specific databases.
DOI is in the process establishing an accurate and current inventory through the development
of the Financial and Business Management System (FBMS) which will bring standardization
and integration of data.

FBMS is a single, integrated tool that will help Interior’s bureaus to manage their many unique
missions. FBMS will help bureaus to manage a variety of administrative functions, including:
Accounts Receivable, Accounts Payable and Project Systems, Budget Formulation, Budget
Execution, Personal Property, Real Property, Fleet, Core Financials, Acquisition, Travel,
Financial Assistance, and Enterprise Information Management. FBMS will also interface with
the Federal Personnel and Payroll System (FPPS), the Bankcard system, and the Quarters
Management Inventory System (QMIS).

FBMS will contain all fields necessary for government-wide real property inventory reporting.
Data elements for property records in FBMS include key fields on the number, size, location,
use, type, occupants, and age of the assets. FBMS will be the system of record for the 23
Federal Real Property Council (FRPC) data elements developed by the FRPC which DOI and
other Federal agencies will report for their real property assets. Inventory data for DOI
constructed assets (i.e., those maintained by DOI) will be uploaded to FBMS from the
Facilities Maintenance Management System (FMMS), which will be a standardized single
platform solution for facilities management,

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The Facilities Maintenance Management System (FMMS), which will be a standardized single
platform solution for facilities management, will utilize the MAXIMO™ Enterprise Adapter.
The MAXIMO™ Enterprise Adapter, which is compatible with the SAP software used for
FBMS, will enable a single point of interface between the two systems, increasing efficiency
and cost savings.

Because of the integration of financial and asset management functions within FBMS, the real
estate module will directly accrue all financial information associated with a facility, asset, or
rental unit, including labor, contracts, rental income, materials, supplies and utilities. In
addition, once the interface with the single level FMMS is complete, the system will be able to
collect all costs associated with work orders generated in FMMS.

This capability will allow DOI to understand and provide a brief description of each owned and
operated asset, current use, location, major subsystems and components, and other general
information. The extent of information required will be appropriate to the size of the
investment, management, and reporting requirements. This information will be required for
new assets that are evaluated as part of portfolio management.

The extensive inventory of DOI-owned and GSA-provided fleet vehicles and heavy equipment
will also be maintained and managed within FBMS. Using FBMS as a tool, for fleet, DOI will
continue to report its inventory through GSA’s Federal Automotive Statistical Tool system
(FAST). FBMS will also enable DOI to continue to use the Exhibit 54 to report its rented
space inventory and budgetary requirements.

2.3.1.3 Asset Condition

DOI has developed, is using, and will refine asset condition assessment processes that
rigorously support the best possible investment strategy for improving and maintaining the
portfolio. The condition assessments identify and validate the condition of facilities and lead to
the identification of maintenance needs. This tool assists managers in establishing maintenance
schedules, estimating budgetary requirements for cyclical and deferred maintenance.

The condition assessments integrated with the use of FMMS will create the ability to plan,
schedule and conduct maintenance and to properly define the scope and cost of repair,
improvement, replacement operations, recurring and preventive maintenance (condition
assessments should ideally be conducted as an integral part of preventive maintenance
activities) and component renewal activities in the future.

Comprehensive assessments may include examination of assets for issues related to non-
functioning building components and equipment, accessibility, deferred maintenance, historic
preservation, structural fire, energy conservation, environmental code and life safety code
compliance. The desired end state for the condition assessment program with FMMS is to
facilitate integrated, collaborative data collection that provides information on all necessary
facets of management requirements for the asset.

DOI is developing standardized practices to estimate the costs of repairing asset deficiencies as
documented during the condition assessment phase. Either contractors or internal bureau staff
will perform the assessments depending on the level of expertise required. Wherever possible,

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the DOI standardized practices will use industry-accepted cost estimating guidelines, such as
R.S. Means or Whitestone Research. Continual value-added industry standard assessment
efficiencies of various classes of assets will be incorporated by the DOI to affect frequencies,
relative risk, levels and costs.

The relative condition of owned assets will be measured using the Facility Condition Index
(FCI), which is an accepted industry metric for determining the relative condition of assets.
The deferred maintenance costs developed from the condition assessment process are divided
by the asset replacement cost to calculate the FCI. The FCI will be used with a fully developed
DOI-wide asset priority index (API) that rates each existing or proposed owned and leased
asset in the inventory based on its importance in carrying out the DOI mission and achieving
strategic goals. (See Section 10 of the AMP for the list of other sections in this document that
discuss FCI and API.)

To achieve this result, the Department is working to:

• Adapt industry-based performance measures for portfolio management of owned and
leased assets;
• Utilize a common FCI scale by asset type for overall condition rating; and
• Coordinate with leasing authorities to establish appropriate performance measures.

2.3.1.4 Asset Valuation

The use of the Current Replacement Values (CRV) for assets, including those that are
considered to be heritage, is only for the purpose of calculating the FCI, which is an indicator
of the asset’s condition and serves as a performance measure for condition improvement. In
doing so, the CRV on these assets, including those that are heritage, is based on functional
replacement and does not include intrinsic values; overall CRVs on all assets should not be
used for any other purpose (i.e., appraisal value, reproduction value, acquisition costs for
capitalization and depreciation, etc.).

CRV is defined as the standard industry cost and engineering estimate of materials, supplies,
and labor required to replace a facility or item of equipment at its existing size and functional
capability, and to meet current regulatory codes. DOI will refine its capability to evaluate
each owned and operated asset to determine its CRV. CRV policies for heritage assets will be
developed with input from DOI cultural resource specialists and other appropriate discipline
experts.

2.3.1.5 Improving the Condition of the Asset Portfolio and Properly

Sustaining It Over Time – Life Cycle Management
The Department’s portfolio approach to asset management is based on life cycle principles that
include acquisition, sustainability, and disposal where appropriate. The Department and
bureaus utilize five year plans to prioritize and budget for component renewal, cyclic
maintenance, and annual operations costs based on life cycle needs to allow forecasting annual
funding requirements. FMMS provides the system support to manage these processes at the
individual facility and complex level. In addition, the Department’s Capital Planning and
Investment Control (CPIC) process, discussed in Sections 2.3.2 and 2.3.3, incorporates a
Departmentwide, national review of major investments. (See Section 10 of the AMP for the
list of other sections of this document that discuss CPIC.)

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With deployment of FBMS, the tools available to asset managers will significantly improve.
FBMS and FMMS business tools will work together to facilitate the determination of these life
cycle needs. Procedures will be developed to specify whether the life cycle costing applies to
asset life cycle or component life cycle. Sustainment strategies should identify operations and
maintenance costs, disposal costs, equipment replacement needs, and component renewal costs.
FCI and API are important components already available to Interior in implementing and
executing an asset management planning process that incorporates life-cycle principles.

Departmentwide standards will be developed to guide Interior and bureau-level scoring

processes and will reflect the mission of each individual organization. API scores fall within a
0-100 point scale. Mission dependency and operations criteria comprise 80 percent of the total
weight. Asset substitutability equals 20 percent.

The move to incorporate API into the Department’s life cycle and portfolio-based approach
will ensure that the highest priority mission critical assets are incorporated into the five-year
plans. This system will maximize spending upon bureau mission critical assets at the most
important periods in the assets life cycle. Under this procedure, bureaus will first sort assets
into four categories, high API/good FCI, high API/poor FCI, low API/good FCI, and low
API/poor FCI:
• Assets with high API and good FCI should be maintained with practices that protect the
government’s investment;
• Assets with high API and poor FCI should be considered for demolition and
replacement. If the asset's API is high principally because another asset cannot be
substituted for it (e.g., an historical significant asset) repair and rehab activities will be
the priority;
• Assets with low API and good FCI should be considered candidates for transfer or
beneficial use by other parties; and
• Assets with low API and poor FCI should be considered for disposal.

These indices will be used to determine the prioritization for projects to be included in DOI’s
Five-Year Deferred Maintenance and Capital Improvement Plan. This will accomplish the
following:
• Assist in directing resources where they are needed most, based on mission need and
strategic goals;
• Assist in identifying lower priority assets that should be considered for excess if they
no longer support the DOI mission;
• Effectively manage the life-cycle of every asset;
• Assist in maturing the Department’s focus from project formulation and execution to
one of life-cycle asset management where the planning focus is not about projects and
project funding, but rather the effect the project will have on the asset throughout its
life-cycle; and
• Adopt and utilize other performance measures that will enhance the Department’s
ability to be predictive regarding future management of the asset portfolio, e.g.,
component renewal index (CRI) and/or dollar per square foot ($/SF) for operations and
maintenance.

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The implementation of the DOI AMP incorporates the five critical focus categories defined
above into a cohesive process that will evolve and mature. DOI will begin to incorporate these
principles into its current processes for decision-making in order to prioritize, plan, and manage
the life-cycle of all assets that comprise the Department’s asset portfolio.

2.3.2 Current Decision-Making Process

In most of the Department’s bureaus, real property asset management decisions are made in a
hierarchical process that starts at the local field office level, is reviewed and prioritized a the
regional level, and is reviewed and prioritized at the national level. Investment review and
prioritization at each of these levels results in the formulation of five year plans. These plans
set the framework for decisions about funding levels for projects and program.

The DOI Information Technology and Construction Capital Planning and Investment Control
Guide, Version 1.0 at http://www.doi.gov/pam/cpic/ provides the framework for this process
and guidance on thresholds for construction projects. Decisions to recommend construction
projects between $2 and $10 million are made at the director-level of the bureaus. Projects
above $10 million, or other special interest projects, are made at the highest levels within DOI.
See Section 3.1.1 for additional details on capital planning for major projects.

Each bureau and the Department have Investment Review Boards (IRB). The Development
Advisory Board (DAB) within NPS and the Bureau Investment Review Board (BIRB) within
BIA are examples of executive-level investment committees that decide which
major/prospective capital investments should be recommended for funding consideration. In
the bureaus, regional or local leadership is responsible for managing the day-to-day operations
and for shaping reinvestment decisions for the real property assets in their portfolios.

IRB membership includes representation from throughout the Department or bureau including
mission programs, acquisition, budget, planning, construction, space, fleet, human resources
and other areas to ensure a balanced and enterprise approach to investment decisions. The use
of the broad based group ensures full engagement at the management level and decision
making that considers mission support needs and strategic goals of the organization.

The bureau IRBs report to the bureau or office head or deputy head that approves projects and
plans. The bureau IRBs are chaired at a level no lower than the Bureau’s Senior Asset
Management Officer. Accordingly, the bureau IRBs make funding recommendations on
proposed projects and current space investments to the bureau heads.

The Department utilizes IRBs at the technical, managerial and policy levels including the Asset
Management Team that is chaired by the DOI Senior Real Property Officer, the Management
Initiatives Team that is chaired by the Assistant Secretary – Policy, Management and Budget
and the Management Executive Council that is chaired by the Secretary or Deputy Secretary.
These Department-level IRB responsibilities include setting performance goals and assessing
how well investments meet the goals, as well as addressing identified strategic and mission
needs.

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IRBs review the investment portfolio and make decisions using the five-year plans and exhibit
300s that are the basis for the annual budget request. Decisions are made considering the
mission related needs, strategic goals, return on investment, cost and schedule, etc. The
following chart depicts the roles and responsibilities of the IRBs.

Investment Review Boards Primary Responsibilities

Secretary • Decide Approval/Disapproval

• Consider Appeals of MIT Decisions

Management Excellence Council

(MEC)

• Develop Investment Strategy

• Validate Major Project Scoring
Management Initiatives Team • Certify Portfolio
(MIT) • Resolve Duplication
Asset Management Team (AMT) , an MIT • Project Integration Opportunities
Sub-team (The Asset Management Partnership • Recommend Approval/Disapproval
and the Asset-Specific Partnerships/Working • Review Exhibit 300
Groups provide staff support to the AMT) • Identify Duplication
• Score Projects
• Prioritize Portfolio
• Oversee CPIC Process

Bureau Heads • Prepare and review Exhibit 300s

• Identify Project Integration
Bureau Investment Review Boards Opportunities
• Scoring/Ranking/Multi-year Plan
• Oversee Individual Investments and
Portfolio
• Oversee CPIC Process

2.3.3 Moving to Portfolio-based Decision-Making

DOI actively manages a portfolio of capital investments in order to maximize the return on
investment to the taxpayer and Government at an acceptable level of risk. The AMP outlines
the process whereby DOI is moving from a current reliance on a project-based review process
to a life-cycle, asset-based portfolio management process. Effective capital planning within
DOI requires improved long range planning and a disciplined budget process as the basis for
managing a portfolio of assets to achieve performance goals and objectives with minimal risks,
lowest life cycle costs, and greatest benefits to the business of the bureaus and the Department
overall.

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The Department has developed and continues to refine its approach to establishing a more
consistent, structured, performance-based, integrated approach to its Capital Planning
Investment Control (CPIC) process. As DOI’s portfolio-based approach matures, the
Department and the bureaus will continue to improve their ability to manage risks and returns
of capital assets throughout their life cycle necessary to ensure that DOI’s investments are well
conceived, cost-effective, and support strategic mission and business goals. The analysis of
these investments is a living tool that will be continually revisited, refined and updated. It is
articulated in a business case, the extent of which is commensurate with the cost and impact of
the investment on the organization and mission.

Within DOI, the CPIC objectives are achieved through the five phases noted in the CPIC
process as depicted in the following diagram; pre-select, select, control, evaluate, and steady-
state.

S e le c t
H o w d o yo u k n o w
y o u h a ve s e le c te d
th e b e s t
in ve s tm e n ts ?
Pre - C o n tr o l
S e le c t W h a t a r e y o u d o in g
W h a t a r e th e T o e n s u r e th a t th e
b u s in e s s n e e d s In ve s tm e n ts w ill
fo r th e d e live r th e b e n e fits
in ve s tm e n ts ? p r o je c te d ?

S te a d y - E va lu a te
Ba s e d o n yo u r
S ta te e va lu a tio n , d id th e
D o th e in ve s tm e n ts in ve s tm e n ts d e live r
s till c o s t e ffe c tive ly w h a t yo u
s u p p o rt e x p e c te d ?
r e q u ir e m e n ts ?

The executive governance structure is the cornerstone of the Department’s CPIC process and
for managing and assigning accountability for the life-cycle of the portfolio of assets and the
individual assets that comprise the portfolio. The governance structure is multi-tiered,
comprised of bureau and the Department’s IRBs.

Governance relies on the following activities:

• Identifying project integration opportunities – resource sharing, co-location
opportunities;
• Ranking/prioritizing projects in multi-year plans;
• Overseeing and monitoring the process for managing the portfolio of individual assets;
and
• Establishing portfolio investment strategy, and performance objectives and goals.

As part of the governance process, the bureaus have flexibility in the design of their internal
CPIC process, but must assure that needs have been analyzed and evaluated by their IRBs. The
bureaus’ IRBs support the criteria and performance goals defined by the Secretary and the

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Department executive IRB and establish bureau-specific criteria and goals that complement
and support those of the Department. The criteria and goals will be used when making
investment decisions.

The bureau IRB approves those investments that best meet bureau needs. Individual project
proposals are assessed and prioritized. On at least an annual basis and in line with
Departmental budget planning and CPIC guidance, proposed projects are:
• Reviewed by the bureau IRB and submitted for the consideration of the bureau head;
• Approved or disapproved by the bureau head and, as appropriate, the multi-year plan is
revised with bureau heads certifying project approvals and strategic plans; and
• Forwarded by the heads of bureaus and offices to the Department’s IRB when deemed
major including projects with a life-cycle cost of over $10 million, projects that are at
high risk (e.g., may exceed budget, schedule, and/or scope), and projects that are of
unique interest to the Secretary, OMB and/or the Congress.

Departmental governance in the planning and budgeting phase generally focuses on:
• Convening of IRB meetings to review and recommend portfolio priorities, based on the
five-year plans;
• Identifying and overseeing major Departmentwide or multi-bureau ongoing projects
relative to cost and schedule, investment decisions on acquisitions and portfolio
strategies, performance, outcomes and criteria;
• Conducting IRB and Secretary’s review and approval of IRB portfolio
recommendations;
• Providing feedback on the portfolio to reflect approved individual major project asset
acquisitions (OMB Exhibit 300s) and overall Five Year Plan with major and non-major
projects; and
• Approving the portfolio of investments that will be submitted to OMB as part of the
annual budget request, and to report milestone changes.

Utilizing tools including FBMS, FMMS, CPIC, API and improved asset management
guidelines, DOI is shifting from project funding to a portfolio-based approach, with a much
stronger emphasis on life-cycle management; where the planning focus is on asset investments,
whether owned or leased, rather than just project formulation and project execution. The
bureaus’ IRBs identify project integration, and space co-location and consolidation
opportunities to score and rank investments and for multi-year planning. This shift is occurring
during a transition period and involves extensive management commitment.

DOI will facilitate this transition through the use of a full suite of tools relating to asset
priority, asset inventory, asset condition, asset valuation, and life-cycle management. DOI will
use these tools and develop metrics to be implemented at the field, regional, bureau
headquarters and Departmental levels to improve the performance of individual assets and the
overall asset portfolio.

By building on the current best practices and proven CPIC processes used throughout DOI (i.e.,
the Five-Year Deferred Maintenance and Capital Improvement Plan, capital planning and
governance through IRBs), an enhanced portfolio management process will better ensure that
each bureau and Departmental-level IRB collectively analyzes and compares all investments

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and proposals to select those that best fit with the strategic business direction, needs, and
priorities of the bureau. In addition, DOI will have practical limits on funding, the risks it is
willing to take, and the length of time for which it will incur costs on a given investment before
benefits are realized.

To address these practical limits, portfolio management will use categories to aid in investment
comparability and cost, schedule, benefit and risk oversight. Once all investments within the
portfolio are categorized, investments and proposals can be compared to one another within
and across portfolio categories.

Portfolio management is an integral component of the CPIC process; however, portfolio

management cannot be accomplished without first establishing an investment foundation.
Building an investment foundation, using a maturity model such as the General Accountability
Office’s Information Technology Investment Management maturity model as described in
GAO/AIMD-10.1.23, requires that DOI first establish asset investment management processes
to ensure:
• An investment is selected based on established selection criteria;
• An Investment proposal is business driven;
• IRB establishes and maintains an asset inventory of current investments; and
• IRB oversees these investments.

With maturity and experience in establishing an investment foundation, DOI can move forward
with developing a complete investment portfolio. Based on the GAO model cited above, the
DOI asset portfolio is based on:
• Ensuring the alignment of the various IRBs;
• Developing portfolio selection rating, and ranking criteria that supports DOI mission and
strategic goal;
• Conducting continuous analysis of each investment at every phase of it’s life-cycle;
• Developing portfolio performance measures; and
• Strengthening the analysis of investment proposals to incorporate, in a more consistent
fashion, the degree that investments support mission and business needs and goals.

During this transition to a portfolio-centered approach, the CPIC process at the individual
investment level will continue to consider underlying assumptions; the alternatives considered;
a full range of costs and benefits; and the potential risks to their organizations. This analysis
ensures that the objectives are clearly defined and performance goals are established, and
includes the life-cycle costs of proposed assets, which includes the costs of operations and
maintenance as well as any other operational requirements resulting from the investment
decision.

As part of its analysis process, the DOI will include, where appropriate, the evaluation of ways
to abandon, disengage, or exit from facilities investments and include disposal costs in facilities
life-cycle cost to help select the best solution to meet the requirement. Through DOI’s
performance based system for all employees there is an organizational and individual linkage
of accountability, responsibility, and authority when making and implementing facilities
investment decisions.

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2.4 Asset Management Objectives

DOI has established a set of objectives specific to assets that comprise its portfolio. These
objectives will be used to establish a strategy to manage and oversee DOI-owned and leased
assets to maximize their contribution toward accomplishing the Department’s diverse missions.
These objectives include:
• Aligning investments with strategic missions and business goals and outcomes;
• Ensuring adherence to Federal and Departmentwide investment life-cycle management
principles and standards;
• Instituting consistent Departmentwide objectives, goals and performance measures;
• Analyzing baseline information;
• Evaluating, prioritizing, acquiring, managing and disposing of owned and leased assets
based on a range of current and future business, technical and workforce issues and
factors and strategic goals;
• Balancing the value of the asset portfolio and individual assets with current and
potential risks;
• Seeking sound, efficient, and effective solutions to address asset management needs;
• Maximizing return on investment for the cost of operating and maintaining assets; and
• Incorporating planning and management requirements for historic property under E.O.
13287 of March 3, 2003, and for environmental management under E.O. 13148 of
April 21, 2000.

These objectives are driven by increasing demands for accountability and associated reporting
requirements; the need to link asset decisions to mission support, strategic goals and cost
benefit considerations; the need to share information and gain economies of skill; and ever
increasing demands by the public for access to heritage assets. They are the foundation for
developing a portfolio or asset level strategy. DOI’s asset management framework involves
understanding and balancing customer and mission requirements and the need to maintain
condition/performance of its assets with fiscal discipline and resource considerations.

Bureau missions and program variations have resulted in the bureaus developing and operating
separate efforts that respond to Departmental standards. Changing circumstances, including
recent legislation, administration initiatives, new technologies, and anticipated budget
constraints, has resulted in the DOI Asset Management community adopting this
Departmentwide AMP. Bureau-level AMPs will be written to support mission
accomplishment for the eight bureaus, but will be guided by the Department’s AMP.

2.5 Asset Management Tools

Two cornerstone systems that support implementation of DOI’s AMP are the Financial and
Business Management System (FBMS) and the Facility Maintenance Management System
(FMMS). FMMS is a tool to improve the efficiency of the day-to-day life-cycle management,
while FBMS will provide the financial and business management information associated with
facility assets. These systems will be electronically linked in order to share data and streamline
data gathering and reporting.

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The consolidation of many independent information systems into two electronically linked
systems provides improved efficiencies that will allow DOI to make better decisions on the
management of DOI’s portfolio of assets. Executive Order 13327 requires the development of
a national database to track and share information on real property assets. DOI will work
closely with the Office of Management and Budget (OMB), General Services Administration
(GSA) and the rest of the Federal community to coordinate DOI systems with the proposed
national system.

2.5.1 FBMS
Access to accurate and timely financial and property management information from the FBMS
will provide an improved opportunity to fully manage all DOI owned and leased assets. FBMS
is a single integrated tool that will help Interior’s bureaus manage their many unique missions.
An integrated web-based suite of software applications, FBMS will manage a variety of
administrative functions, including: Budget Formulation, Budget Execution, Personal Property,
Real Property, Fleet, Core Financials, Acquisition, Travel, Financial Assistance, and Enterprise
Information Management. By improving financial and business processes and incorporating
state-of-the art technology, FBMS enables DOI to become a more effective and efficient
business management organization. As a web-based computer tool, it allows information to be
entered and queried at any level of the organization.

FBMS is the official repository of information on property owned or leased by the Department.
Each item is assigned a unique property identification number and all financial transactions
throughout the life of that asset are associated with that number. All transactions are
electronically stored in a manner that preserves an audit trail. The application will contain all
fields necessary for DOI’s financial statements and government-wide real property inventory
reporting. Data elements for property records in FBMS include key fields on the number, size,
location, use, type, occupants, and age of the assets. FBMS will include the 23 key data
elements required by the Federal Real Property Council which each agency will report for each
of its Real Property assets.

From the standpoint of managing real property, the strength of FBMS lies in its integrated
approach to tracking inventory/ownership information and relating it to financial management.
Additional advantages for management of real property are provided through linkage of FBMS
to a leading commercial maintenance management software system designated the FMSS.

2.5.2 FMMS
The deployment of a standardized FMMS is the cornerstone to DOI’s efforts to better manage
its owned and operated facilities. It builds on the financial management strengths inherent in
FBMS by adding a robust capability to manage data on the condition, maintenance, and
improvement of real property assets.

The FMMS is an important tool for managing facility assets Departmentwide with a focus
towards improving the overall condition of the constructed assets and assuring better allocation
and utilization of the limited resources dedicated to operating and maintaining these assets.
The FMMS will better enable DOI to provide accurate and timely information to the Office of
Management and Budget (OMB), the Congress, and the public regarding the condition, repair,
and improvement of real property assets.

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In FY 2001, the Department adopted MAXIMO™ as the software for DOI’s FMMS.
MAXIMO™ is currently being used by BLM, Bureau of Reclamation (BOR), USGS, FWS,
NPS, BIA (Irrigation Projects and Safety of Dams) and NBC (for facilities maintenance
management of the Main and South Interior Buildings in Washington, D.C.) Initially, bureaus
were allowed to implement the system with bureau specific configurations and platforms. The
bureaus accomplished this while continuing their compliance with Departmental standards for
data requirements and business practices.

In a memorandum of August 17, 2004, from the Assistant Secretary – Policy, Management and
Budget, the Department was directed to implement a MAXIMO™ Departmental single
platform configuration to increase standardization, reduce operating costs, and enable the
development of a single interface with FBMS. The latest release of the fully web-based
version of MAXIMO™ software makes it possible for Interior to operate with a single platform
solution. This will result in better control of data standards, easier analysis of Department-
wide asset information, and provide a more efficient and effective interface between DOI’s
FMMS and the Financial and Business Management System (FBMS).

Bureaus are currently transitioning to a new single platform MAXIMO™ application that is
being phased concurrent with the phased implementation of FBMS. FMMS in its new single
platform configuration will be implemented in the Bureau of Land Management, the National
Park Service, and the Fish and Wildlife Service in FY 2007 and in the rest of DOI in FY 2008.

2.6 Environmental Auditing and Environmental Management Systems

Environmental compliance remains a high priority for the Department and each bureau/office
is responsible for developing and implementing its own environmental auditing and
environmental management system (EMS) program. Environmental auditing is the systematic,
documented, periodic, and objective review of facility operations and practices related to
meeting environmental compliance. Departmental Manual Chapter 515 DM 2 requires Bureau
and Offices to conduct environmental audits of their facilities.

Environmental auditing is an integral part of an EMS program. EMS is a management tool that
assists in achieving continuous improvement of environmental goals and is required by
Executive Order 13148, “Greening the Government through Leadership in Environmental
Management.” EMS’s reduce an organization’s environmental “footprint” by promoting
continuous environmental improvement in its day-to-day activities and are required by
Department Manual Chapter 518 DM 4. Furthermore, in response to the President’s
Management Council Compliance Initiative Recommendations, the Secretary issued a
Secretarial Memorandum to all employees in August 2003, on improving environmental
compliance and performance through environmental management systems implementation.

2.7 Human Capital, Policy and Decision-Making Initiatives

DOI supports a number of programs and has begun a number of initiatives to improve the
competency of the workforce, policy and decision-making and governance. The following are
the key initiatives and the target dates (quarter by fiscal year) for completion.

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The Department of the Interior will:

• Undertake mission needs analysis/gap analysis to evaluate and compare the resource
requirements necessary to implement the AMP. Q1 ‘06

• Revise the DOI CPIC guide to address the life-cycle period in determining the full cost
of each type of asset covered in the AMP. Q1 ‘06

• Develop API framework, criteria, and weighting to guide Department and bureau-level
scoring processes that reflect the missions of each individual organization.
Q4 ‘05

• Include FRPC’s 23 key data elements in the DOI asset inventory as follows:
- 19 Static Elements in Q1 ‘06
- 4 Dynamic Elements:3
à Utilization Q1 ‘06
à Mission Dependency Q2 ‘06
à Condition Assessment Q4 ‘06
à Operating and Maintenance Cost (data to be derived upon full
implementation of FBMS) Q4 ’06

• Issue Departmental policy to standardize the practice of estimating the cost of repairing
asset deficiencies as documented during the condition assessment phase. Q2 ‘06

• Issue Departmental policy on evaluating owned and operated assets to determine its
CRV. Q2 ‘06

• Issue Departmental policy on improving the condition of the asset portfolio and
properly sustaining it over asset life cycle or component life cycle. Q2 ‘06

• Expand the Draft Facility Management Workforce Plan to be consistent with the DOI
Human Capital Management Plan. Q3 ‘06

3. PLANNING AND ACQUISITION OF REAL PROPERTY

During the acquisition phase, DOI translates mission needs into discrete requirements,
marshals the necessary resources to acquire assets that meet requirements, and receives the
assets. Several of the bureaus with the largest number of assets develop planning documents
for each management unit with significant public participation and input. These documents, in
addition to stating the mission of the management unit, include identification of the needed
structures on the land, such as visitor centers, employee housing, and maintenance shops that
are necessary for the successful operation of the unit. For instance, BLM develops Resource
Management Land Use Plans/Special Area Management Activity Plans, FWS develops

3
Waivers will be requested from OMB for performance metrics (mission dependency, condition assessment
and operating and maintenance cost) that can not be reported for all contructed assets by Q1 ’06.

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Comprehensive Conservation Plans for National Wildlife Refuges, NPS develops General
Management Plans, and Bureau of Reclamation (BOR) develops a variety of Resource
Management Plans.

When a space requirement is received or developed, DOI and bureaus attempt to use
Government-owned assets first before seeking to add new square footage to the federal
inventory. If there are no suitable solutions using an existing Government asset, DOI has
several acquisition alternatives such as lease a new asset from the private sector, buy or transfer
an existing asset, or build a new Federal asset.

To determine the most appropriate acquisition approach, DOI considers a variety of criteria
including:
• How many assets are needed;
• How quickly the asset is needed;
• How long the asset is needed;
• How specialized is the asset; or
• How is the environmental condition of the asset?

Additionally, DOI considers mission-fit and the long-term total cost of ownership. Because so
much of the Department’s mission is tied to the management of land and resources, asset
acquisition decisions must take into account suitability and location of facilities to support
resource management and long-term management requirements. Each of these factors has a
significant impact on the alternatives and feasibility of the project acquired either by
construction, purchase, transfer, or leasing.

By evaluating these factors, the Department can determine the acquisition method and
incorporate appropriate planning models to meet the needs of the Department.

3.1 Capital Plan for Major Projects

There are several ways to meet space requirements for the Department. This section discusses
planning methods for acquiring new construction, repair and alterations, and leases for major
projects. To determine which acquisition method would be most cost effective and suitable to
meet DOI’s requirements, the Department is following the CPIC methodology, as discussed in
Sections 2.3.2 and 2.3.3, that includes an alternatives analysis. This process allows the
Department to compare the present value cost of buildings by repair and alteration, new
construction, and lease alternatives.

The CPIC process provides the framework for the planning, prioritization, and decision making
for acquisition and construction of major assets. Through this process major projects are
evaluated and based on investment review board decision making incorporated into the budget
request.

For all owned and managed assets, the Department reports annually through the five-year plan
its anticipated budgetary requirements and plans for construction and maintenance by site.
Consistent with OMB requirements, the Department completes GSA FAST reporting annually
to complete an inventory of fleet, reporting on the number of vehicles in the inventory, the
number planned for purchase, leasing, and disposal. The Exhibit 54, required by OMB, reports

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annually, on the Department leased space inventory, the outyear budgetary requirements and
expansion plans, and related support costs.

DOI’s Office of Policy, Management, and Budget plays a key role in securing the necessary
resources to maintain current real property assets, acquire new or replacement assets that meet
the evolving needs of the agency, and preserving the historical and cultural assets placed in
DOI’s care.

3.1.1 New Construction of Major Projects ($2 Million and above)

The program for new construction addresses requirements serving a Federal need that cannot
be readily met with existing Federal assets or assets available in the private sector. DOI’s Five-
Year Deferred Maintenance and Capital Improvement Plan is used to prioritize capital projects
for repairs, alterations and new construction.

The Department follows the requirements for capital asset planning with a CPIC process that
considers investments at the bureau and Department level. Currently, DOI requires capital or
major construction projects, having design and construction costs greater than $2 million, to be
reviewed and approved by a bureau IRB. Projects over $10 million in design and construction,
or that meet other significant criteria defined in the DOI Information Technology and
Construction Capital Planning and Investment Control Guide, Version 1.0, must be reviewed
and approved by both bureau and the Department’s IRBs.

The threshold for construction of building and structures is currently being re-evaluated and
other asset categories including leased assets and fleet will be established. Thresholds will
reflect acquisition, operation and maintenance and disposal costs attributed to an asset.

The Department has followed and refined its CPIC process for constructed assets. DOI is
continually improving its CPIC process and supporting procedures to create a structured,
rigorous and repeatable process for managing portfolios and assets throughout their life-cycle.
The current process for construction projects has yielded useful results in the selection of
projects. DOI will place enhanced emphasis on tracking projects’ earned value as a critical
measure to ensure they are within budget, schedule and scope. A quarterly reporting tool will
help management at all levels to better track the progress of ongoing projects.

DOI’s CPIC policy will be re-evaluated to address the life-cycle period in determining the full
cost of each type of asset covered in the AMP. DOI will establish CPIC review requirements
for facility projects, whether they are constructed, leased, GSA-assigned, purchased, or
received through donation or transfer. Central to the CPIC review of projects is multi-year
strategic planning for new major construction projects that emphasizes the organization's
mission, goals, objectives, and resources necessary for achieving the organization's objectives.

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Strategic planning through the DOI Five-Year Deferred Maintenance and Capital Improvement
Plan satisfies the organization's requirements and positions the portfolio to meet mission needs.
The primary objectives of strategic planning within DOI are to:
• Align projects with strategic missions, business goals, and outcomes within an
enterprise (Departmentwide) portfolio;
• Establish the long term direction to be followed by the bureaus and the Department for
making sound investments and cost effective use of constructed assets in support of
missions and programs;
• Serve as the basis for requests to OMB for funding necessary to support mission and
program needs; and
• Ensure the workplace environment meets employee needs and contributes to greater
productivity.

Bureaus have flexibility to design their strategic planning process to embody qualities such as
the following:
• Rigorous, repeatable, and documented;
• A continual analysis of needs and the exploration of alternatives through collaborative
efforts;
• Governance through chartered IRBs; and
• Meets the provisions of the Information Technology and Construction Capital Planning
and Investment Control Guide, Version 1.0 and Attachment G, “Facilities Deferred
Maintenance and Capital Improvements,” of DOI’s annual budget planning guidance.

Planning provides managers at all levels Departmentwide, the foundation for successful
portfolio management and the acquisition of new major construction projects. New
Departmental emphasis is on a more robust, inclusive CPIC process. Combined with new
procedures in bureaus to evaluate partnership and other unique project requirements, the
planning process reflects:
• Close coordination of program sponsors and managers, project managers, space
portfolio managers, and senior management including the heads of bureaus;
• Participation of subject matter experts from key functional areas such as planning,
budget, human resources, contracting, facilities and property management, legal, safety,
security, information technology and the environment in the planning and decision-
making process; and
• Governance by mid-level managers and senior executives Departmentwide through
their participation on bureau and Departmental IRBs.

Collectively managers at all levels and subject matter experts, through their collaboration and
cooperation, are integral to the success of DOI’s portfolio management process. They apply
sound business practices to the planning, acquisition, operation, maintenance and disposal of
capital investments, and ensure compliance with guidance from Congress, OMB, the GSA and
the Government Accountability Office (GAO). In planning and budgeting for new projects,
managers ensure that projects align with strategic and mission needs, develop project
proposals, and incorporate projects into the multi-year planning process.

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The Department, in close collaboration with the bureaus, is working to significantly strengthen
capital planning in several areas. Efforts are being initiated to better ensure that managers:
• Link projects to mission through the use of tools such as the API;
• Evaluate a range of alternative approaches (i.e., construct/purchase vs. lease; dispose of
current asset vs. retain and repair) to meet strategic and mission needs;
• Project space needs and develop an estimate of costs and benefits (both quantitative and
qualitative) that will be realized by a project;
• Explore the Department’s inventory, seeking opportunities to meet needs through co-
location and consolidation;
• Address several factors that can have a bearing on benefits, cost, risk and schedule
associated with a specific proposal such as security, environmental, safety/health,
contingency planning, optimal space utilization, telecommunications, information
technology, green technologies, energy use, utilities, historic preservation, Americans
with Disabilities Act and Architectural Barriers Act (accessibility) requirements,
preliminary market surveys; and move and relocation costs;
• Account for likelihood of risks identified in the risk assessment occurring, the severity
of those risks and the mitigating actions necessary to resolve risks;
• Coordinate with bureau portfolio managers, planners, budget officers, human resource
personnel and other subject matter experts;
• Assemble integrated project teams comprised of program managers and stakeholders to
perform due diligence to determine the best way to meet the agency’s mission needs
using feasibility studies, historical data, industry best practices, cost/benefit analysis,
and risk analysis (for example) to develop project scope and budget; the project team
prepares quality project data sheets and Exhibit 300s to document the general
requirements for each proposed project;
• Incorporate the operations and maintenance costs into the project proposals; and
• Address the requirements of projects conducted in concert with partnerships.

3.1.2 Repair and Alterations Major Projects ($2 Million and above)
Prior to the submission of projects into the ‘5-Year Deferred Maintenance & Capital
Improvement Plan’, assets in the portfolio had been considered for their importance and
contribution to mission. Life-cycle decisions were made to maximize the effectiveness of
available maintenance and repair funding. This was done through many different means by the
local Field Operating Unit Managers. There was no codified standard ranking system, but
many bureaus implemented in-house decision-making and priority setting processes as their
business practice. Although ranking projects based on critical health and safety, resource
protection, and critical mission served DOI well, it was a project-centric focus.

Under the current process for developing the Five-Year Deferred Maintenance and Capital
Improvement Plan, bureaus rank and prioritize projects with highest emphasis on critical
deferred maintenance needs in health and safety, resource protection, and bureau mission.
Projects involving critical health and safety components of work are coordinated with the
bureaus’ safety managers. New capital improvements not concerned with compelling health
and safety or resource protection needs are only funded in exceptional situations. The bureaus
perform the analysis and develop the projects for submittal to the Office of Budget and the
Office of Acquisition and Property Management for inclusion in DOI’s Five-Year Plan.

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To provide greater consistency DOI-wide, projects are ranked using a weighting process based
on the percentage of the work (total project dollars) that falls in each of the following
categories. The weighting factors to be applied are:
• Critical Health and Safety Deferred Maintenance (CHSdm) 10
• Critical Health and Safety Capital Improvement (CHSci) 9
• Critical Resource Protection Deferred Maintenance (CRPdm) 7
• Critical Resource Protection Capital Improvement (CRPci) 6
• Critical Mission Deferred Maintenance (CMdm) 4
• Compliance and Other Deferred Maintenance (C&Odm) 3
• Other Capital Improvements (Oci) 1

Based on these weight factors, projects are to be ranked using the following calculation:
• (%CHSdm x 10) + (%CHSci x 9) +(%CRPdm x 7) + (%CRPci x 6) + (%CMdm x 4) +
(%C&Odm x 3) + (%Oci x 1) = TOTAL SCORE

NOTE: The total of the percentages for a project must equal 100% and not exceed it.
This ranking formula is designed to accommodate all types and sizes of projects, from the
simple to the complex. It places the highest priority on facility-related Critical Health and
Safety and Critical Resource Protection deferred maintenance needs in that order. Capital
improvement projects that eliminate substantial amounts of deferred maintenance receive a
higher rank score than projects that do not address deferred maintenance needs.

As bureaus reduce the accumulated deferred maintenance in these categories, funding is

directed to lower priority deferred maintenance and new capital improvement projects.
Complex projects, including many items of work involving both maintenance and capital
improvements, can have portions of the project in several of the ranking categories. Smaller,
less complex projects may include work in only one or two of the ranking categories. For
example in a Project Description, the rehabilitation is to correct critical health and safety
deficiencies by:
• Providing a fire alarm system which is currently lacking for the new headquarters
office annex building;
• Providing fire suppression systems for storage rooms in the old headquarters office
building;
• Installing a fume hood;
• Installing an eye wash station; and
• Complying with the requirements for the National Electrical Code, the project includes
replacing and repairing the portions of the electrical system in the old headquarters
office building.

The percentage of this project in the categories might be 70% CHSdm and 30% C&Odm. The
project's TOTAL SCORE would be (70 x 10) + (30 x 3) = 790.

Additional detail about DOI scoring is provided in Attachment G, “Facilities Deferred

Maintenance and Capital Improvements,” of the annual DOI Budget Guidance. Major Repair
and Alterations Projects are reviewed and those with a strong business case are approved by

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bureau IRBs. These projects meeting the Department threshold for major projects are reviewed
by the Departmental IRB.

The bureaus rank projects that are subject to further scrutiny from the bureau IRBs and bureau
directors based upon technical sufficiency, financial viability, agency considerations and
consideration to carry out socio-economic-environmental responsibilities. Once the final
project rankings are established, the budget submittal is completed based upon the amount of
funding that is available. Remaining projects will be prioritized for submittal the following
year, or alternative methods of meeting the need, such as leasing, will be explored.

With the move to a life-cycle and portfolio-based approach, DOI is establishing an enhanced
ranking capability that will build upon a mission focus ranking process, using API and FCI to
allow the highest mission critical assets to be recognized in conjunction with the project
ranking system. Life-cycle decisions will be made to maximize the effectiveness of available
maintenance and repair funding. This system is necessary to optimize spending upon a
bureau’s mission critical assets at the most important periods in the asset life cycle. Under this
procedure, bureaus will first sort assets into four categories, high API/good FCI, high API/poor
FCI, low API/good FCI, and low API/poor FCI:
• Assets with high API and good FCI should be maintained with practices that protect the
government’s investment;
• Assets with high API and poor FCI should be considered for demolition and
replacement. If the asset's API is high principally because another asset cannot be
substituted for it (e.g., an historical significant asset) repair and rehab activities will be
the priority;
• Assets with low API and good FCI should be considered candidates for transfer or
beneficial use by other parties; and
• Assets with low API and poor FCI should be considered for disposal.

Proposed projects for assets that should be retained and maintained would then be subjected to
the rankings based on critical health, resource protection, and critical mission. A prototype of
this priority-setting methodology will be tested for the FY 2007 budget.

3.1.3 Acquisition of Major Leases

Through a Departmentwide Space Management Initiative, DOI is analyzing and recommending
actions to strengthen policy, management and governance of the portfolio of owned and leased
office and warehouse space. DOI expects to achieve significant savings through improved
management of direct leases and efforts to co-locate offices and consolidate space. In
anticipation of those savings, DOI has included a budget reduction in the 2006 budget.

Through the Exhibit 54, the bureaus annually report to OMB the current space inventory, the
budgetary requirements for current space, the budget year request reflecting increased space
square footage, rate increases, expansions, and associated costs. Based on OMB’s review of
the space requests, they are incorporated within the budget request. Bureau oversight of the
leased space inventory is not consistent or comprehensively evaluated as an investment
decision. Decisions on space including new leases, renewals, relocations, consolidations and
collocations are handed in a decentralized manner.

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GSA is the Federal leasing entity. When programmatically and economically viable, and no
existing Federal or DOI leased or owned space is suitable, bureaus and offices may request this
delegation from GSA. The bureau or office must use a Real Property Contracting Officer
warranted in compliance with Departmental requirements.

DOI acquires leased space when existing or build-to-own government space is not viable
alternatives. The Secretary of the Interior, along with heads of the other Federal agencies, is
required by GSA and the Office of Management and Budget to prepare an annual Work Space
Management Plan and Budget Justification. This process facilitates the development of
projected space requirements and associated funding. Bureaus and offices are required to
submit Plans to the Department’s Office of Acquisition and Property Management. The
Department coordinates preparation of the Plan, including liaison with GSA and all appropriate
Department entities, evaluates and consolidate bureau and office Plans for submission to GSA
and OMB to coincide with the annual budget submission.

DOI, working through the bureaus’ headquarters property office, performs the scoring analysis
and develops the projects for submittal as part of its Annual Space Planning Process. DOI will
ensure that new leasing proposals are contained in a five-year plan and that the lease term
conforms to OMB’s operating lease scoring requirements. DOI will examine each leasing
proposal for consistency with the portfolio strategy, the availability of space in the local
market, and the appropriateness of timing. Projects meeting all applicable criteria are included
in DOI’s capital program request to OMB and Congress.

Draft policies and procedures are under review that when implemented will establish a new
process whereby the Department will formulate a multi-year space plan that will guide
decisions Department-wide for lease renewals, consolidations, and collocations. Based on
input from the bureaus on projected lease expirations, relocation and consolidation plans, the
Department will focus on the most cost effective opportunities to co-locate offices, consolidate
space, and achieve more effective and efficient lease arrangements.

3.2 Capital Plan for Non-Major Projects

Capital planning for all projects including non-major projects is structured around the
development of a consistent approach for five categories of asset management:
• Contribution to mission;
• Asset inventory;
• Asset condition;
• Asset valuation; and
• Improving the condition of the asset portfolio and properly sustaining it over time –
life-cycle management.

DOI’s accomplishments and actions in the capital planning for all projects are the foundation
and building blocks for strategies to strengthen DOI’s asset management.

3.2.1 New Construction, Repair and Alterations of Non-Major Projects

Although ranking projects based on critical health and safety, resource protection, and critical
mission has served DOI well, it has a project-centric focus. With the move to a life cycle and
portfolio-based approach, DOI is establishing an enhanced ranking capability that will build

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upon this ranking process, using API and FCI to allow the highest mission critical assets to be
recognized prior to any project ranking system. This system is necessary to maximize
spending upon a bureau’s mission critical assets at the most important periods in the asset life
cycle.

Bureaus rank and prioritize non-major projects through consideration of mission, alternatives,
and cost. All bureaus have priority-setting processes in place to review non-major projects.
For example, USGS develops a business case for non-major construction, repair, and leasing
projects for review by regional investment review boards.

3.2.2 Acquisition of Non-Major Leases

DOI acquires leases below prospectus level from the private sector when leasing is the most
economical answer to meeting Federal needs, when construction funding is not sufficient, or
when a government-owned site is not available in the area. Bureaus such as USGS, OSM and
MMS currently use GSA to perform all of their leasing activities, but the other bureaus (BOR,
NPS, BIA, FWS, and BLM) use a combination of GSA-assigned, in-house leasing, and DOI
owned facilities to meet their space requirements. The decision about whether to lease or build
is usually made at the field office level.

Because of the remoteness of many offices in small, isolated communities and or those that
have special space requirements that are outside of GSA’s normal operating area, GSA is not
used in some cases. In accordance with 41 CFR 102-72.30, the Administrator of General
Services has issued a standing delegation of authority (under a program known as “Can't Beat
GSA Leasing”) to the heads of all Federal agencies to accomplish all functions relating to
leasing of general purpose space for terms of up to 20 years in non-major metropolitan areas.
This delegation includes some conditions Federal agencies must meet prior to conducting the
lease acquisition for their agencies. The Department utilizes this authority when appropriate to
secure space to meet mission needs.

Currently, BLM’s National Business Center has a centralized acquisition staff with the largest
leasing staff in the Department of the Interior. The National Business Center facilitated the
collocation of BLM employees with Forest Service under the “Service First” agreements
between BLM and USDA Forest Service. These “one-stop” offices in communities where
BLM and the Forest Service both have a presence are a streamlined, effective and efficient
approach to meeting the needs of these two agencies. The Department is evaluating additional
opportunities for Service First and expanding the concept to include other Interior bureaus.

Requirements for space over 10,000 square feet are advertised in local newspapers and the
Federal business opportunities webpage at www.fedbizopps.gov. A Solicitation for Offers is
sent out to all potential offerors, the bid packages are analyzed to determine which ones best
meet the needs of the Government and, after negotiation, a Best and Final Offer is requested
from each acceptable offeror. Once an award is made, the contracting officer will select a
Contracting Officer Representative (COR) to monitor the construction or renovation phases,
and to administer the lease.

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Space requirements less than 10,000 square feet are routinely handled by GSA or in the case of
bureaus that conduct leasing. The steps include conducting a Market Survey of the area and
subsequently, having discussions with potential offerors and performing a small lease
acquisition.

The Department’s Space Coordination Council (SCC), comprised of representatives from each
bureau, brings together the subject matter experts in space management throughout the
Department. Established in 1995 via directive from the Assistant Secretary – Policy,
Management and Budget, the SCC provides coordination among the bureau on common space
related issues. The SCC recommends policies and procedures, coordinates research, provides
guidelines, and advises on management issues concerning the Department-wide space
management program effort. Specific functions include:
• Develop a communication network to foster a unified space management program;
• Periodically review space management policies and procedures;
• Explore ways to share expertise and data management throughout the Department to
maximize efficiency and minimize costs;
• Collectively explore emerging technologies and innovative methodologies to
recommend Department-wide adoption;
• Ensure communication with GSA, OMB, Department of Labor and other organizations
to foster input on policy issues, assure compliance with requirements, and share
information; and
• Assist with the establishment of educational, training, and career development
programs within the space management field.

The SCC is working on a number of initiatives that will be used to improve space management,
Department-wide. It has prepared policies and procedures that are in draft and being reviewed.
Once implemented the policies and procedures will provide more information for linking space
decisions to mission-related needs, require an investment review process at the bureau and
Department levels for new and expanded space, establish a multi-year planning process that
will be the basis for a Department-wide strategy to guide decision-making that can improve the
effective use of space including taking advantage of opportunities for consolidation and
collocation.

3.2.3 Acquisition of Fleet (Vehicle-focused)

Each bureau is responsible for the acquisition (by purchase or lease), maintenance, and disposal
of vehicles. In the past, the majority of bureaus acquired vehicles through appropriated funds.
Currently, BLM employs the use of a working capital fund (WCF) to operate a fee-for-service
arrangement that funds the acquisition, maintenance and disposal of their fleet. This model is
being evaluated for use in other bureaus.

The Department has issued a fleet management improvement strategy with goals for effective
life cycle management, optimization of vehicle use, use of alternative fuel vehicles, and other
best practices. Each bureau and office is developing a fleet management plan to identify the
steps that they will take to implement the fleet management improvement strategy.

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The Departmental Office of Planning and Performance Management (PPP), working with the
Office of Acquisition and Property Management and the Office of Budget, are coordinating
with bureaus to develop performance measures for fleet that are bureau and location specific.
These measures will be incorporated into the Departmental strategy for performance measures
that will be tracked annually. Included in each strategy will be methods for base-lining and
‘right sizing’ the fleet. This strategy will address the issues raised the OIG in the audit of fleet
and criticisms of the size and underutilization of fleet.

Deployment of fleet management plans is scheduled for FY 2006 in order to be able to achieve
cost savings identified in the 2005 and 2006 budgets, totaling $13 million. The Department’s
fleet managers group is working collaborative on performance measures to gauge success in
fleet improvements, approaches that can be pursued with GSA to improve the terms and
conditions of leases, and other innovations.

The use of environmentally-friendly vehicles through the acquisition of alternative fueled

vehicles (AFV) powered by natural gas, electricity, propane, alcohol-based fuels and bio-diesel
will, in many applications, enhance the Nation's energy security by reducing dependence on
foreign crude oil, create jobs by stimulating domestic industry, and improve air quality by
reducing emissions. The use of AFVs contributes to DOI's stewardship responsibilities for the
Nation's publicly-owned lands and natural resources.

The Energy Policy Act of 1992 and E.O. 13149 require DOI to demonstrate leadership in AFV
use and ensure that 75 percent of new light-duty vehicles leased or purchased in FY 2005 in
urban areas are AFVs. The AFVs acquired for DOI facilities in rural locations also count
toward meeting the E.O.’s goal. In FY 2003, DOI met the agency-wide goal for the acquisition
of AFVs for a sixth consecutive fiscal year. Departmentwide accomplishments in this area
must continue, as AFVs become more available.

To cover the additional cost of AFVs over the cost of conventionally-fueled vehicles leased
through GSA, DOI has entered into an agreement with GSA to surcharge through its billing
process for the approximately 16,000 fleet motor vehicles that it leases to bureaus. DOI pays
an additional monthly surcharge to GSA on every GSA-leased vehicle to cover the additional
cost of procuring an AFV. This allows the Department to share the additional costs for AFV
acquisition amongst all bureaus, increasing the procurement of AFVs throughout DOI.
Bureaus are to provide the full funding necessary to ensure compliance with the E.O., including
covering the incremental cost of AFVs purchased and the GSA surcharge on leased vehicles.

3.3 Acquisition Performance Measures and Continuous Monitoring

Key performance measures will be used to measure the effectiveness of the acquisition phase
of the life-cycle of asset management. For example, measures will be tracked and used for
multiple purposes including DOI’s Strategic Assessment, Strategy and Action Plans, Program
Assessment and Rating Tool submittals, Performance Accountability Report, and
Congressional Justification submittal.

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DOI will use internal scorecards as continuous monitoring and feedback mechanisms. For
example, DOI will use key measures in conjunction with agency goals in quarterly
Departmental and bureau scorecards for Real Property. Departmental and Bureau senior
management will monitor performance and progress toward meeting key initiatives associated
with the President’s Management Agenda and the agency scorecard. Quarterly bureau
scorecards and major project reporting will provide an opportunity to shape the direction and
allow for midcourse corrections for both programs and projects, influence asset strategies and
informed investment decisions.

The Department will also explore the use of a “Self-Assessment Guide toward Portfolio
Management Maturity” to measure CPIC asset program and portfolio management success
within the Department and the bureaus. This guide will be based on the Information
Technology Investment Management (ITIM) process maturity stages, issued by the GAO.

3.3.1 DOI Acquisition Measures

DOI’s GPRA Strategic Plan includes two acquisition-oriented measures against which
performance was first reported in FY 2004. The measures track construction acquisition
performance, supporting completion of Bureau of Reclamation water infrastructure
construction projects in a manner that ensures we are complying with environmental
requirements (see UIM 9.11) and ensures a target amount of water is made available
(UIM.458). Both measures can be reviewed in Section 7 of this AMP. Targets for the
measures have been established for FY 2005 with initial performance targets proposed for FY
2006. (Additional DOI Acquisition Measures will be developed following the release of
Federal Real Property Council guidelines for measures for acquisition.)

Project sponsors prepare a business case in the form of an OMB Exhibit 300. The business
case is evaluated through the bureau governance process. For major projects over $10 million,
the business case is evaluated through the bureau and Departmental governance process.
DOI will place enhanced emphasis on ensuring these business cases provide s sufficient work
breakdown structure to better enable the tracking of projects’ earned value. Earned value is a
critical measure to track progress and aids in ensuring that projects are managed within budget,
schedule and scope. A quarterly reporting tool will help management at all levels to better
track and measure the progress of ongoing projects.

3.3.2 Agency Specific Measures

DOI is using additional specific measures at the bureau level to evaluate effectiveness in the
project delivery for constructed and leased assets. A series of measures that track project
schedule, scope, and budget include:
• Construction Acquisition Measure
DOI uses FCI and earned value to track construction performance. DOI will strengthen
the use of earned value methodology to track construction projects to ensure they
remain on schedule and on budget. DOI will also explore reviewing the management
of the constructed asset portfolio of new projects by the percentage of the projects that
are at variance vs. the overall number of projects.

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• Leasing Acquisition Measure

The Department’s space council is developing on policies and procedures that will
guide consistent performance measures to gage improvements in space management.
At the bureau level, various strategies are used to keep leasing costs at or below market
levels include comparing lease offers to industry benchmarks, using market surveys to
comparison shop for best prices, using a published market source to gain a better
understanding of area markets and to ensure leasing costs are in line with the private
sector market.
• Fleet Measure
The Department’s fleet managers group is working collaborative on performance
measures to gage success in fleet improvements. Each bureau is developing measures
specific to their respective organization. Currently BLM is utilizing a number of
measures that evaluate the cost effectiveness of maintenance schedules, life cycle
replacement schedules, etc.
• Customer Satisfaction Surveys/Measures
DOI facility managers will continue to use a variety of tools to assess internal customer
satisfaction with assets and acquisition processes. They will also continue to track
tenant satisfaction with newly constructed assets to ensure that the end users are
satisfied with the asset.

3.4 Planning and Acquisition Initiatives

DOI supports a number of programs and has begun a number of initiatives to improve its
planning and delivery of acquisition projects and to improve financial and program
management. The following are the key initiatives and the target dates (quarter by fiscal year)
for completion.

The Department of the Interior will:

• Through a Departmentwide Space Management Initiative, recommend actions to
strengthen policy, management and governance of the portfolio of owned and leased
office and warehouse space. Q4 ‘05

• Develop key performance measures to determine the effectiveness of the acquisition

phase of asset management. Q4 ‘05

• Develop template for sustainment information for project presentations to include the
total cost of ownership. Q4 ‘05

• Implement the performance measures identified by the FRPC (utilization, API/mission

dependency, FCI and operating costs) as follows4:
- Utilization Q1 ’06.
- Mission Dependency Q2 ’06;
- Condition Index Q4 ’06; and

4
Waivers will be requested from OMB for performance metrics (mission dependency, condition assessment
and operating and maintenance cost) that can not be reported for all contructed assets by Q1 ’06.

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- Annual Operating and Maintenance Costs (data to be derived upon full

implementation of FBMS) Q4 ’06.

• Formulate a Departmentwide multi-year space planning process to guide future

locations through relocations, consolidations, and collocations with space data provided
by the bureaus. Q2 ‘06

• Measure bureau CPIC programs and portfolio management success through use of
“Self-Assessment Guide toward Portfolio Management Maturity.” (The Guide will be
based on the Information Technology Investment Management (ITIM) process maturity
stages, issued by the General Accounting Office) Q4 ‘07

Each Bureau will:

• Report FCI (current FCI and revised FCI) for all currently approved FY 2005 and FY
2006 construction projects for which FCI had not previously been provided. Q3 ‘05

• Include API as a performance measure for each asset in major project proposals
submitted to the IRB. Q1 ‘06

• Include sustainment information to demonstrate the total cost of ownership in all FY

2008 project presentations to the IRB. Q2 ‘06

4. OPERATIONS OF REAL PROPERTY

The operations phase of DOI’s assets involves making decisions regarding operations,
maintenance and reinvestment as well as monitoring administration of leases and servicing
agency needs. Critical information is needed on all assets to support operational decision-
making.

DOI’s approach to asset management is to provide managers at all levels with the tools to make
informed choices for proper operations and maintenance (O&M) in owned and leased
buildings, structures, linear and fleet assets in order to contribute to each bureau’s mission.
Managers will have the knowledge and tools to enable them to successfully address the
complex decisions inherent in managing a diverse portfolio of assets. Bureaus are undertaking
improved analysis to determine requisite operations and maintenance cost for facilities with
major emphasis on implementing modern O&M practices throughout the life-cycle of
individual assets.

4.1 Inventory and Description of Assets

4.1.1 DOI’s Real Property Inventory

Real property is defined by E.O. 13327 as any real property owned, leased, or otherwise
managed by the Federal Government, and improvements on Federal lands. For the purpose of
the E.O., Federal real property does not include assets held in private ownership; land
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or national wildlife refuge purposes except for improvements on those lands; and land held in
trust or restricted fee status for individual Indians or Indian tribes.

DOI’s real property portfolio includes more than 40,000 buildings and housing units and a
wide variety of other constructed assets such as roads, trails, bridges, recreation facilities, water
and power facilities, irrigation facilities, research facilities, fish hatcheries, wetland
management impoundments, and others. The Department also leases and occupies office,
laboratory and warehouse space that costs approximately $300 million annually.

DOI measures the owned and leased assets in billions of dollars, and many are considered
priceless for their cultural and historical significance; many significantly contribute to the
Nation’s economy. As stewards of the assets, DOI is committed to improving the management
of existing facilities and making capital investments in new facilities that are essential to our
mission.

4.1.2 DOI’s Inventory of Motor Vehicle Fleet

Consistent with its geographically dispersed organization, DOI has a large motor vehicle fleet.
Leased and owned vehicles are an important tool for service delivery. Accomplishment of
mission work at remote locations in field based professions, such as forestry and monitoring,
are essential to programs such as law enforcement. DOI has the third largest motor vehicle
fleet among civilian agencies with an inventory over 38,000 general-purpose vehicles. DOI
has put a priority on reducing the number of owned vehicles and promoted leasing. Currently
the Department leases nearly 45 percent of its motor vehicle fleet from the GSA Leasing
Office, and also enters into a small number of lease agreements with private vendors. The bulk
of the fleet, nearly the remaining 55 percent, are vehicles purchased from the GSA Automotive
Office.

DOI employees, contractors, and authorized volunteers use motor vehicles to support multiple
mission activities that are predominantly located in remote areas. In some locations,
government vehicles are provided to support service contractors. Over 4,000 vehicles are used
seasonally (i.e., only in winter or summer), or for special purposes, such as law enforcement or
fire fighting. Nearly 90 percent of the fleet is trucks, vans, buses and ambulances, and 10
percent are sedans and station wagons.

The Department, in the past year, implemented a Fleet Initiative designed to promote the
effective and efficient management of fleets in each bureau and office. This initiative targets
effective life cycle management, optimum utilization and where appropriate reducing the motor
vehicle fleet, ensuring that DOI acquires vehicles that meet mission needs and disposes of
excess vehicles.

Each bureau is responsible for developing a fleet management plan which defines its strategy
for implementing these initiative goals. The bureau fleet management plans include the bureau
process to develop investment strategies, effectively manage and maintain accountability for
fleet, ensure the safety of vehicles, and demonstrate improved performance. The baseline will
be used to set performance measures for the bureaus’ fleet program by the goals established in
the bureaus’ fleet management plan. Within each plan, Bureaus have outlined how they will
optimize the size of the fleet in accordance with Departmental and Bureau specific missions.

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The DOI Fleet Initiative covers the approximately 25,000 light duty vehicles that are within the
Department of the Interior. The initiative generally excludes medium and heavy-duty vehicles,
buses, and emergency vehicles.

4.1.3 Historic Preservation Requirements

AMPs are required by E.O. 13327 for real property owned, leased or otherwise managed by the
DOI that “incorporate(s) planning and management requirements for historic property pursuant
to 13287 of March 3, 2003 – “Preserve America.” The AMPs include historic properties, as
defined by the National Historic Preservation Act of 1966 (NHPA), which meet the criteria of
Federal real property, as defined in E.O. 13327. The “planning and management requirements”
for historic properties described in E.O. 13327 include those in NHPA, as amended (16 U.S.C.
470 et.seq.) and other mandates.

The NHPA directs federal agencies to manage and maintain historic properties in a way that
considers the preservation of their historic, archaeological, architectural and cultural values; to
take into account the effect of an undertaking; and to protect historic properties through the
application of the Secretary of the Interior’s Standards and Guidelines for Archeology and
Historic Preservation.

4.2 Asset Documentation

DOI will use FBMS and FMMS to store documentation relating to the acquisition and
operation of its assets. This may include but not be limited to a map, a copy of the title or
lease, a metes and bounds survey, a legal description of the property, documented
environmental liabilities, Leadership Environmental and Energy Design (LEEDs) ratings,
historic significance, an Architectural Barriers Act survey, documented fire/ life safety issues,
as-built or CAD drawings, and a housing plan showing the tenants within the asset or facility.
In addition, the use of the linked documents featured in FMMS will allow storage of asset
deficiency cost estimates or other maintenance related documents.

The bureaus’ Chief Financial Officers are responsible for maintaining documentation of
account reconciliations. Persons who manage real property are responsible for maintaining
documentation of physical inventories. This documentation must be available for review by
auditors. Maintenance of the hard copy documentation resides at the bureau level. The
Department and bureaus will have access to electronic documentation in FBMS and FMMS.

4.3 Bureau-level Asset Management Plans

The bureaus will develop and utilize AMPs, which will follow FRPC guidance and tier off of
the DOI Asset Management Plan. The bureau-level Asset Management Plans will be used to
drive strategic management and funding decisions related to their asset portfolios. These plans
outline a methodology not only for understanding the current status and requirements of the
overall asset portfolio, but more importantly for making strategic decisions about the portfolio
that advance the goals of the Department’s Asset Management Plan.

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The Asset Management Plans will enable the bureaus to make management and funding
decisions based on life-cycle asset management principles. These plans will be incorporated
into existing and future organization-wide business planning processes which examine overall
operating and administrative requirements.

4.4 Asset Business Plans (site-specific)

Bureaus will develop and utilize Asset Business Plans as the third tier for implementing life-
cycle asset management principles. Bureaus will develop an Asset Business Plan for their
individual management areas based on portfolio guidance and methodology contained in the
second-tier Bureau-wide Asset Management Plans.

The level of organization or management area that the Asset Business Plans will focus on will
be adjusted to fit the differing structures of each bureau. For example, the National Park
Service has prepared pilot Asset Business Plans at the major national park level. The U.S.
Geological Survey plans to prepare Asset Business Plans for science center campuses. The
Bureau of Land Management expects to pilot Asset Business Plans at the State Office level
where the analytical expertise is available and the major asset decisions are formulated. These
BLM State Office plans, that will include site-specific information, would be prepared with the
involvement of BLM District Offices with assistance from the local field office managers and
staff.

The DOI will develop a site-specific Asset Business Plan format for use by the individual
bureaus. The DOI AMP Implementation Plan schedule calls for the format guidance to be
issued by the first quarter of Fiscal Year 2006. The Implementation Plan then calls for each
bureau to develop site-specific Asset Business Plans which will follow the DOI guidance by
the first quarter of FY 2007.

The Plans will reflect the level of investment, and authority and responsibility for decision-
making. Plans will be formulated and maintained utilizing FMMS and FBMS. These web-
based information systems allow bureau staff to store and manipulate data about each asset and
each asset type in the real property inventory. The FMMS and FBMS will be automatically
linked with asset inventory information, performance measures data, and financial and
accounting information. The building block for the Asset Business Plan is the asset type which
is the key item used to organize data for analysis, presentation and decision-making.

The following elements are examples of content in an Asset Business Plan.

• Typical Background Information
- Existing asset portfolio profile (number, type, age, quantity, API) by asset type
- Projected (five-year) asset portfolio profile (with planned new construction) by
asset type
- Baseline condition (FCI) reported by asset type
- Current year base budget for operations and maintenance by asset type
- Current year and future secured non-base funding by asset type

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• Summary of Asset Portfolio Requirements

- Annualized operations and regular maintenance requirements by asset type
- Projected annual recapitalization requirements by asset type
- Projected FCI estimates by asset type and by API based on current budget

• Summary of Asset Portfolio Management Strategies

- Plan to reach FCI targets by asset type and by API over a specified period resulting
from:
à Investment plan;
à Budget reallocation strategies;
à Revenue-generating strategies; and
à Cost-savings strategies (e.g., disposal, leasing, mothballing)

• Implementation Strategy

4.5 Periodic Evaluation of Assets

Condition assessments begin with verification and existence of the asset and then proceed to
examination of its condition. There are two required types of condition assessments; Annual
and Comprehensive with the preponderance of assets examined during the Annual Condition
Assessments.

Annual Condition Assessments are conducted on all constructed assets with a CRV over
$5,000. The goal of an annual assessment is to verify existence and update documentation of
maintenance needs and accomplishments in FMMS. Constructed assets under $50,000 have
not been reported consistently. That will change with the revised FRPP data call in 1st Quarter
of FY ‘06. Bureaus and their constituent Field Operating Units will determine the Annual
Condition Assessment schedules, so that all respective assets get their required assessment.

The minimum DOI standard requires completion of a Comprehensive Condition Assessment at

least every five years on DOI-owned constructed assets with a CRV over $50,000. Inspection
findings will be integrated into the FMMS to ensure that required corrective actions are
included in budget requests as appropriate. At the end of FY 2005, this program will have
concluded its fourth year of a Five-Year program to assess all constructed assets with CRV
over $50,000.

Different types of assets require different frequencies of comprehensive assessment inspections

as required by public law or regulations. For example, BIA schools and BOR dams and power
generation facilities are required by public law, regulation or policy to conduct comprehensive
condition assessments more frequently than the DOI standard of every five years. Bureau-level
asset management plans will define the specific condition assessment schedules by asset type.

4.6 Operations and Maintenance Plan

DOI operating units, i.e. national parks, resource areas, national wildlife refuges, etc, currently
or will use FMMS to plan and manage the conduct of operation and maintenance activities
considering for such activities as visitation, trust responsibility, educating children, scientific
knowledge acquisition, power production, mineral management or resource protection factors.

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Asset inventory, condition assessments and the cost to perform work orders will be updated in
FMMS.

In many respects, the DOI infrastructure portfolio is unique in its composition and has
important implications for considering proper benchmarks, performance measures, and asset
management planning strategies. The DOI inventory is composed primarily of many small
structures, typically located in remote regions of the country; many are historic.

Many of DOI’s public use facilities receive high annual public visitation. In short, there are
few comparable organizations that could provide adequate benchmarks for comparing common
measures such as $/SF operations and maintenance costs. For example, Building Owners and
Managers Association (BOMA) benchmarks are primarily drawn from large, several hundred
thousand square foot office buildings in metropolitan areas. These types of buildings have
little in common with the average DOI administrative facility that is often one thousand square
feet, on average, located in a remote community.

Accordingly, DOI’s strategy for operations and maintenance (O&M) planning will be to assess
and plan for such activities at the asset level. DOI may take a scaled approach to planning
O&M activities where critical assets (as defined by the API process) may receive a detailed,
systems-level build up (derived from FMMS) of operational, and recurring and preventive
maintenance costs and activities. Other assets, however, may receive a higher level “$/SF”
estimate of what is required for proper sustainment on an annual basis.

The foundation of DOI O&M planning is based on properly defining and implementing
accurate and comprehensive O&M worktype definitions. The use of consistent work types in
FMMS will help to ensure that proper focus is placed on the long-term life-cycle management
of DOI’s unique asset portfolio and will help to minimize problems created by deferred
maintenance and maintenance backlog.

Creating O&M models for bureau assets, based on R.S. Means industry practices for operating
a facility, will give DOI and bureaus the requirements and benchmarks for establishing a good
O&M program. O&M includes the work types of preventive maintenance, recurring
maintenance, custodial work, refuse collection, pest control, unscheduled maintenance, site
maintenance and utility costs. If a bureau’s business practices do not identify the O&M
requirements for an asset portfolio, the end result is deferred work and an increase in the
maintenance backlog. Data on the benchmarks will reside in FMMS upon implementation.

Tracking budgeted or actual O&M costs does not identify the work required for an adequate
O&M program that will prevent an increase in deferred maintenance. Combining O&M
requirement benchmarking knowledge with API and FCI allows a manager to reallocate
resources from low to higher priority assets in good or fair condition.

4.7 Plan for Basic Repair and Alterations (R&A) Needs

Section 3.1.2 describes DOI’s Five-Year Deferred Maintenance and Capital Improvement Plan
to address repair and alteration needs.

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4.8 Capital and Operating Resource Requirements

On an annual basis, the Department formulates a budget that considers the costs for capital
investments and operations and maintenance costs for all facilities. The CPIC process
provides the overall framework for investment review. At the Departmental level capital
(defined as construction and IT) investments of $10 million or that meet other specific criteria
are evaluated and approved or disapproved by the Management Initiatives Team and the
Management Excellence Council. Each of these investments is supported by an Exhibit 300.
Within each bureau investment boards review these investments and those that are below the
$10 million threshold.

The formulation of the capital investment portfolio in each bureau is guided by Attachment G,
the budget guidance that is issued annually. Attachment G requires that each bureau maintain a
five-year plan that guides budgetary decisions and investment requirements. Supporting the
five year plan is a set of project descriptions. The Department reviews and approves the five
year plans during formulation of the budget submission to OMB and at the time the President’s
budget is released.

The operations and maintenance costs are considered with the identification of planned newly
constructed assets as well as with planned land acquisition. Each bureau is responsible to
budget for operating and maintenance costs or to identify the redirection of funds for operation
of facilities. Annual budget guidance requires that the bureaus identify these costs within the
bureau target funding level. See Section 3.1.2 on Repair and Alterations Major Projects for
additional detail.

4.9 Operations Continuous Monitoring and Performance Measures

DOI uses performance measures to measure program performance and effectiveness. The
Asset Management Partnership will be working to bring consistency to existing measures and
formulate new measures, as appropriate. Examples of these performance measures are
described in greater detail below.

4.9.1 Federal Real Property Council Measures

FRPC
Measure Description

Condition DOI uses the FCI. Condition assessments are performed on five-year
Index cycles, three-year cycles and annually, depending on the type of facility
and its current replacement value. For each constructed asset, the Repair
Backlog is compared to Current Replacement Value to calculate the FCI.
Utilization Several bureaus currently maintain utilization data for facilities, including
Index BIA schools, visitor facilities, fleet and leased space. DOI recognizes the
need to more consistently measure utilization and to provide the data to the
Federal Real Property Profile, consistent with the FRPC guidance for
offices, warehouses, laboratories, and housing.
Operating Interior bureaus currently budget for operating costs. Some bureaus
Costs capture this data centrally at a very detailed park, refuge, and field station
level, while other bureaus maintain this information at the regional level.

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FRPC
Measure Description

The Department has been working with the bureaus to improve the
consistency of formulating operating costs, and tracking and reporting
these costs. DOI recognizes the need to measure operating costs and to
provide the data to the Federal Real Property Profile data call, consistent
with the FRPC guidance. DOI will be consistent with the Federal Real
Property FRPC’s latest standards for this measure.
Mission Interior bureaus and offices currently evaluate the mission dependency of
Dependency assets and facilities. The BIA evaluates the importance of schools and
uses that to determine the priority for repair and replacement. DOI has not
had a consistent approach to mission dependency in the past, but began in
FY 2005 to use an API index to determine mission dependency. This
Federal Real Property Profile measure categorizes all constructed assets
into the following categories: Mission Critical, Mission Dependent Not
Critical, and Non-Mission Dependent.

4.9.2 DOI and Agency Specific Measures

The Department’s GPRA Strategic Plan contains 24 measures related to operations continuous
monitoring. The majority of these measures focus on measuring our progress toward
improving the FCI, Facilities Reliability Rating, or Service Level Index of specific physical
structures, including buildings, bridges, and roads. For the most part, emphasis is on moving
facilities from “poor” to “good” condition status, respectively.

One measure in our GPRA Strategic Plan tracks improvements in cost-efficient operation of
water storage facilities. Another measures our progress toward increasing the number of
universally-accessible facilities on our recreation areas. A list of these measures and our actual
performance results against targets established for these measures in FY 2004 can be found in
Section 7 of this AMP. Final targets have been set for FY 2005 and initial targets proposed for
FY 2006 for each of these measures.

DOI will examine other measures in the future for development and implementation, taking its
lead from the FRPC Performance Measures Committee, which will now address 2nd Tier
Performance Measures.

Existing DOI Performance Measures:

• Conservation and biological research facilities are in fair to good condition as measured
by FCI;
• Percent of cultural properties in DOI inventory in good condition;
• Percent of participating cultural properties owned by others in good condition;
• Percent of collections in DOI inventory in good condition;
• Facilities are in fair to good condition as measured by the FCI;
• Hydropower Facilities are in fair to good condition as measured by the Facilities
Reliability Rating (FRR);
• Cost per acre-foot of water to operate water storage facilities at full capacity;

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• Facilities (exclusive of FRR facilities) are in fair to good condition as measured by the
FCI (results pertain to both water and hydropower facilities);
• Water infrastructure is in fair to good condition as measured by the FRR;
• Percent of environmental audit findings and reviews addressed (results pertain to both
water and hydropower facilities);
• Potential acre-feet made available through completion of projects;
• Percent of universally accessible facilities in relation to the total number of recreation
areas;
• Percent of bridges in good or better condition based on the Service Level Index (SLI);
• Percent of miles of road in good or better condition based on the SLI;
• Facilities Condition: Other facilities, including roads, dams (non-BOR), trails and
bridges (non-BIA) are in fair to good condition as measured by a FCI;
• Facilities Condition: Buildings (e.g., administrative, employee housing) in fair to good
condition as measured by a FCI;
• Percent of physical and chemical hazards mitigated within 120 days to ensure visitor or
public safety;
• Indian natural resource trust assets management – percent of collections in DOI
inventory in good condition;
• Indian natural resource trust assets management – percent of paleontologic localities in
DOI inventory in good condition;
• Indian natural resource trust assets management – percent of cultural properties in DOI
inventory in good condition;
• Law enforcement facilities are in fair to good condition as measured by the FCI;
• Percent of facilities that have a calculated FCI;

Examples of additional Bureau-specific performance measures are:

Dollars/Gross Square Foot (GSF for Operations & Maintenance)

This indicator represents the relative operations and maintenance expenditures for the
stewardship responsibility of the Park’s assets. The indicator is expressed as a ratio of the
maintenance and operating expenditures to the asset unit of measurement. Operations &
Maintenance (O&M) includes the cost to perform the work on an asset as shown in the
categories listed below:
• Custodial - Standard custodial tasks that are performed at various frequencies (daily,
weekly, monthly, etc…) for functional spaces within a given building.
• Pest control - Periodic treatments or actions that eliminate or protect facilities from
pests.
• Refuse collection - Refuse collection begins after refuse has been collected from
individual rooms and placed in an intermediate container. It includes the emptying of
the intermediate container into a dumpster and emptying the dumpster at an approved
landfill.
• Preventive maintenance - Regularly scheduled periodic maintenance activities (within a
year) on selected equipment, typically includes inspection, lubrication, and minor
adjustment.

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• Recurring maintenance - Work activities that recur based on normal wear patterns on a
periodic cycle of greater than 1 year and less than 10 years. Typical work includes
painting, caulking, sealing, carpet replacements, etc. Note: A few RM activities may
have cycles greater than 10 years, such as re-pointing of bricks.
• Unscheduled maintenance - Unscheduled Maintenance includes work items of an
immediate nature, both emergencies and minor repairs.
• Utilities costs - Costs that are captured by asset (if metered) or prorated if metered for a
site, location, or park. These include energy, water or waste water that is generated or
treated onsite, purchased from a municipal system, or from a private supplier.

Gross Square Footage is defined as the sum of floor areas within the outside faces of the
exterior walls for all building levels which have floor spaces. Covered walkways, open roofed-
over areas that are paved, porches and similar spaces shall have the architectural area
multiplied by an area factor of 0.50. Operations & Maintenance does not include expenditures
for major maintenance and/or component renewal funded by other accounts, nor does it include
expenditures for support services such as mail, telecommunications, public safety, security,
environmental health and safety, central receiving etc. The unit of measure is how the asset is
usually quantified. For example, the unit of measure for buildings is square feet while the unit
of measure for roads is miles.

$/GSF = Operations Costs ($) + Maintenance Cost ($)

Unit of Measurement for the asset (BLDG GSF)

Component Renewal Index (CRI) – 10 Year Window

Annual Component Renewal Expenditures are all expenditures over and above facility
maintenance operating budget expenditures required to keep the physical plant in reliable
operating condition for its present use. These expenditures are over and above normal
maintenance for items with a life cycle in excess of one year and are not normally contained in
an annual facility operating budget. This is a separately funded, uniquely identified program
that renews, replaces, or renovates building systems (roof /HVAC system replacement) on a
schedule based on life cycle recommendations and on assessment of expected remaining useful
life.

This is typically represented as a total expenditure for component renewal of agencies capital
assets. Plant renewal focuses on maintaining the operability, suitability, and value of capital
assets. It is accomplished through the replacement and rework of those components of a
building that wear out even though those components are routinely maintained. Capital or
plant renewal is a time-driven process with specific useful life cycles for heating and
ventilation systems, etc. This often is provided in the form of capital funding for "major
maintenance" before it becomes "deferred." NPS is looking at projecting an asset’s component
renewal requirements to10 years for budgeting purposes.
CRI = Component Renewal ($)
Current Replacement Value ($)

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4.10 Operations Initiatives

DOI supports a number of programs and has begun a number of initiatives to improve its
operation and maintenance of assets. The following are the key initiatives and the target dates
(quarter by fiscal year) for completion.

The Department of the Interior will:

• Develop bureau scorecards for Real Property. Q3 ‘05

• Develop a tool for the quarterly status reporting of current major construction projects
similar to that used for DOI information technology projects. Q3 ‘05

• Develop standard template for bureau asset management plans. Q4 ‘05

• Accurately inventory all owned and leased space and constructed assets consistent with
FRPC guidance. Q1 ‘06

• Develop a site specific Asset Business Plan format for use by the individual bureaus.
Q1 ‘06

• Roll-out the Department’s Single Platform MAXIMO™. TBD

Each Bureau will:

• Implement the DOI developed tool for the quarterly status reporting of current major
construction projects similar to that used for DOI information technology projects. Q4
‘05

• Submit bureau internal scorecards. Q4 ‘05

• Implement each bureau’s respective fleet management plan and begin tracking the
performance measures established within the plan. Q1 ‘06

• Develop bureau-wide Asset Management Plans, which will follow FRPC guidance and
the DOI issued standard template. Q3 ‘06

• Develop site specific Asset Business Plans, which will follow the DOI issued format.
Q1 ‘07

5. DISPOSAL OF UNNEEDED ASSETS

The Department of the Interior is one of the largest landholding agencies in the Federal
Government. DOI showed increasing trends in disposal activity when the General Services
Administration (GSA) studied it over a period of five years between 1991 and 1995; these
trends continued to rise over the next ten years. Disposals could be increased if the proceeds
from disposal could be retained for agency requirements for all affected Bureaus.

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The Department faces two key challenges when it comes to the disposal of unneeded assets.
First, when a property (building or land) is of historical significance, additional time and
documentation is required for research and negotiation for disposal. Second, when a property
is found to have or will affect environmental considerations, additional resources, time, and
contractor support, is required for documentation and may also be required for removal or
abatement of hazardous materials.

Another significant and costly challenge in terms of resource time is the requirement to report
each property under the McKinney-Vento Act regardless of the condition of the property
(completion of a six-page checklist, which takes an average of 40 hours per checklist). We are
working with HUD to streamline the reporting burden when appropriate cases are presented to
the Department by requesting HUD's approval to list multiple properties as one Title V
checklist.

The Department has broad disposal authority in connection with its operations; specific
authorities and policies are summarized below for the Bureau of Land Management, Bureau of
Reclamation, Fish and Wildlife Service, National Park Service and Bureau of Indian Affairs.
As specified in 41 CFR 114-47.201-2(a)(4), Interior’s disposal guidelines state “Each Interior
Bureau and Office having jurisdiction over real property shall maintain its inventory of real
property at the absolute minimum consistent with the economical and efficient conduct of
assigned programs.”

Bureau of Land Management – Disposal of real property assets is accomplished through

standard procedures below using GSA unless it involves public land that falls under the
authority of FLPMA (Federal Land Policy Management Act of 1976, 90 Stat. 2743) or the
Southern Nevada Public Land Management Act (SNPLMA), which became law in October,
1998.

FLPMA authorizes DOI to sell public lands where, as a result of land use planning, it is
determined that land targeted for sale: 1) was acquired for a specific purpose and the tract is
not required for that or any other Federal purpose; or 2) disposal of the land shall serve
important public objectives, including but not limited to , expansion of communities and
economic development, which cannot be achieved prudently or feasibly on lands other than
public lands and which outweigh other public objectives and values, including, but not limited
to, recreation and scenic values, which would be served by maintaining such tract in Federal
ownership; or 3) such tract, because of its location or other characteristics is difficult and
uneconomic to manage as part of the public lands and is not suitable for management by
another Federal department or agency.

SNPLMA allows the Bureau of Land Management to sell public land within a specific
boundary around Las Vegas, Nevada. The revenue derived from land sales is split between the
State of Nevada General Education Fund (5%), the Southern Nevada Water Authority (10%),
and a special account available to the Secretary of the Interior for Parks, Trails and Natural
areas, Capital improvements, Conservation initiatives, multi-species habitat conservation,
environmentally sensitive land acquisitions and Lake Tahoe restoration projects. Other
provisions in the SNPLMA direct certain land sale and acquisition procedures, direct the BLM

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to convey title to land in the McCarran Airport noise zone to Clark County, and provide for the
sale of land for affordable housing.

Accountable officers recommend disposal of various types of property, ranging from land to
buildings that are no longer needed to meet the mission. The goal is to achieve maximum
utilization of excess real property and to minimize expenditures for the purchase of real
property.

Bureau of Reclamation – The net proceeds from Bureau of Reclamation disposal of acquired or
withdrawn real estate is deposited in the Reclamation Fund or to the Land and Water
Conservation Fund, both of which are in the General Treasury. The proceeds are “credited” to
the accounts of the specific project for which the property was acquired or withdrawn in
accordance with existing laws and accounting procedures. No such revenues, other than
recovery of administrative costs of processing the disposal, are actually “retained” by
Reclamation, as appropriation of such funds by Congress is still required.

Sale of Land: All net proceeds from the sale of land are for deposit to the Reclamation
Fund, a special receipt account designated as Treasury Symbol 145000, pursuant to the
statutes noted below. In the first three scenarios, revenues are credited to the appropriate
Reclamation project.

• Withdrawn, improved public land sales are to be credited to the project for which such
lands had been withdrawn pursuant to the Sale of Surplus Improved Public Lands Act
of May 20, 1920 (43 U.S.C. Sec. 375).

• Withdrawn, unimproved lands sales that are in tracts too small to qualify as farm units
are credited to the project for which such lands had been withdrawn pursuant to the
Disposal of Small Tracts Act of March 31, 1950 (43 U.S.C. Sec 375(e)).

• Acquired lands sales are credited to the project for which the lands were acquired
pursuant to the Sale of Surplus Acquired Lands Act of February 2, 1911 (43 U.S.C. Sec
374).

• Public domain land sales are a general credit to the Reclamation Fund pursuant to
Section 1 of the Reclamation Act of June 17, 1902 (43 U.S.C. Sec 391).

Sale of Real Property without the Underlying Land: Revenues from any sale or other
disposition of surplus real property and related personal property are deposited as follows.
If the real property was:

• Acquired by the use of reimbursable funds, then the proceeds from the disposition of
that property are credited to the project pursuant to the Federal Property and
Administrative Services Act of 1949 (June 30, 1949, 40 U.S.C. Sec. 485(c)).

• Not a cost to the project, then it is disposed of pursuant to the 1949 Act, 40 U.S.C. Sec.
485 (a).

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Area Managers make the decisions on disposal to eliminate requirements to manage real
property that is no longer needed, to facilitate economic development, and to comply with
Interior policy to hold no more real property than is needed for mission accomplishment. This
applies to land and buildings that are no longer needed for projection or public purposes. Area
Managers continuously survey the real property and when a survey results in a decision that
property is no longer needed, then it is disposed of with the goal that all real property that is not
mission critical is disposed and fair market value is received for it.

Fish and Wildlife Service – All gross receipts from the sale of property within the National
Wildlife Refuge System that was donated or originally acquired with Migratory Bird
Conservation Fund monies must be deposited in the MBCF to be used by the Service for future
land acquisitions approved by the Migratory Bird Conservation Commission [6 U.S.C. Sec.
668dd(a)(2)]. Funds from the sale of all real property which is declared surplus and turned
over to GSA for disposition are deposited in the Land and Water Conservation Fund (41 CFR
101-47.307.6). Funds from the sale of all other real property must be deposited into the
General Fund of the Treasury as Miscellaneous Receipts (346 DM 1.2).

The Director’s approval is required for disposal of any FWS lands or interests in land. The
disposal of lands in the NWRS also requires the approval of Congress or, in the case of land
purchased with MBCF money, the approval of the MBCC. FWS Regional Directors are
authorized to approve the disposal through an exchange of up to 10 percent of the approved
acquisition boundary acreage or 40 acres, whichever is greater, subject to certain conditions.

It is Service policy to dispose of real property and improvements that are excess to its needs in
keeping with the Acts of Congress specific to that real property. When disposals are
legislatively mandated, the Services’ disposal objective is to act as necessary to satisfy
Congressional mandates.

National Park Service -- NPS has no authority to dispose of real property except under
authority of Public Law 100-47 (102 Stat. 2281) that amended the National Trail System. This
authority is limited to the sale of Park lands outside of the boundary of a National Trail. The
proceeds from such sales are credited to the Land and Water Conservation Fund.
Improvements or structures on Park land that have salvage value are disposed of using the
proceeds to offset the cost of the contract.

Unneeded structures or improvements on real property are typically removed through

demolition contracts because of deteriorated condition and for public safety and health reasons.
NPS follows the guidelines set forth in the Federal Management Regulations (41 CFR Part
101-47) after compliance with the McKinney–Vento Act and the Historic Preservation Act and
proper coordination with and concurrence of the GSA.

The Park Superintendent recommends removal of specific structures, which are reviewed on a
case by case basis by a designated Board of Survey. The findings and recommendations of the
Board are written into a Report of Survey and forwarded through the Regional Director to the
Associate Director, Administration, and GSA for approval.

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Lands acquired for the NPS are disposed of to protect and preserve a corridor through which a
Trail passes, to buffer the Trail from activities on private lands which detract from or diminish
the hiking experience. In many cases, there are improvements or structures which exist on
these buffer and corridor lands. The structures contribute nothing; are an unwanted intrusion;
detract from the scenic resources; and are a liability to the Park Service. Unwanted
“incidentally acquired structures” are disposed, including dilapidated cabins, farm houses,
chicken coops, privies, office trailers, small trailer homes, sheds, etc.

Disposal occurs after all of the reporting requirements are met and approval has been granted;
however, it should be noted that it takes one year or longer to dispose of excess property under
current authorities.

Bureau of Indian Affairs – The Bureau of Indian Affairs does not usually sell its real property
assets. If the Bureau’s realty assets are located within the exterior boundaries of an Indian
reservation and/or abutting, the Bureau will transfer or convey the land to the applicable Indian
tribe. The Authorizing Public Law 93-599, is codified in 40 U.S.C. 483(1)(2) – Disposal of
Certain Excess and Surplus Federal Property to the Secretary of the Interior for the Benefit of
Any Group, Band or Tribe of Indians. These transfers/conveyances are at “no cost” and no
monies are derived from the transfers/conveyances.

Also, if an Indian tribe requires real properties off-reservation, the Bureau will convey
ownership of its off-reservation lands to an Indian tribe if it will further the tribe’s Indian self-
determination contract(s) and/or grant(s). The Bureau will assist an Indian tribe in acquiring
other Federal properties pursuant to the Federal Property and Administrative Services Act and
then convey/donate the realty assets to the Indian tribe pursuant to Public Law 93-638, the
Indian Self-Determination and Education Assistance Act. These transfers/conveyances are also
“no cost” transfers and no monies are derived from the transfers/conveyances.

The Bureau of Indian Affairs has other disposal authorities as follows:

• 25 U.S.C. 443a – Conveyance to Indian Tribes of Federally-Owned Buildings,

Improvements and Facilities. This statute authorizes the Secretary or designated
representative to convey to an affected Indian tribe, band, or group, title to any Bureau-
owned buildings, improvements, or facilities (including personal property used in
connection with such buildings, improvements, or facilities) that are situated on lands
of such tribes, band or group or on lands reserved for the administrative of its affairs,
and that is no longer required by the Secretary for the administration of Indian affairs.

• 25 U.S.C. 15 – Utility Facilities Used In Administration of Bureau of Indian Affairs.

This statute authorizes the Secretary to contract under such terms and conditions as he
or she considers being in the best interest of the Federal Government for the sale,
operation, maintenance, repair or relocation of government-owned utilities and utility
systems and appurtenances used in the administration of the Bureau. Upon the
determination by the Area Director that a utility system is no longer needed or is no
longer subject to 25 U.S.C. 443a or 40 U.S.C. 483a, notice will be provided to currently
operating regional utility corporations of the availability of the system for conveyance.
In these instances, monies can be derived from the sale of the utilities.

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• 25 U.S.C. 293 – Conveyance of School Properties to Local School Districts or Public

Agencies. The Secretary’s designated representative is authorized to convey to state or
local governmental agencies or to local school authorities all the right, title, and interest
of the United States in any land and improvements thereon and personal property used
in connection therewith heretofore or hereafter used for Federal Indian school purposes
and no longer needed for such purposes.

The local agency line official determines if the realty assets are excess. Once this
determination is made, the area Director is responsible for ensuring the necessary disposal
actions are completed. There are 12 area directors in the Bureau that have jurisdiction over real
property assets.

The Bureau disposes of its realty assets, including land, buildings, structures, and utility
systems, when they are no longer needed to carry out the mission or to enhance a tribe’s 638
contract(s) and/or grant(s). Lack of funding for environmental cleanups has slowed the
Bureau’s overall disposal process.

In May 2005, the BIA Asset Manager met with GSA, seeking methods to improve the disposal
of unneeded assets. Discussions focused on the disposal of approximately 2 million square feet
of space in a variety of locations. Additional discussions are planned when location data can
be introduced into the spreadsheets depicting the unused space.

As more and more Indian tribes contract pursuant to the Indian Self-determination Act, the
Bureau’s realty assets will be disposed of whenever possible using either Public Laws 93-599
or 93-638 authorities.

This section addresses disposal (transfer, demolition, and sale) for the major categories of
constructed or acquired assets in the various bureaus of the DOI. Authorities for disposal vary
for each of these categories. Terms of acquisition may affect the authority for disposal of
certain assets. Clarification and implementation is a work in progress with active participation
from each DOI land-holding bureau. Each of the six major categories of assets is separately
addressed to assist in the understanding of the complexities and uniqueness of each of the DOI
disposal processes.

Category
Category Description
Number

Category 1 Constructed/Acquired Assets on Federally Owned Land

Category 2 Constructed/Acquired Assets on Non-Federally Owned Land
Category 3 Constructed/Acquired Assets on Public Lands
Category 4 Federally-Owned Land Assets
Category 5 Fleet Assets
Category 6 Other Assets not Otherwise Defined

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5.1 Data Tools to Support Decision-Making

The determination that an asset no longer is needed or able to provide support for the mission
of the various DOI bureaus is made by the analysis of the following data tools. This analysis is
initiated and supported by a Retention and Disposal (R&D) Study and other pertinent
documentation that examines the viability of retaining or excessing the asset. Some of the data
tools used in this analysis, currently exist while some will need to be defined and standardized
at the Department level by Q4 ‘06. The identification and management of excess asset
disposition, transfer and sale will be greatly enhanced as the suite of the following tools are
defined and implemented.

Currently in
Data Tools Enhanced/”To Be”
Place/”As Is”
Mission Related Data Tools X
- Clear and Definitive Disposal
Policy and Procedures
- Current and Long Range Customer
Mission Needs
Appropriate API Determinations for each X
Asset
Annual and Long Term Prioritized Annual current Long-term
Disposal Planning Procedures
Asset Inventory/Backlog Data Tools X
Current and Accurate Asset Inventories X
Deferred Maintenance/Replacement Costs X
Deferred Maintenance Backlog Disposal X
Related Costs
Disposal Related Compliance Costs X
FCI Determinations from Deferred On-going under
Maintenance Backlogs revision

5.2 Disposal Processes

Each bureau is currently subject to similar mandatory screening or disposal processes
legislatively defined in the Federal Property and Administrative Services Act of 1949 (Pub. L.
152, Ch. 288, 63 Stat 377) and 41 CFR 102 unless further defined by unique regulation or law.
The Report of Excess (ROE) with the following supporting documentation provides the basic
framework for the disposition process.

Mandatory screening processes are currently used for:

• Continued Federal Use;
• Public Benefit Conveyance Opportunities;
• Local Community Future Re-Use; and
• Sealed bid sale, public outcry auction or Internet sale.

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Exception screening processes include:

• Screening for Transfer to Tribal Governments

The major categories of assets that are addressed in this plan include primarily both Federally-
Owned and Non-Federally owned assets while land assets are more adequately addressed by
other plans, regulations and laws. The following major asset categories are further defined.

Category 1 - Constructed/Acquired Assets on Federally Owned Land will be disposed of in

accordance with previously mentioned GSA authorities and regulations delegated to the
Secretary of the Interior and the heads of Bureaus by Departmental Manual. These authorities
are defined in 41 CFR 102-71.25 and 102-75.1095. This represents the largest category for
asset disposal. If other federal use is not initially determined, various Public Benefit
Conveyance opportunities are examined, including and not restricted to the following for the
homeless.

• McKinney-Vento Homeless Assistance Act

Title V of the McKinney-Vento Homeless Assistance Act, 42 U.S.C. Section 11411
(1988), establishes a socio-economic program whereby the Secretary of Housing and
Urban Development (HUD) requests, identifies and publishes lists in the Federal
Register of excess or surplus property that are suitable for use to assist the homeless.

DOI reports quarterly to HUD on its unutilized, excess and surplus real properties
(buildings, structures and land). DOI’s Office of Acquisition and Property
Management conducts comprehensive canvasses on the first day of the first and third
quarters of each calendar year.

Properties published as “suitable” are not available for any purpose other than to assist
the homeless for a holding period of 60 days beginning on the date of publication in the
Federal Register. Unsuitable property is subject to a similar holding period of 20 days
following the determination of unsuitability.

Category 2 - Constructed/Acquired Assets on Non-Federally Owned Lands that are State,

local government, Tribal or privately owned or leased. Disposal of these assets are influenced
and regulated by public law, legislative authority or lease agreements.

An example is public conveyance, where assets have been constructed on land administratively
withdrawn for specific purposes such as Indian schools or BIA Administrative Agencies under
25 U.S.C. 443a Conveyance to Indian Tribes of Federally-Owned Building Improvements, or
Facilities and 40 U.S.C. 483 (a) (2) Disposal of Certain Excess and Surplus Federal Property to
the Secretary of the Interior for the Benefit of any Group, Band or Tribe of Indians. Another
example would be when BLM has constructed air tanker bases on land leased by BLM.

Category 3 – Constructed/Acquired assets on Public Land where special authorities

stipulate special realty disposal processes other than GSA delegated processes.

The land associated with real property, especially in BLM, is often part of the public domain
and, therefore, reverts to stewardship land status when all buildings, structures and

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improvements have been removed. In extremely rare circumstances, it may be considered

advantageous to the government to dispose of the land associated with real property. Because
of the unique nature of the laws governing the BLM, prior to making any decision that includes
the disposal of BLM-owned land, field office realty staff needs to be consulted.

Category 4 – Federally Owned Land disposal processes are currently beyond the scope of the
AMP. These processes are being addressed and defined in other DOI plans, manuals,
directives, regulation or statute.

Type A. Non-stewardship Land

The disposal processes for non-stewardship land parallel those for Category 1,
Constructed or Acquired Assets on Federally Owned land. Non-stewardship land is
considered to be the land associated with constructed assets such that it would be
impractical to try to separate them for sale. Typically all the land under a built-up site
or campus with buildings, structures, roads, and similar assets would be managed as a
complete parcel and disposed of by sale or other transfer as a parcel. The land would
go with the site or campus.

Some bureaus may have other non-stewardship vacant land that would be eligible for
disposal through the normal real property disposal processes. These vacant parcels
would be handled, if appropriate, through the same mechanisms as Category 1
property. If this is not appropriate, the special factors, rules and considerations would
be detailed in the individual Bureau-wide Asset Management Plans.

Type B. Stewardship Land

Stewardship land for the purposes of this AMP is considered to be the same as “public
land” as used in the Executive Order. These are the national forests, national parks,
public domain, and other natural resource lands not built up with infrastructure.
Disposal processes for stewardship land are currently beyond the scope of the AMP.
These processes are being addressed and defined in other DOI plans, manuals,
directives, regulation or statute.

Category 5 – Fleet Asset disposal will continue to be implemented in accordance with

authorities and regulations delegated to GSA. Interior owned fleet sales are conducted in
accordance with 41 CFR 101-45 Sale, Abandonment, or Destruction of Personal Property, 101-
45.103-1 Conduct of Sales, 102-36 Disposition of Excess Personal Property, 101-45.304-10
Disposition and Final Payment, i.e., eBay, Oregon State Agency for Surplus Property
(ORSASP).

Category 6 – Other Asset disposal provides the identification of unique assets that do not fit
any of the other five standard categories.

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5.3 Performance Measures and Continuous Monitoring

The determination of assets that are excess to the mission of the bureaus and the
implementation of the disposal processes can be measured and monitored in any of the
following methods.

5.3.1 DOI Disposal Measures

Disposal Index
As the FRPC and OMB further define the disposition algorithm, DOI will work to ensure
consistency with the FRPC’s standards. The disposal algorithm should reflect the realistic
prioritization processes and outcomes for all Departmental disposal, transfer or sale of excess
assets such as:
• Determination of whether to Dispose, Transfer or Sell;
• Prioritization of all existing excess assets for Disposition;
• Prioritization of all existing excess assets for Transfer;
• Prioritization of all existing excess assets for Sale;
• Effective and efficient use of existing fiscal resources;
• Timely completion of funded demolition, transfer or sale projects; and
• Determination of standardized units of measure (Square Feet, Dollars, Time).

5.3.2 Bureau Specific Measures

No disposal measures are contained in the Department’s GPRA Strategic Plan. However, the
following bureau performance measures are either proposed or presently included in their
individual bureau budget appropriation language, OMB PART program assessment
requirements or GPRA performance goal requirements. There currently is no standardization
of measures between bureaus for disposition, transfer or sale of similar type assets. Because of
the unique nature of some bureau assets, standardization of all measures will not be feasible.

Examples of present various bureau performance measures:

• Establish baseline excess asset inventory counts and square footages (BIA);
• Annual square foot baseline reduction percentages (BIA);
• Long term square foot baseline reduction plans and percentages (BIA);
• Timely disposal of identified excess assets following compliance of applicable laws (all
Bureaus); and
• Cost effective disposal of identified excess assets (NPS).

5.4 Disposal Initiatives

The Department of the Interior will:

• Develop a vehicle management policy which includes guidance for performance
measures, baselining the fleet, maximizing the utilization of vehicles and disposing of
excess vehicles. Q4 ‘05

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• Update disposal policy to emphasize reduction of DOI’s inventory of low priority

assets using the API, FCI and other factors. Q4 ‘06

Each Bureau will:

• Identify low priority assets and request funding for their disposal in the bureaus' FY
2008 budget. Q1 ‘06

• Include in each bureau’s Fleet Management Plan appropriate guidance to ensure that
the Bureau has the minimum number of vehicles to accomplish its mission.
Q4 ‘05

6. CONCLUSION

DOI actively manages a large and unique portfolio. In many cases, this portfolio more than
facilitate DOI’s mission, it is DOI’s mission. To accomplish this, DOI has undertaken
significant reforms including the use of FCI, API, CPIC, completing condition assessments,
utilizing a five-year plan to guide budget decision-making, and implementation of FMMS. The
Department is building on this and is moving to a life-cycle, asset-based portfolio management
process. DOI will facilitate this transition through the use of a full suite of tools relating to
asset priority, asset inventory, asset condition, asset valuation, and life-cycle management.

DOI will use these tools and develop metrics to be implemented at the bureau-level to improve
the performance of individual assets and the overall asset portfolio. The portfolio-based
approach follows the structured, performance-based, integrated CPIC approach to managing
the risks and returns of capital assets necessary to ensure that DOI’s investments are well
conceived, cost-effective, and support strategic mission and business goals.

This Asset Management Plan establishes the framework and strategic direction for the
Department. In accordance with E.O. 13327 and the FRPC, DOI will continually refine
business practices to improve accountability and performance.

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7. INTERIOR’S GOVERNMENT PERFORMANCE AND RESULTS ACT

(GPRA) STRATEGIC PLAN ASSET MANAGEMENT PERFORMANCE
MEASURES

Measure ID Performance Measure FY04 Actual FY05 Final FY06 Proposed

Target Target
Mission Area #1: Resource Protection – Protect the Nation’s Natural, Cultural, and Heritage Resources
Improve information base, information management and technical assistance (sustain biology)
PIM.747 Conservation and biological 0.12 (E) 0.062 0.062
research facilities are in fair to
good condition as measured by the
Facilities Condition Index (FCI)
Protect cultural and natural heritage resources
PIM.391 Percent of cultural properties in 64.50% 54.66% 55.23%
DOI inventory in good condition
PEM.460 Percent of participating cultural 42.3% (P) 4% 5%
properties owned by others in good
condition
PEM.462 Percent of collections in DOI 4.9% (E) 49% 54%
inventory in good condition
PEM.461 Percent of paleontologic localities 61.1% (P) 57% 57%
in DOI inventory in good condition
Reduce degradation and protect cultural and natural heritage resources
PIM.748 Facilities are in fair to good 0.118 0.152 0.152
condition as measured by the FCI
Mission Area #2: Resource Use – Manage Natural Resources to Promote Responsible Use and Sustain a Dynamic
Economy
Operate and maintain reliable, safe and secure power facilities
UIM.362 Hydropower Facilities are in fair to 100% 94.6% 94.6%
good condition as measured by the
Facilities Reliability Rating (FRR)
Deliver water, consistent with applicable State and Federal law, in an environmentally responsible and cost-efficient
manner
UEM.367 Cost per acre-foot of water to No Baseline Establish TBD
operate water storage facilities at established Baseline
full capacity
Operate and maintain a safe and reliable water infrastructure
UIM.361 Facilities (exclusive of FRR No Baseline 0.868 0.868
facilities) are in fair to good established
condition as measured by the FCI
(results pertain to both water and
hydropower facilities)

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Measure ID Performance Measure FY04 Actual FY05 Final FY06 Proposed

Target Target
UIM.909 Water infrastructure is in fair to 97.40% 94% 94%
good condition as measured by the
FRR
Complete construction projects to increase delivery infrastructure and water availability
UIM.911 Percent of environmental audit 56% 83% 84%
findings and reviews addressed
(results pertain to both water and
hydropower facilities)
UIM.458 Potential acre-feet made available 103,598 31,689 33,535
through completion of projects
Mission Area #3: Recreation – Provide Recreation Opportunities for America
Enhance the quality of recreation opportunities
RIM.373 Facilities are in fair to good 0.181 0.166 0.166
condition as measured by the FCI
Improve capacities to provide access for recreation where appropriate
RIM.331 Percent of universally accessible 7.80% 13% 17%
facilities in relation to the total
number of recreation areas
Mission Area #4: Serving Communities – Safeguard Lives, Property and Assets, Advance Scientific Knowledge, and
Improve the Quality of Life for Communities We Serve
Improve public safety and security and protect public resources from damage
SIM.333 Percent of bridges in good or better No Report 47% 49%
condition based on the Service
Level Index (SLI)
SIM.334 Percent of miles of road in good or No report 15% 16%
better condition based on the SLI
SIM.349 Facilities Condition: Other 0.312 (E) 0.167 0.157
facilities, including roads, dams
(non-BOR), trails and bridges (non-
BIA) are in fair to good condition
as measured by a FCI
SIM.348 Facilities Condition: Buildings 0.130 (E) 0.223 0.221
(e.g., administrative, employee
housing) in fair to good condition
as measured by a FCI
SIM.347 Percent of physical and chemical Baseline 23% 22%
hazards mitigated within 120 days established
to ensure visitor or public safety
Improve information base, information management and technical assistance
SIM.848 Facilities are in fair to good 0.172 17% 17%
condition as measured by the FCI
Fulfill Indian fiduciary trust responsibilities
SIM.587 Indian natural resource trust assets 17% 18% 19%

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Measure ID Performance Measure FY04 Actual FY05 Final FY06 Proposed

Target Target
management – percent of
collections in DOI inventory in
good condition
SIM.588 Indian natural resource trust assets Baseline Baseline TBD
management – percent of established
paleontologic localities in DOI
inventory in good condition
SIM.586 Indian natural resource trust assets No baseline 93% 96%
management – percent of cultural established
properties in DOI inventory in
good condition
Improve education and welfare systems for Indian Tribes and Alaska Natives
SIM.317 Facilities are in fair to good 0.l24 0.107 0.091
condition as measured by the FCI
Enhance public safety
SIM.408 Law enforcement facilities are in 0.169 0.169 0.154
fair to good condition as measured
by the FCI
Strategic Goal: Management Excellence – Manage the Department to be Highly Skilled, Accountable, Modern,
Functionally Integrated
Performance/process improvement
XIM.522 Percent of facilities that have a No report 83.3% 100%
calculated FCI

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8. DOI BUREAU MISSIONS

Bureau Mission

Bureau of Land The Bureau of Land Management (BLM) manages 264 million acres of
Management surface acres of public lands located primarily in the 12 Western States,
including Alaska. BLM manages an additional 300 million acres of below
ground mineral estate located throughout the country. Originally, these lands
were valued principally for the commodities extracted from them; today, the
public also prizes them for their recreational opportunities and their natural,
historical, and cultural resources they contain.
Minerals The Minerals Management Service (MMS) regulates and manages the
Management development of mineral resources in the Federal waters off the Nation's
Service shores. MMS also collects, audits and distributes all mineral revenues from
these Federal waters as well as from mineral resources on both Federal and
Indian lands.
Office of The Office of Surface Mining (OSM) mission is to carry out the requirements
Surface Mining of the Surface Mining Control and Reclamation Act in cooperation with
States and Tribes. OSM's primary objectives are to ensure that coal mines
are operated in a manner that protects citizens and the environment during
mining, assuring that the land is restored to beneficial use following mining,
and to mitigate the effects of past mining by aggressively pursuing
reclamation of abandoned coal mines.
Bureau of The mission of the Bureau of Reclamation (BOR) is to manage, develop, and
Reclamation protect water and related resources in an environmentally and economically
sound manner in the interest of the American public. Established in 1902,
BOR is the largest wholesale water supplier in the country, delivering 10
trillion gallons of water to more than 31 million people. BOR manages 457
dams, and its 348 reservoirs have more than 90 million recreation visits
annually. It is also the Nation's second largest producer of hydropower and
the tenth largest electric utility, generating about 42 billion kilowatt-hours a
year.
U.S. Geological The U.S. Geological Survey (USGS) serves the Nation as an independent
Survey fact-finding agency that collects, monitors, analyzes, and provides scientific
understanding about natural resource conditions, issues, and problems. The
value of the USGS to the Nation rests on its ability to carry out studies on a
national scale and to sustain long-term monitoring and assessment of natural
resources. Because it has no regulatory or management mandate, the USGS
provides impartial science that serves the needs of our changing world. The
diversity of scientific expertise enables the USGS to carry out large-scale,
multi-disciplinary investigations that build the base of knowledge about the
Earth. In turn, decision makers at all levels of government and citizens have
the information tools they need to address pressing societal issues.

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Bureau Mission

U.S. Fish and The Fish and Wildlife Service (FWS) works with others to conserve, protect,
Wildlife Service and enhance fish, wildlife, and plants and their habitats for the continuing
benefit of the American people. The National Wildlife Refuge System is
among the world’s most significant land and water systems managed for the
benefit of fish and wildlife. The 95 million-acre network provides stepping
stones of habitat for many species of migratory birds and other wildlife,
sanctuary for hundreds of threatened and endangered species, and secure
spawning areas fisheries. The system includes 545 refuges and 37 wetland
management districts. The FWS fisheries program helps safeguard inter-
jurisdictional fisheries worth billions of dollars; rescues troubled aquatic
species on the brink of extinction; and provides recreational opportunities for
the public. The 69 national fish hatcheries produce about 150 million fish
annually, including striped bass, steelhead, lake trout, and salmon. In
addition, FWS operates an historic national fish hatchery, 7 fish technology
centers, and 9 fish health centers.
National Park Created by Congress on August 25, 1916, the National Park Service (NPS)
Service preserves, unimpaired, the natural and cultural resources and values of the
national park system for the enjoyment, education, and inspiration of this and
future generations. The National Park System of the United States comprises
388 areas covering more than 84 million acres in 49 States, the District of
Columbia, American Samoa, Guam, Puerto Rico, Saipan, and the Virgin
Islands. These areas are of such national significance as to justify special
recognition and protection in accordance with various acts of Congress. NPS
cooperates with partners to extend the benefits of natural and cultural
resource conservation and outdoor recreation throughout this country and the
world.
Bureau of Indian The Bureau of Indian Affairs (BIA) responsibility is the administration and
Affairs management of 55.7 million acres of land held in trust by the United States
for American Indians, Indian tribes, and Alaska Natives. There are 562
Federally recognized tribal governments in the United States. Developing
forestlands, leasing assets on these lands, directing agricultural programs,
protecting water and land rights, developing and maintaining infrastructure
and economic development are all part of the agency's responsibility. In
addition, the BIA provides education services to approximately 48,000 Indian
students.

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9. ASSET MANAGEMENT IMPLEMENTATION PLAN

Lead
Due Location in
Initiative Action DOI/
AMP
Bureau Date
Establish/ 1 Develop API framework, criteria, and weighting to guide Department and DOI Q4 ‘05 Support Agency Missions and Strategic Goals
A bureau-level scoring processes that reflect the missions of each individual
Update
Policy organization
2 Develop template for sustainment information for project presentations to DOI Q4 ‘05 Planning and Acquisition of Real Property
include the total cost of ownership.
3 Issue Departmental policy to standardize the practice of estimating the cost DOI Q2 ‘06 Support Agency Missions and Strategic Goals
of repairing asset deficiencies as documented during the condition
assessment phase.
4 Issue Departmental policy on evaluating owned and operated assets to DOI Q2 ‘06 Support Agency Missions and Strategic Goals
determine its Current Replacement Value (CRV).
5 Issue Departmental policy on improving the condition of the asset DOI Q2 ‘06 Planning and Acquisition of Real Property
portfolio and properly sustaining it over asset life cycle or component life
cycle.
6 Update disposal policy to emphasize reduction of DOI’s inventory of low DOI Q4 ‘06 Disposal of Unneeded Property
priority assets using the Asset Priority Index (API), Facility Condition
Index (FCI) and other factors.
Produce 1 Include FRPC’s static key data elements (19 of the 23 elements). (The DOI Q1 ‘06 Support Agency Missions and Strategic Goals
Accurate plan for the 4 performance metrics is noted below under C4.)
B and 2 Accurately inventory all owned and leased space and constructed assets DOI Q1 ‘06 Operations of Real Property
Complete consistent with FRPC guidance.
Inventory
Implement 1 Develop bureau scorecards for Real Property. DOI Q3 ‘05 Operations of Real Property
C
Performance 2 Submit bureau internal scorecards Bureau Q4 '05 Operations of Real Property
Metrics Develop key performance measures to determine the effectiveness of the DOI Q4 ‘05 Planning and Acquisition of Real Property
3
acquisition phase of asset management

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Lead
Due Location in
Initiative Action DOI/
AMP
Bureau Date
4 Implement the performance measures identified by the FRPC (FCI, DOI Planning and Acquisition of Real Property
API/mission dependency, operating costs, and utilization) as follows:
• Utilization Q1 ‘06
• Mission Dependency Q2 ‘06
• Condition Index Q4 ‘06
• Annual Operating and Maintenance Costs (data derived on full Q4 ’06
implementation of FBMS)
Strengthen 1 Report FCI (current FCI and revised FCI) for all currently approved FY Bureau Q3 ‘05 Planning and Acquisition of Real Property
D Project/ 2005 and FY 2006 construction projects for which FCI had not previously
Portfolio been provided.
Governance 2 Develop a tool for the quarterly status reporting of current major DOI Q3 ‘05 Operations of Real Prop
(CPIC Items) construction projects similar to that used for DOI IT projects.
3 Implement the DOI developed tool for the quarterly status reporting of Bureau Q4 ‘05 Operations of Real Prop
current major construction projects similar to that used for DOI IT projects.
4 Revise the DOI CPIC guide to address the life-cycle period in determining DOI Q1 ‘06 Sup of Agency Missions & Strategic Goals
the full cost of each type of asset covered in the AMP.
5 Include API as a performance measure for each asset in major project Bureau Q1 ‘06 Planning and Acquisition of Real Property
proposals submitted to the IRB.
6 Include sustainment information to demonstrate the total cost of ownership Bureau Q2 ‘06 Planning and Acquisition of Real Property
in all FY 2008 project presentations to the Bureau Investment Review
Board (IRB).
7 Measure bureau CPIC programs and portfolio management success through DOI Q4 ‘07 Planning and Acquisition of Real Property
use of “Self-Assessment Guide toward Portfolio Management Maturity.”
(The Guide will be based on the Information Technology Investment
Management (ITIM) process maturity stages, issued by the Government
Accountability Office).
Strengthen 1 Develop standard template for bureau Asset Management Plans. DOI Q4 ‘05 Operations of RP
E
Planning 2 Develop a Site Specific Asset Business Plan format for use by the DOI Q1 ‘06 Operations of RP
individual bureaus.
3 Develop bureau-wide Asset Management Plans which will follow FRPC Bureau Q3 ‘06 Operations of Real Property
guidance and the DOI issued standard template.

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Lead
Due Location in
Initiative Action DOI/
AMP
Bureau Date
4 Develop Site Specific Asset Business Plans which will follow the DOI Bureau Q1 '07 Operations of RP
issued format.
Cross Cutting 1 Through a Departmentwide Space Management Initiative, recommend DOI Q4 ‘05 Planning and Acquisition of Real Property
F actions to strengthen policy, mgmt and governance of the portfolio of
Initiatives
(i.e., Fleet, owned and leased office and warehouse space.
Space, 2 Formulate a Departmentwide multi-year space planning process to guide DOI Q2 '06 Planning and Acquisition of Real Property
Single future locations through relocations, consolidations, and collocations with
Platform space data provided by the bureaus.
MAXIMO™) 3 Develop a vehicle management policy which includes guidance for DOI Q4 ‘05 Disposal of Unneeded Property
performance measures, base-lining the fleet, maximizing the utilization of
vehicles and disposing of excess vehicles.
4 Implement each bureau’s respective Fleet Management Plan and begin Bureau Q1 ‘06 Operations of Real Property
tracking the performance measures established within the plan.
5 Include in each bureau’s Fleet Management Plan appropriate guidance to Bureau Q4 ‘05 Disposal of Unneeded Property
ensure that the Bureau has the minimum number of vehicles to accomplish
its mission.
6 Roll-out the Department’s Single Platform MAXIMO™. DOI TBD Operations of RP
Analyze 1 Undertake mission needs analysis/gap analysis to evaluate and compare the DOI Q1 ‘06 Sup Agency Missions &
G Resource resource requirements necessary to implement the Asset Management Plan.
Needs 2 Identify low priority assets and request funding for their disposal in the Bureau Q1 ‘06 Disposal of Unneeded Property
bureaus' FY 2008 budget.
3 Expand the Draft Facility Management Workforce Plan to be consistent DOI Q3 ‘06 Sup Agency Missions and Strategic Goals
with the DOI Human Capital Management Plan.

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10. AMP SECTIONS REFERENCING FACILITY CONDITION INDEX,

ASSET PRIORITY INDEX, AND CAPITAL PLANNING AND
INVESTMENT CONTROL

Facility Asset Capital

REFERENCE IN AMP Condition Priority Planning and
Index (FCI) Index (API) Investment
Section Title Control
(CPIC)
Executive Summary

2.3.1.1 Contribution to Mission

2.3.1.3 Asset Condition

2.3.1.5 Improving the Condition of the Asset Portfolio and Properly

Sustaining It Over Time – Life Cycle Management
2.3.2 Current Decision-Making Process

2.3.3 Moving to Portfolio-based Decision-Making

2.6 Human Capital, Policy and Decision-Making Initiatives

3.1 Capital Plan for Major Projects

3.1.1 New Construction of Major Projects ($2 Million and above)

3.1.2 Repair and Alterations Major Projects ($2 Million and above)

3.2.1 New Construction Repair and Alterations of Non-Major Projects

3.3 Acquisition Performance Measures and Continuous Monitoring

3.3.2 Agency Specific Measures

3.4 Planning and Acquisition Initiatives

4.4 Asset Business Plans (site-specific)

4.6 Operations and Maintenance Plan

4.8 Capital and Operating Resource Requirements

4.9.1 Federal Real Property Council Measures

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Facility Asset Capital

REFERENCE IN AMP Condition Priority Planning and
Index (FCI) Index (API) Investment
Section Title Control
(CPIC)
4.9.2 DOI and Agency Specific Measures

5.1 Data Tools to Support Decision-Making

5.4 Disposal Initiatives

6. Conclusion

7. (GPRA) Strategic Plan Asset Management Performance Measures

8. Asset Management Implementation Plan

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Department of the Interior
Site-Specific Asset Business Plan (ABP) Model Format Guidance

I. Purpose

The Site-Specific Asset Business Plan (ABP) model format provided in this guidance is to aid
the bureaus’ asset managers in structuring the requirements of the ABP that best support the
Bureau Asset Management Plan (AMP). The model format is a tool that defines the general
criterion that needs to be reflected in an ABP.

This tool is designed to ensure that bureaus of the Department of the Interior (DOI) have the
flexibility necessary to structure ABPs that best meet their mission needs and conforms to the
nature of their assets and management structure. The ABP can be adjusted to fit each bureau’s
organization, program or management structure. Bureaus may prepare an ABP at the field unit,
campus and/or regional level. For example, the National Park Service has prepared a pilot ABP
at the major national park unit level and the U.S. Geological Survey plans to prepare an ABP for
their science center campuses.

II. Structure of this Guidance

This Guidance is comprised of the following components:

I. Purpose
II. Structure of the Guidance
III. Defining an ABP
IV. Timeframe for ABP Development
V. Elements of an ABP

A. Strategic Asset Planning

B. Asset Prioritization
C. Operations & Maintenance
D. Project Development
E. Asset Disposition

VI. Systems ABP Support

VII. Reference Documents
VIII. Attachments

III. Defining an ABP

Field employees are on the front lines of a real property life-cycle asset management program
and are often the most knowledgeable regarding the condition and components or sub-systems
of an asset. They know how important an asset’s function is to enabling the mission of the
bureau. These front-line employees are responsible for the operation, maintenance and use of
these assets ensuring that they are maintained in a safe and efficient manner over their useful
life and utilized effectively in support of the bureau’s mission.

The ABP will promote a proactive management approach to effectively address and articulate
the life-cycle issues and characteristics of a site’s asset portfolio. The ABP will also implement
the requirements of the Federal Real Property Council (FRPC) and Executive Order 13327 on
Federal Real Property Asset Management. ABPs will be developed for field facilities and units.

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At a minimum, ABPs will cover all assets reported in the FRPC’s Federal Real Property Profile
and all General Services Administration (GSA) assigned facilities. It may also be developed as
a decision-making tool to be used during the acquisition process.

An ABP provides facility and regional managers with a micro-level view of a site’s assets. The
ABP projects a 5 to 10-year snapshot of the assets using the performance metrics of the Asset
Priority Index (API), the Facility Condition Index (FCI), utilization, and Operations and
Maintenance (O&M) costs to help make informed investment decisions that drive budget
distribution.

Beneficial Use by Other Component Renewal

An ABP is to be used as an annual
High
action plan to help direct resources
where they are needed the most: to
Regular, Recurring the assets that best support
Regular, Recurring Stabilize, Restore, Renew
Asset Priority Index

Maintenance
Maintenance or Replace Department and bureau missions.
Preventive Maintenance Stabilize, Restore, or For example, managers of owned
Preventive Maintenance Replace facilities would use the API and the
Component Renewal FCI to help make resource allocation
Component Renewal decisions (see the adjacent
TransferororDesignate
Designate Candidate for Disposition Diagram). For GSA or leased space,
Transfer for
for Beneficial Use by
Beneficial Use by Other (Change in Status)
Candidate for Disposition
managers would use API in
Other Parties
Parties conjunction with other metrics such
Low as utilization and/or cost per square
foot to ensure that non-owned assets
Better Facility Condition Index Worse are being utilized effectively.

Standardized business practices are utilized to the extent possible in developing and managing
an ABP that help facility staffs manage work orders1, create staffing plans, package and
schedule projects and make decisions about changing or renewing leases or Occupancy
Agreements. The overarching goal is to operationalize the Bureau AMP, linking strategy to
execution, thereby improving asset portfolio performance.

Articulating the performance metrics helps facility managers detail their business case that
results in more efficient spending and enhanced funding opportunities. Desired outcomes of the
ABP are:

• Maintaining the good condition of current inventory;

• Using existing assets effectively;
• Making informed decisions regarding acquisitions; and
• Streamlining the portfolio through asset disposition.

1
Work orders are defined as a set of tasks necessary for the maintenance and/or repair of assets
throughout the life-cycle of that asset and are essential elements of maintenance management. Work
orders may be prescriptive to the routine maintenance of the asset, reactive to events that damage the
asset, or predictive component renewal, thus they track both events that have occurred and work that has
been performed.

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Bureaus will develop and utilize the ABP as the third-tier plan for implementing life-cycle asset
management principles. Bureaus will develop ABPs for their individual management areas
based on portfolio guidance and methodology contained in the second-tier Bureau AMP2. The
bureau AMP, supported by the ABPs, serves as a building block to update the first-tier DOI
AMP.

IV. Timeframe for ABP Development

The bureaus’ initial AMP is to be submitted to the Department’s Senior Real Property Officer
(SRPO)3 by June 1, 2006. This first Bureau AMP will provide a framework, strategic vision and
plan of action for effective management that is to be reflected in each ABP. The DOI AMP
Implementation Plan calls for each bureau to develop site-specific ABP that will follow the DOI
guidance by the first quarter of FY 2007. Starting in FY 2007, asset management plans,
practices and accomplishments described in the ABPs will provide the basis for Bureau AMP
updates.

V. Elements of an ABP

As with the Bureau AMP, an ABP presents a strategy at the field level that is to be employed by
managers at the site to:

• Manage and oversee all bureau real property assets, whether owned, leased, or obtained
from GSA or elsewhere;
• Maximize the asset’s contribution toward accomplishing the diverse missions of the
Department and each bureau; and
• Implement the bureau and Department’s strategic goals, and maximize utilization,
effectiveness, and efficiency.

An ABP embodies the following principles:

• Recognizes that real property assets are integral to bureau and Department missions;
• Reflects a full life cycle (planning to disposition) approach;
• Complies with Departmental and bureau business practices and policies including the
guidance developed in support of the Department’s AMP and Executive Order 13327;
• Ensures full and appropriate use of retained assets and the identification and disposal of
unneeded assets; and
• Uses applicable industry standard benchmarks and best practices.

2
The guidance and structure for Bureau AMP was issued by the Asset Management Team in September
of 2005 and can be found at http://www.doi.gov/pam/AMPTemplate092105.pdf.
3
The SRPO is also the Department’s Senior Asset Management Officer.

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An ABP should have the following five components:

A. Strategic Asset Planning – Strategic asset planning is a process that recognizes

changes in mission priorities and the functional needs of assets over time.

B. Asset Prioritization – The prioritization of assets helps managers focus funding to

optimize portfolio performance.

C. Operations & Maintenance – For DOI owned and operated assets, the development,
prioritization, and management of O&M requirements helps to improve portfolio
performance by identifying the true requirement for properly maintaining, operating, and
sustaining assets at the constructed asset level. For other assets, the focus is on rental
costs and efficiency.

D. Project Development – The planning, prioritization, scheduling, funding, and

management of all real property projects are part of the project development process.
Key project development focus is on maximizing effective use of all real property assets
and making the business case whether to change the real property asset in some way to
accommodate changes in program requirements. Deferred maintenance and
component renewal projects represent a large piece of project development specifically
relating to DOI owned and operated real property assets.

E. Asset Disposition – Disposition of an asset results in a change in its status that is

accomplished through either employing a disposal option such as sale, demolition,
deconstruction or transfer or a retention option such as alteration for another use, doing
nothing/hazard prevention or interim leasing. Initiating a disposition program for the
asset portfolio ensures that managers are able to properly identify assets that may no
longer support the mission, and that could become potential candidates for disposal,
thereby freeing up resources for other uses. This applies to all assets, whether owned,
or obtained from GSA, leased, or acquired through another means.

A. Strategic Asset Planning

Planning over 5 to 10-years will identify the resources necessary to maintain mission critical
assets in good or fair condition. It will also identify project funding necessary to improve the
condition of high priority assets and the resources required to operate and maintain that
condition over the 5 to 10-year time period, and identify low priority or non-mission critical
assets that are candidates for disposition.

Strategic asset planning encompasses all components of the life cycle asset management
process and is used as a roadmap to manage, maintain and invest in the asset portfolio.
The process of inventorying assets includes assigning Current Replacement Values (CRV),
determining mission need and conducting annual and comprehensive condition
assessments. As part of that process, a site will be able to develop a 5 to 10-year strategic
Site-Specific Asset Business Plan. This plan should be based on the information derived
from the other four elements of an ABP: asset prioritization using the API, project
development using the API and FCI, O&M using work types including the metric of dollars
per unit of measure, and asset disposal using API, FCI, utilization and other factors.

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The 5 to 10-year plans contain information at a site level that essentially states the means
by which a facility manager intends to undertake projects and meet O&M requirements.
Embedded in the concept of the 10-year plans is the idea that planning for all asset work
types over the expected design life provides a window into the total cost of facilities
ownership. Through FRPC performance measures—such as the FCI, API, cost per square
foot for O&M, and the facility utilization index — facility and asset managers can better make
effective resource decisions in an environment of continually constrained budgets.

B. Asset Prioritization

High Beneficial Use by Other Component Renewal This aspect of an ABP explores
A B Assets the relationship among a site’s
assets. Prioritizing assets
based on their importance to
Regular, Recurring
Asset Priority Index

mission is one of, and the most

Maintenance significant criteria used in
determining where to focus
Replace funds. Identifying work orders
related to these high priority
assets is required to ensure
each dollar of funding is spent in
C D the most efficient way. The
adjacent diagram shows an
example of a distribution of
assets at a site. This chart can
Low be a useful tool in presenting
the prioritization of owned
Better Facility Condition Index Worse assets.
For GSA or leased assets, API can be combined with cost, utilization or substitutability
metrics to guide planning and decision making on effective use of non-owned assets. A
similar quadrant chart as presented above can be developed to identify high-priority assets.
Because leased assets are not evaluated for condition, the quadrant chart axes must be
modified. One solution is to make the x-axis the “Substitutability of Requirements”
component of the API score and the y-axis the “Mission Dependency” component of the API
score. (See the following diagram.) In this scenario, the circle diameter would represent
annual operating expenses, including rent and O&M. Using this modification, assets in
quadrant B are considered most important to the site and/or bureau because they are both
“critical” and difficult to “substitute.”

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A B $4,630,000
Mission $2,320,000
Criticality of Leased Assets

Critical
$3,820,000

Mission
Dependent, $2,940,000

Not Critical $1,530,000

C D
Not Mission
Dependent

High Low
Substitutability of Requirements

The use of the API helps managers identify the most important assets, and therefore,
provides a logical continuum for which to direct limited funding. In addition, the use of the
API is not only important in developing deferred maintenance and component renewal
projects. It is equally important when planning for operations, recurring maintenance, and
preventive maintenance and changes in asset status (e.g., expansion, consolidation, and
disposal).

Fundamental to prioritization is a complete and accurate inventory of a site’s assets which

includes conducting an API analysis and condition assessments, and developing other asset
performance metrics such as utilization, cost per rentable square foot, and asset
substitutability. Ultimately, the API when combined with the FCI are two of the most
important tools available for managing the total cost of asset ownership because they can
be used for making funding decisions for every key work type. The use of the FCI helps
managers identify which assets have the greatest repair need.

C. Operations & Maintenance (O&M)

B eneficial
H ighU se by O ther
R egular, R ecurring
The work types of asset O&M are
R egular, R ecuce
M aintenan rring
S ta bilize, R estore, R enew explored in this part of an ABP.
M aintenance S ta bilize,
and RR estore, or
Determining all O&M costs is a key
Asset Priority Index

eplace
P reven tive R eplace
M aintenan
P reventive ce
M aintenan ce R eplace step in life cycle execution and funding
C
Com
ompo
ponnent
ent R
Renew
enewal
al processes. The basic management
philosophy behind the adjacent
T ransfer or D esignate
for B eneficial U se by C andidate for Disposal diagram is simple: take care of the
O ther P a rties (C hange in Status) most important assets already in good
Lo w condition to prevent them from
B etter F acility C o n d itio n In d ex W orse deteriorating.

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Managing O&M requires an adequate understanding of what is required to fully fund all
O&M activities. In many respects, exorbitant deferred maintenance costs are indicative of
historically inadequate O&M budgets. By better defining O&M requirements, facility
managers can better arm themselves with a more powerful business case in regard to the
importance of fully funding O&M work activities. O&M costs can be broken down into the
following work types:

Work Type
Work Type Definition Examples
Code
Facility FO Work activities, performed on a Annual Lease costs, GSA-assigned
Operations recurring basis throughout the year, space costs, janitorial and custodial
which intends to meet routine, daily services, snow and sand removal,
operational needs solid waste removal, operation or
purchase of utilities (water, sewer,
and electricity), grounds keeping, etc
Facilities FM Emergency Maintenance: Downed power lines, flooded
Maintenance Unscheduled maintenance repair, to facilities, downed trees causing a
include call outs, to correct an hazard to pedestrian or vehicle
emergency need to prevent injury, traffic, etc.
loss of property, or return asset to
service. These repairs are initiated
within a very short time period from
when the need was identified, usually Preventive Maintenance
within hours. examinations, lubrication, and minor
adjustment.
Preventive Maintenance: Scheduled
servicing, repairs, examinations,
adjustments, and replacement of
parts that result in fewer breakdowns Replace glass windowpanes, repair
and fewer premature replacements cracks in walls, replace damaged
and achieve the expected life of signage, minor door and window
facilities and equipment. These repair, etc.
activities are conducted with a
frequency of 1 year or less. Painting, caulking, sealing, carpet
replacements, etc.
Corrective Maintenance:
Unscheduled maintenance repairs to Removal and replacement of primary
correct deficiencies during the year in systems such as HVAC units, roof
which they occur. coverings, exterior enclosure and
windows, etc.
Recurring Maintenance: Preventive
maintenance activities that recur on a
periodic and scheduled cycle of
greater than 1 year, but less than 10
years.

Component Renewal: Preventive

maintenance activities that recur on a
periodic and scheduled cycle of
greater than 10 years.

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Work Type
Work Type Definition Examples
Code
Inspections IN Periodic inspections by qualified Condition assessments: equipment,
personnel to fully determine and dam, bridge, seismic safety,
document the condition of an asset environmental compliance, safety
or item of equipment and identify and accessibility inspections, etc.
maintenance needs.
Administrative AD Activities associated with general To support documenting
administrative support functions, administrative needs, plans, and
travel, training, meetings, leave, accomplishments that generally
supervision, budget formulation, etc. support maintenance activities, but
are not asset or field station specific.

The requirements of component renewal, an activity listed under the Facility Maintenance
work type noted in the chart above, must be identified and included as part of the project
development process over a five to ten year period. Planning an asset’s component
renewal requirements over time helps to prevent equipment failure and the resultant
expensive repair and rehabilitation costs. Replacing a component at the end of its design
life is a proactive approach to managing assets.

D. Project Development

Beneficial
HighUse by Other In this part of the ABP, business
Regular,
Regular, Recurring
Recurring practices related to owned real property
Stabilize, Restore, Renew
Maintenance
Maintenance assets are used to bundle deferred
Asset Priority Index

or Replace
Stabilize, Restore, or
Preventive Maintenance
Preventive Maintenance Replace maintenance work orders and
Component Renewal component renewal requirements over
Component Renewal a 5 to 10-year period to convert them
into projects to manage maintenance
Transfer or Designate
for Beneficial Use by Candidate for Disposition backlog, or in the case of component
Other Parties (Change in Status) renewal, to effectively manage the life
Low cycle of assets. Doing so requires the
identification of deferred maintenance
Better Facility Condition Index Worse
priorities including Critical Health
Safety, Critical Resource Protection, Critical Mission, Compliance and Other Deferred
Maintenance, together with Component Renewal and in some cases minor Capital
Improvements as part of a larger deferred maintenance project. This area focuses on
decisions that stabilize, restore or replace assets that are mission critical or mission
dependent but are in poor condition.

A strategy for maximizing investment dollars is the use of bundling work orders. Two
common methods for reviewing and bundling work orders are:

(1) Bundling of work orders by asset, or the asset-level approach; (such as bundling the
total repair requirements for an individual asset and doing a complete renovation) and

(2) Bundling of work orders associated by asset components or the component-level

approach, (such as repairing all the roofs at a site). If the component-level approach is

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used, the completed work and costs must be reported back to the individual constructed
asset.

Using work order bundling provides a mechanism for sorting through the detailed data.

Component renewal projects can be created following a process that is similar to the
prioritization processes used for deferred maintenance work order bundling. Component
renewal work orders are an important element of life cycle management. Replacing a
component at the end of its design life is a proactive approach to managing assets.
Understanding component renewal needs also is a critical aspect of documenting and
accounting for total life cycle costs, or the total cost of facilities ownership.

During project development, it may be deemed necessary to consider replacing an asset

rather than improve, repair, restore or stabilize it. Direct leases, new GSA space
assignments or capital improvements that include new construction and alterations or
expansion, may be a better solution to maintaining an asset’s function rather than investing
in deferred maintenance reduction. These projects normally need more lead time and more
extensive planning and may involve additional land as the asset footprint may change.

Project Development is the best methodology for compilation of the DOI 5-Year Deferred
Maintenance & Capital Improvement Plan (5-Year Plan). Project focus should be on the
highest priority assets and the assets with the greatest need. The 5-Year Plan provides a
mechanism to rank these projects for funding using established criteria. The 5-Year Plan
will rank these projects by Critical Health Safety, Critical Resource Protection, Critical
Mission, Compliance and Other Deferred Maintenance categories. Projects that are
completed ahead of schedule, rewritten due to a significant change in scope or no longer
required will be re-ranked annually.

In addition, each year, the bureaus will develop a five-year space plan, identifying projects
with the highest priorities and greatest needs for GSA space assignments and direct leasing
actions, steps that will be taken to reduce space and/or lease costs, potential opportunities
for furthering collocation with other entities, and critical requirements in reaching stated
objectives.

E. Asset Disposition (Changing the Status of an Asset)

Beneficial
HighUse by Other

Regular,
Regular, Recurring
Recurring
Stabilize, Restore, Renew
Highlighted in this area is the recognition
Maintenance
Maintenance that an asset no longer supports the mission
Asset Priority Index

or Replace
Stabilize, Restore, or
Preventive Maintenance
Preventive Maintenance Replace of the site or bureau or that has reached the
Component Renewal end of its useful life. It is at this point in an
Component Renewal
asset’s life-cycle that a manager should
Transfer or Designate consider asset disposition. In this part, the
for Beneficial Use by Candidate for Disposal disposition of an asset is considered which
Other Parties (Change in Status)
can result in:
Low

Better Facility Condition Index Worse

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• The disposal of an asset and removal from the inventory; or

• Retention of the asset with a change in its status within the inventory.

The disposition of an asset requires a pro-active process, beginning with asset selection
using the performance metrics. Each asset that is considered for disposition must go
through the process described in the diagram above.

Given the nature of the demands and constraints placed on DOI organizations, there simply
are not enough resources to adequately fund all assets in the inventory. The business case
for disposal is clear: limited resources to fully support even the most important assets, an
overextended asset inventory put severe strain on O&M budgets. Reducing deferred
maintenance backlog is not a realistic endeavor if a substantial portion of the asset inventory
will never receive project funding. Finally, a smaller asset inventory makes the achievement
of FCI goals more attainable (due to reduced replacement values).

One important issue surrounding asset disposition is the concern that a bureau could
inadvertently dispose of an asset that has historical or other significance. Therefore, each
asset that is considered for disposal must go through the process described in the attached
diagram. A Departmental disposition policy has been developed to assist with the asset
disposition process.

When it is decided that an asset is still needed to meet critical mission needs but its
condition is such that replacement is the best option for the government, the bureau should
do the following:

• Include in the replacement project budget and plan, the planned method of disposal and
any associated costs or anticipated proceeds from transfer or sale, and
• With funding available for disposal, dispose of the original asset. This process ensures
that the deferred maintenance on the original asset is actually eliminated.

Assets of historic significance that require preservation treatment are exceptions to the
disposal requirement.

Systems ABP Support

Plans will be formulated and maintained utilizing the Facility Management System (FMS) and
the Financial and Business Management System (FBMS). These web-based information
systems allow bureau staff to store and manipulate data about each asset and each asset type
in the real property inventory. The FMS and FBMS will be automatically linked with asset
inventory information; performance measures data, and financial and accounting information.

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References Documents

Asset Management Plan - July 2005

Asset Management Plan Template
Asset Priority Index Guidance
Sustainment Cost Template for Constructed Assets

Attachment

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11/18/05
DOI ASSET DISPOSITION PROCESS

Sequence of
Process Overview/ Tasks/Areas of Focus
Events/Actions

Site Specific Asset Business Plan

API/FCI Analysis &

Historic/Archeological
Decision Tree Analysis Mission Critical
Selecting Assets Decision Tree Analysis
for Disposition

Change in No Change
Change
Status in NoStatus
In Change
Status In Status

Conduct Certification Analyze Disposition Methods*

Certification Conduct Certification Analyze Disposition Methods*
Refine Costs
and Analysis DetermineRefine Costs
Disposal Timeline
Disposal Options
Planning

Environmental, Disposal Options

Toolkit Environmental, Determine Disposal Timeline Sell, Transfer, Deconstruct, Demolish,
Historic, Sell, Transfer, Deconstruct, Demolish,
Historic, Perform Comparative Exit Lease, Off-Site Removal
Archeological, Perform Comparative Exit Lease, Off-Site Removal
Archeological, Analysis or Benefit /Cost
McKinney-Vento, Analysis
Analysis of or Benefit
Viable /Cost
Options Retention Options
McKinney-Vento, Analysis of Viable Options Retention Options
Other Federal, State and
Refine Costs Checklist Other Federal, State and Alteration for Another Use, Mothball,
Alteration for Another Use, Mothball,
Local Regulations, Do Nothing/Hazard Prevention, Interim
Local Regulations, Do Nothing/Hazard Prevention, Interim
Leasing
Leasing
Select Method Select Disposition Method
Select Disposition Method

Finalizing Cost/Timeframe Prioritize

Disposition Cost BasedPrioritize
on Fiscal Low Priority
Bundling and Prioritizing Based on Fiscal Priority Continually Reassessed
and Budgeting Impact of Status Change
Impact of Status Change
Change
Status

Status Follow FMR Requirements

Change Status of Asset
Change Change
Based Status of Asset
on Priority Adapt Bureau Best Practices
Based on Priority

Remove from Inventory

Reporting

Reports and Reporting Update FRPP & Reconcile DOI Reconcile Real Property and
Update FRPP & Reconcile
Records DOI
Disposal OMB Reporting Financial Records
OMB Reporting Records
Reporting * Screen for reuse within DOI is
the highest proirity in considering
(External Provide Historical Record
a preferred disposition method. Retain or Archive
Reporting) Retain or Archive
Close-out/Retire Bureau Records Historical Records
Historical Records

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DIRECTOR’S ORDER #80: ASSET MANAGEMENT

Approved: _________________
Director

Effective Date:

Sunset Date:

This Director’s Order and the associated Reference Manual supersede the 1986 National Park
Service Maintenance Management System and all other previously published directives and
policy related memoranda regarding National Park Service asset management.

Table of Contents:
4.5 Policies for Heritage Assets and General
1. Background and Purpose Properties
2. Authorities 4.6 Automated Facilities Management
3. Policies, Requirements, and Standards Systems
3.1 Requirements of Public Law 98-540 4.7 Policy Implementation Support and
3.2 Requirements of GPRA Resources
3.3 Requirements of 23 USC 204 4.8 Systems Integration
3.4 Requirements of FASAB #6 5. Responsibilities
3.5 Conclusions of DOI’s Facilities 5.1 Director
Maintenance Assessment and 5.2 Deputy Directors and Associate Directors
Recommendations 5.3 Associate Director, Park Planning,
3.6 Requirements of Executive Order 13327 Facilities, and Lands
4. Implementation of Policies, Requirements, 5.4 Regional Directors
and Standards 5.5 Park Superintendents
4.1 NPS Organizational Core Capabilities 5.6 Park Facility Managers and Staff
4.2 Asset Management Planning Processes 5.7 Summary of Responsibilities
4.3 Cost of Ownership
4.4 Training

1. Background and Purpose

The mission of maintenance and asset management within the National Park Service (NPS)
requires an investment in human, natural, and cultural resources in order to provide stewardship
for the nation’s most significant places. This mission emphasizes a foundation of maintenance
and preservation, balanced with new technologies and basic resource needs, and shall be based
on the enabling legislation and mission statement for each park. It includes a shared and deep
understanding of the value and role that public assets and facilities play in fulfilling the mission
of NPS by helping to enable the park experience, and the long-term investment in people,
practices, and facilities required to sustain that value for the future.

The purpose of this Director’s Order is to establish NPS policies, requirements, and standards for
implementing Public Law (PL) 98-540 (October 24, 1984)(which, among other things, amended
the Volunteers in the Parks Act of 1969 (16 USC 18g – 18j; PL 91-357)). This Director’s Order
14-day review draft. E-mail comments to Tim Harvey by March 11, 2005.

also integrates the requirements of this law with other initiatives, legislation, and regulations that
require NPS to provide information about assets, facilities management, and facilities operation.
PL 98-540 directs NPS to implement a maintenance management system to support maintenance
and operations programs of the national park system. In addition to PL 98-540, several other
asset initiatives are recognized and incorporated into this Director’s Order:

• The Government Performance and Results Act of 1993 (GPRA)(31 USC 1115 et seq.; PL
103-62).

• 23 USC 204, regarding the Federal Lands Highways Program.

• The September 1995 Federal Accounting Standards Advisory Board Statement of

Recommended Accounting Standards Number 6: Accounting for Property, Plant and
Equipment (FASAB #6).

• The February 1998 Department of the Interior (DOI) document entitled Facilities
Maintenance Assessment and Recommendations.

• Executive Order 13327—Federal Real Property Asset Management.

While NPS originally implemented a maintenance management system in 1986, these

subsequent laws and directives (which are described in more detail in Section 3), combined with
changes in technology since PL 98-540 was passed, have necessitated updating, expanding, and
clarifying NPS asset management policies, requirements, and standards.

This Director’s Order is intended only to improve the internal management of NPS, and is not
intended to, and does not, create any right or benefit, substantive or procedural, enforceable at
law or equity by a party against the United States, its departments, agencies, instrumentalities or
entities, its officers or employees, or any other person. To the extent possible, DO-80 will cover
concessions-related assets as well. However, concessions-managed assets will be maintained in
accordance with legislation that pertains specifically to those assets.

2. Authorities

The authority to issue this Director’s Order and the associated Reference Manual is contained in
the National Park Service Organic Act (16 USC 1 – 4), and the delegations of authority
contained in Part 245 of the DOI Manual. Other important legal, regulatory, and policy
requirements are those listed in the background information in Section 1, above, which are
explained in more detail in Section 3, below.

3. Policies, Requirements, and Standards

3.1 Requirements of Public Law 98-540

Section 4(a) of PL 98-540 (16 USC 1a-8(a)) directs NPS to implement a maintenance
management system to support maintenance and operations programs of the national park

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system. By law, this maintenance management system must contain, but is not limited to, the
following elements:
(1) a work load inventory of assets including detailed information that quantifies for all
assets (including but not limited to buildings, roads, utility systems, and grounds that
must be maintained) the characteristics affecting the type of maintenance work
performed;
(2) a set of maintenance tasks that describe the maintenance work in each unit of the
national park system;
(3) a description of work standards including frequency of maintenance, measurable
quality standard to which assets should be maintained, methods for accomplishing
work, required labor, equipment and material resources, and expected worker
production for each maintenance task;
(4) a work program and performance budget which develops an annual work plan
identifying maintenance needs and financial resources to be devoted to each
maintenance task;
(5) a work schedule which identifies and prioritizes tasks to be done in a specific time
period and specifies required labor resources;
(6) work orders specifying job authorizations and a record of work accomplished which
can be used to record actual labor and material costs; and
(7) reports and special analyses which compare planned versus actual accomplishments
and costs and can be used to evaluate maintenance operations.

3.2 Requirements of GPRA

GPRA directs that all Federal agencies provide to the Office of Management and Budget a
strategic plan, annual performance plan, and annual performance report for program activities
performed by the agencies. See, 5 USC 306 and 31 USC 1115 – 1117 (respectively, sections 3
and 4(b) of PL 103-62).

3.3 Requirements of 23 USC 204

The need for all Federal public roads to be treated under uniform policies similar to those that
apply to Federal-aid highways is recognized in 23 USC 204. This law established a coordinated
Federal Lands Highways Program that applies to public lands highways, park roads and
parkways, and Indian reservation roads and bridges. NPS roads and highways are in this
category.

3.4 Requirements of FASAB #6

FASAB #6 requires that all Federal agencies disclose certain information about agency-owned
property, plant and equipment (PP&E), including Federal mission PP&E, general PP&E,
heritage assets, and stewardship land.

Chapter 2 of FASAB #6 defines the four categories of PP&E as follows –

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• General PP&E – facilities and land that could be used for similar or alternative purposes by
non-government entities.
• Federal Mission PP&E – generally military and space exploration facilities having no non-
governmental equivalent.
• Heritage Assets – PP&E that is unique for one or more of the following reasons:
- prehistoric or historic site significance;
- cultural and natural history resources, educational, or artistic (e.g., aesthetic) significance;
- significant architectural characteristics; and
• Stewardship Land – land not included in general PP&E.

Chapter 2 of FASAB #6 requires that all Federal agencies disclose, or report, a variety of
facilities information about each category of PP&E owned by the agency.

Chapter 3 of FASAB #6 defines “deferred maintenance” as maintenance (1) that was not
performed when it should have been or was scheduled to be and which, therefore, is put off or
delayed for a future period, and (2) continued deferment of which will result in deficiencies.
FASAB #6 requires Federal agencies to disclose, or report, on current levels of deferred
maintenance for the four categories of PP&E.

3.5 Conclusions of DOI’s Facilities Maintenance Assessment and Recommendations

In February 1998, the DOI Planning, Design, and Construction Council (now the Planning,
Design, Construction, and Maintenance Council) published its Facilities Maintenance
Assessment and Recommendations report. This report recommended that DOI and its bureaus
take the following steps to improve management of facilities:

• expand the DOI Planning, Design, and Construction Council to include a DOI-wide facility
maintenance component (since accomplished);
• reduce underutilized space;
• emphasize and initiate steps to make management and staff aware of maintenance
responsibilities;
• establish common definitions for key maintenance terms;
• ensure integrity of maintenance deficiency databases;
• emphasize proactive maintenance management;
• design facilities that are appropriate for local maintenance capabilities;
• conduct benchmarking/best business practices study;
• seek increased funding for facility maintenance; and
• (establish) good management practices.

NPS will follow a holistic approach, as described in section 4, and consistent with guidelines
presented in this Director’s Order when carrying out responsibilities related to:

• acquiring, managing, and disposing of facilities;

• planning, design, construction, and repair/rehabilitation of facilities and related activities;
• development of facilities maintenance and operations programs;

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• establishment of Service-wide automated facilities data collection and management systems;

and
• training and development of all those charged with operation and maintenance of Federally
owned and operated facilities.

3.6 Requirements of Executive Order 13327—Federal Real Property Management

• promote efficient and economic use of America’s real property assets; and
• assure management accountability for implementing federal real property reforms.

Specific excerpts from the Executive Order that pertain to this NPS Director’s Order are as
follows:

EO 13327: Sec. 3. Establishment and Responsibilities of Agency Senior Real Property Officer

(b) The Senior Real Property Officer shall develop and implement an agency asset management
planning process that meets the form, content, and other requirements established by the
Federal Real Property Council established in section 4 of this order. The initial agency asset
management plan will be submitted to the Office of Management and Budget on a date
determined by the Director of the Office of Management and Budget. In developing this
plan, the Senior Real Property Officer shall:

(i) identify and categorize all real property owned, leased, or otherwise managed by the
agency, including, where applicable, those properties outside the United States in which
the lease agreements and arrangements reflect the host country currency or involve
alternative lease plans or rental agreements;

(ii) prioritize actions to be taken to improve the operational and financial management of
the agency’s real property inventory;

(iii) make life-cycle cost estimations associated with the prioritized actions;

(iv) identify legislative authorities that are required to address these priorities;

(v) identify and pursue goals, with appropriate deadlines, consistent with and supportive of
the agency’s asset management plan and measure progress against such goals;

(vi) incorporate planning and management requirements for historic property under
Executive Order 13287 of March 3, 2003, and for environmental management under
Executive Order 13148 of April 21, 2000; and

(vii) identify any other information and pursue any other actions necessary to the appropriate
development and implementation of the agency asset management plan.

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4. Implementation of Policies, Requirements and Standards

NPS–an organization whose assets include many of the nation’s most visible and well-known
structures and cultural resources–will develop the internal capabilities to meet the requirements
of the laws and policies discussed in Section 3 of this Director’s Order. More specifically, NPS
will implement a comprehensive Asset Management Program using organizational core
capabilities to carry out proper asset management processes. A disciplined strategy and
philosophy will be used that ensures efficient and effective management of NPS assets and that
recognizes the total cost associated with ownership and stewardship.

The Asset Management Program is dependent on a variety of external factors including Federal
law and regulations, Executive orders, DOI and NPS regulations, and influenced by changing
technologies and environmental factors. These external factors require the Asset Management
Program to be flexible and allow for future changes.

4.1 NPS Organizational Core Capabilities

NPS will have the program staffing and organizational structure to fulfill five fundamental
organizational core capabilities required for successfully implementing a comprehensive and
mature asset management program:

4.1.1 Capability #1: Asset Inventory and Condition Assessment

This capability will allow for the development of current listings of all assets NPS owns and/or
manages. NPS will be able to understand and provide a brief description of each asset, its use,
location, major subsystems and components, and general information about quantities, and asset
priority index (API) ratings. This capability also will require that all assets be evaluated to
determine their condition. The evaluation should be based on physical condition and fitness of
use.
• The Service will use standardized guidelines to determine the condition of all assets,
including annual and comprehensive assessments, (for unique linear assets (e.g., roads,
pipelines, power lines, trails) that are resource intensive to assess on an annual basis, a
statistical sampling methodology may be used to infer the asset condition.), life-cycle
assessments, and daily work findings. The Service should use Federal Geographic Data
Committee standards and content metadata standards to determine and document asset
locations with GPS units or by other GIS and cartographic procedures such as digitizing,
georeferencing CAD or engineering drawings, and/or address matching. Construction of new
assets require the same locational information. Locational information will be reported or
converted to latitude, longitude, decimal degrees, in North American Datum 1983.
• The Service should develop competencies to estimate the costs of repairing asset deficiencies
as documented during the condition assessment phase.
• Either contractors or internal NPS staff can do the assessments depending on the level of
expertise required.

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4.1.2 Capability #2: Asset Costing

NPS will develop the capability to evaluate each asset to determine its current replacement value
(CRV). CRV refers to the estimated cost of replacement—exchange or substitution of one fixed
asset for another having the same function and scope. CRV policies for heritage assets will be
developed with input from NPS cultural resource specialists and other appropriate discipline
experts.

• CRVs should be estimated using parametric measures—e.g., dollar per square foot—or
similar reputable cost standards.
• To ensure that assets are valued consistently throughout the Service, NPS will develop a
standardized methodology to determine replacement cost. Furthermore, NPS should keep an
historical record of actual costs incurred in replacing or building new assets to help determine
the replacement value of similar assets in the future.
• NPS also should have access to databases that list costs for common assets, and continually
benchmark its costs against the private sector and other Federal agencies ensuring that
replacement values are accurate.
• CRV policies for heritage assets will be developed with input from NPS cultural resource
specialists and other appropriate discipline experts.
• CRV assists in determining the facility condition index (FCI), which is a measure of the
physical state of an asset1, and should not be used to pursue construction funding. For
construction budgeting purposes, NPS should use cost estimates based on specific projects
details (e.g., project description, design drawings, and technical specifications).

4.1.3 Capability #3: Asset Management Planning Process

NPS will have the ability to develop asset management plans (AMPs) to address long-term NPS
needs, priorities, and initiatives. The structure of NPS AMPs will be covered in more detail in
Section 4.2.

• A budget will flow directly from the asset management plans, and will provide input for
packaging and bundling projects. The asset management planning process will reflect
initiatives and projects that have been approved or deferred in the budget process.
• The asset management plan will concentrate on funds to be spent on the acquisition,
maintenance, operations, recapitalization, improvement, expansion, or replacement of assets.
• Data for asset management planning purposes will reside in the Service’s asset management
software tool,2 but other tools may be used to analyze the data, such as the Project
Management Information System (PMIS), five-year plans, and park business and
management plans.

1
Refer to Reference Manual #80 for a more complete discussion of the facility condition index.
2
At the time of writing, this is referred to as the Facility Management Software System, or FMSS.

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4.1.4 Capability #4: Implementation and Execution

NPS will have the ability to implement and execute asset management plans using life-cycle
principles (acquire, sustain, and dispose where appropriate).

• The plans will be executed to allow for the establishment of a baseline, and to consider
changes.
• The plans will be updated as milestones are reached, and cost estimates will be updated with
actual costs.
• A record of actual costs versus planned budgets will be kept for future reference.

The Service will have the ability to carry out a mature operations and maintenance (O&M)
program where costs for O&M activities are continually benchmarked and assessed to determine
the appropriate expenditures for future activities.

4.1.5 Capability #5: Performance Assessment and Asset Portfolio Improvement

NPS staff will develop evaluation methods to analyze the success of the asset management
program. The strategy will include methods for measuring actions to determine program
accomplishments.

• Performance assessment will measure progress against goals. As part of performance

assessment and improvement, a formal program management system will be developed and
implemented.
• The Service also will establish performance goals to meet the requirements of GPRA and the
Program Assessment Rating Tool (PART), as needed.

4.2 Asset Management Planning Processes

The NPS AMP will consist of a series of business practices that identify the steps and procedures
that the Service and individual park units will follow in order to plan for, acquire, sustain, and
dispose of built facilities, when appropriate, that it owns and/or manages. The AMP is a vital
tool in meeting the intent of Executive Order 13327 referenced in Section 3.6. Creating NPS
AMPs requires skill in executing the organizational core capabilities stated in Section 4.1.
Specifics of the AMP process can be found in the forthcoming NPS AMP guidance. The
components of the NPS AMP are as follows and can be considered by a series of questions as
follows:

(1) What is our inventory? -- Asset Inventory;

(2) What is the inventory’s condition? -- Asset Condition;
(3) What is the inventory’s value? -- Asset CRVs;
(4) How do existing or proposed assets contribute to mission? -- Contribution to Mission; and
(5) What is required to improve the condition of the asset portfolio and properly sustain it over
time? – Asset Portfolio Improvement.

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14-day review draft. E-mail comments to Tim Harvey by March 11, 2005.

Addressing these questions/focus categories requires NPS to use a set of common industry
metrics, establishment of performance goals, and the ability to prioritize key investment
decisions. In meeting the requirements of the AMP, NPS will be able to succinctly capture,
analyze, plan, and present all of this information in a manner that facilitates leading “best
practice” concepts in Federal asset management.

The full implementation of this AMP across NPS will provide information to support life cycle
management practices, provide the linkage of assets to mission, and enable NPS to make sound
decisions regarding its asset portfolio investments. It also will enable NPS to report on specific
amounts spent annually for asset acquisition, operation, maintenance, restoration, reutilization or
disposal. As asset stewards, NPS is committed to improving the management of the existing
real property portfolio and making sound capital investments in new facilities that are critical to
its mission.

Through this AMP, NPS will use the API that will provide a clear link to mission for each
existing and proposed asset in its portfolio. Through the use of the FCI and API, NPS will
strengthen its ability to develop business case standards that rigorously support the best possible
investment strategy for improving and maintaining its capital asset portfolio. The FCI and API
are two key metrics that are necessary and important components in implementing and executing
an asset management planning process that incorporates life-cycle principles. Given the nature
of the budgetary environment, the NPS API scale will assist in effectively managing its assets
given that it is not practical (nor desired) to fund every project based on FCI ratings, and to
accomplish the following:

• Assist in directing resources where they are needed most, not just to an asset with a poor
FCI rating.
• Assist in identifying opportunities to eliminate excess assets that no longer support the
NPS mission.
• Effectively manage the life cycle of every asset.
• Incorporate a balanced scorecard approach that evaluates each NPS asset based on how
well it supports NPS’s mission and strategic goals.
• Assist in fundamentally shifting the Service’s focus from a culture of project formulation
and execution to one of life cycle asset management; where the planning focus is not
about projects and project funding, but rather about the assets that projects are intended to
affect.

4.3 Cost of Ownership

Prior to acquisition by any means, including but not limited to purchase, donation, construction,
or exchange, the Service will perform a detailed analysis of the cost of operation, maintenance
and repair, recapitalization, and overall sustainment of facilities proposed or planned for its use.
This will be conducted in conjunction with NPS and Federal agency acquisition processes.
Information obtained by this analysis will be used to determine whether it is appropriate or
feasible to acquire or continue to own and operate the facilities based on cost of ownership over
time.

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4.4 Training

NPS will put into place a comprehensive training program for Service managers, facility
managers, and maintenance employees in all aspects of the NPS Asset Management Process and
its associated components. This training program will be managed by the NPS Training
Division, Facility Management and Maintenance Training Manager, as directed by the
Washington Office (WASO) Park Facility Management Division in coordination with the NPS
Training Division.

4.5 Policies for Heritage Assets and General Properties

For facilities management purposes, a distinction is made between Heritage Assets and General
Properties management. In general, NPS facilities management policies regarding Heritage
Assets and General Properties differ only in the recognition that Heritage Assets have an intrinsic
value above and beyond their originally intended functions, and that a part of the NPS mission is
to protect that intrinsic value.

4.5.1 Heritage Asset Management

According to FASAB #6, Heritage Assets are “plant (facilities), property, or equipment that have
historical or natural significance; cultural, educational, or artistic importance, or significant
architectural characteristics.” This intrinsic value, and the additional cost of protecting and
preserving that value, is a factor that the Service must consider in its overall cost of operating,
maintaining, repairing, stabilizing, disposing, and restoring its facilities. These assets may
include historic structures or property with documented prehistoric or historic site significance,
cultural and/or natural history resource assets, educational or artistic importance, or architectural
characteristics.

4.5.2 General Properties Management

General Properties (property, plant, and equipment) are those tangible assets (i.e., built facilities)
that: (1) have an estimated useful life of two or more years; (2) are not intended for sale in the
ordinary course of business; and (3) are intended to be used or available for use by the agency or
bureau. In general, these assets are to be managed to serve the NPS mission in the most effective
manner possible. These facilities have no intrinsic value above and beyond their originally
intended functions.

4.5.3 Heritage Assets With Components Used for General Properties Functions

Heritage Assets can include components used for general property functions, or multi-use
Heritage Assets. Examples include historic structures used for office space and housing. In
most cases, where functions, features, or attributes of heritage structures are used for general
properties functions, they will be managed as general properties, subject to specific guidance in
Director’s Order #28: Cultural Resources Management, and Director’s Order #36: Housing
Management for managing historic structures.

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4.6 Automated Facilities Management Systems

NPS will establish, implement, operate, and maintain a standard Service-wide asset management
system, previously defined as the NPS FMSS (see section 4.1.3). This system will include an
off-the-shelf maintenance management software package, an NPS standard data management
platform, and a hardware platform.

NPS also will establish, implement, operate, and maintain a standard service-wide asset
management system to support the asset management program. This system will be fully
integrated with FMSS, and will include a standardized condition assessment process and cost
estimation software system, sharing a data management platform and hardware platform with
FMSS.

All NPS units responsible for built facilities and assets will be responsible for using FMSS for
managing facilities data, information, work management, and reporting. A complete description
of FMSS and NPS asset management process is found in a series of training manuals produced
by NPS that supplement this Director’s Order and the accompanying Reference Manual.

4.7 Policy Implementation Support and Resources

Staffing, funding, equipment, and materials required for the development, implementation,
operation, and maintenance of the Asset Management Process tools and systems described in
Section 4.2, is the responsibility of the WASO Park Facility Management Division (PFMD).
PFMD will provide data and coordination with other NPS entities involved in asset management.
This office also is responsible for the development of funding proposals for the Service-wide
system. Each unit of NPS, however, is responsible for the development of, and proper use of
funds for, the site-specific implementation and operation of the Asset Management Process.
This will be accomplished through the use of existing operations and maintenance funds, and
thorough requests for operations and maintenance increases through NPS Operations Funding
System (OFS) and PMIS.

4.8 Systems Integration

The Asset Management Program and its system components, together with FMSS, will be
incorporated into an Agency Asset Management Plan, as specified in Executive Order #13327.
In particular, the intent of the National Park Service is to establish FMSS as the core enterprise
system for the management of its assets and that all other data management systems used
service-wide shall interface to it through a series of automated links to provide consistent
reporting, eliminate redundancy or data duplication, and to establish a common language set
among all entities of the organization. Facility management employees at all levels in the
organization will work to identify key linkages to other data management systems, and will
actively develop data fields, information formats, data management protocols, data standards,
and reporting requirements that are consistent and compatible with other NPS and DOI entities.
These entities may include but are not limited to systems administered by administration, budget
and finance, personnel, real property, cultural resources, natural resources, geographic

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14-day review draft. E-mail comments to Tim Harvey by March 11, 2005.

information systems, concessions and other operations activities, safety and risk management,
and others.

5. Responsibilities

5.1 Director

The Director will ensure that NPS asset management meets the legislative and regulatory
requirements for facilities operations, maintenance, repair, rehabilitation, construction, and
removal or disposal, in a manner that effectively supports the NPS mission.

5.2 Deputy Directors and Associate Directors

The deputy directors and associate directors are responsible for verifying that NPS asset
management remains consistent with the internal requirements of their respective areas. They
also are responsible for ensuring that all activities, projects, and policies in their areas of
operations remain consistent with the legislative and regulatory requirements for asset
management as identified in this Director’s Order.

5.3 Associate Director – Park Planning, Facilities, and Lands

The Associate Director– Park Planning, Facilities, and Lands (also the NPS Senior Real Property
Officer pursuant to EO 13327) is responsible, through PFMD, for development, implementation,
operation, and maintenance of the facility management business practice systems–including asset
management–that support the effective management of facilities in all NPS units. The Associate
Director is hereby delegated authority to promulgate, and revise and reissue, as appropriate,
Reference Manual 80, which will provide more detailed guidance on how to implement this
Director’s Order. The Associate Director also will provide continuing program oversight to
ensure that policies articulated in this Director’s Order are kept up to date.

To coordinate asset management efforts throughout NPS, the Associate Director will select an
Asset Management Advisory Group (currently called the Service-Wide Maintenance advisory
committee (SMAC)). Group members will have expertise with regard to asset management best
practices, procedures and policies beyond levels normally addressed by PFMD and may include
regional, park, and WASO membership. The Asset Management Advisory Group will support
the parks, regions, and WASO in their asset management efforts, including, but not limited to,
answering any technical questions which may arise.

5.4 Regional Directors

Regional directors are responsible for ensuring that all parks within their respective regions are
fully implementing the Asset Management Program. Successful implementation will help make
additional resources available to parks by, for example: more effective use of existing resources
and funding through increased operational effectiveness; restructuring of existing funds to
balance or increase routine and cyclic maintenance with reduced repair and rehabilitation costs;
and increased opportunity for obtaining additional funds through improved accountability.

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Inability of parks to fully implement the Asset Management Program could result in a direct
impact on facilities repair and operations funding available for those parks.

5.5 Superintendents

Park superintendents are responsible for ensuring that facilities in their parks are being managed
in accordance with the NPS the asset management program, and that all facilities information is
current. It is the responsibility of the superintendent to ensure that the staffing and resources
necessary to accomplish this task are made available. As outlined in section 5.4 above,
successful implementation and management of the process and its components will help make
additional resources available to parks. Inability to comply with the legislative and regulatory
requirements for Federal facilities could result in a negative impact on facilities repair and
operations funding available for those parks.

5.6 Park Facility Managers and Staff

Park facility managers and staff are responsible for the day-to-day implementation of the NPS
asset management program at their respective parks.

5.7 Summary of Responsibilities

Table 1 summarizes the core capabilities each member of the NPS team must contribute in order
to fully implement the asset management program. The core capabilities refer to those outlined
in section 4.1 of this Director’s Order.

5.7.1.1.1 Organizational Core Capabilities

Asset Inventory Performance
Capital Planning Implementation
and Condition Asset Valuation Assessment and
and Budgeting and Execution
Assessment Improvement
Director X X
Deputy and
Associate X X
Directors
NPS Position

Associate
Director, Park
Planning, X X
Facilities and
Lands*
Regional
Directors X X X
Superintendent X X X X X
Park Facility
Managers & X X X X
Staff
*Also the NPS Senior Real Property Officer pursuant to EO 13327

Table 1: Organizational core capability responsibility matrix by NPS position

---- End of Director’s Order ----

13
Friday,
February 6, 2004

Part II

The President
Executive Order 13327—Federal Real
Property Asset Management

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5897

Federal Register Presidential Documents

Vol. 69, No. 25

Friday, February 6, 2004

Title 3— Executive Order 13327 of February 4, 2004

The President Federal Real Property Asset Management

By the authority vested in me as President by the Constitution and the

laws of the United States of America, including section 121(a) of title 40,
United States Code, and in order to promote the efficient and economical
use of Federal real property resources in accordance with their value as
national assets and in the best interests of the Nation, it is hereby ordered
as follows:
Section 1. Policy. It is the policy of the United States to promote the
efficient and economical use of America’s real property assets and to assure
management accountability for implementing Federal real property manage-
ment reforms. Based on this policy, executive branch departments and agen-
cies shall recognize the importance of real property resources through in-
creased management attention, the establishment of clear goals and objectives,
improved policies and levels of accountability, and other appropriate action.
Sec. 2. Definition and Scope. (a) For the purpose of this executive order,
Federal real property is defined as any real property owned, leased, or
otherwise managed by the Federal Government, both within and outside
the United States, and improvements on Federal lands. For the purpose
of this order, Federal real property shall exclude: interests in real property
assets that have been disposed of for public benefit purposes pursuant
to section 484 of title 40, United States Code, and are now held in private
ownership; land easements or rights-of-way held by the Federal Government;
public domain land (including lands withdrawn for military purposes) or
land reserved or dedicated for national forest, national park, or national
wildlife refuge purposes except for improvements on those lands; land held
in trust or restricted fee status for individual Indians or Indian tribes; and
land and interests in land that are withheld from the scope of this order
by agency heads for reasons of national security, foreign policy, or public
safety.
(b) This order shall not be interpreted to supersede any existing authority
under law or by executive order for real property asset management, with
the exception of the revocation of Executive Order 12512 of April 29, 1985,
in section 8 of this order.
Sec. 3. Establishment and Responsibilities of Agency Senior Real Property
Officer. (a) The heads of all executive branch departments and agencies
cited in sections 901(b)(1) and (b)(2) of title 31, United States Code, and
the Secretary of Homeland Security, shall designate among their senior
management officials, a Senior Real Property Officer. Such officer shall
have the education, training, and experience required to administer the
necessary functions of the position for the particular agency.
(b) The Senior Real Property Officer shall develop and implement an
agency asset management planning process that meets the form, content,
and other requirements established by the Federal Real Property Council
established in section 4 of this order. The initial agency asset management
plan will be submitted to the Office of Management and Budget on a date
determined by the Director of the Office of Management and Budget. In
developing this plan, the Senior Real Property Officer shall:

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(i) identify and categorize all real property owned, leased, or other-
wise managed by the agency, including, where applicable, those
properties outside the United States in which the lease agreements
and arrangements reflect the host country currency or involve alter-
native lease plans or rental agreements;
(ii) prioritize actions to be taken to improve the operational and finan-
cial management of the agency’s real property inventory;
(iii) make life-cycle cost estimations associated with the prioritized ac-
tions;
(iv) identify legislative authorities that are required to address these
priorities;
(v) identify and pursue goals, with appropriate deadlines, consistent
with and supportive of the agency’s asset management plan and
measure progress against such goals;
(vi) incorporate planning and management requirements for historic
property under Executive Order 13287 of March 3, 2003, and for
environmental management under Executive Order 13148 of April
21, 2000; and
(vii) identify any other information and pursue any other actions nec-
essary to the appropriate development and implementation of the
agency asset management plan.
(c) The Senior Real Property Officer shall be responsible, on an ongoing
basis, for monitoring the real property assets of the agency so that agency
assets are managed in a manner that is:
(i) consistent with, and supportive of, the goals and objectives set
forth in the agency’s overall strategic plan under section 306 of
title 5, United States Code;
(ii) consistent with the real property asset management principles de-
veloped by the Federal Real Property Council established in section
4 of this order; and
(iii) reflected in the agency asset management plan.
(d) The Senior Real Property Officer shall, on an annual basis, provide
to the Director of the Office of Management and Budget and the Administrator
of General Services:
(i) information that lists and describes real property assets under the
jurisdiction, custody, or control of that agency, except for classified
information; and
(ii) any other relevant information the Director of the Office of Man-
agement and Budget or the Administrator of General Services may
request for inclusion in the Government-wide listing of all Federal
real property assets and leased property.
(e) The designation of the Senior Real Property Officer shall be made
by agencies within 30 days after the date of this order.
Sec. 4. Establishment of a Federal Real Property Council. (a) A Federal
Real Property Council (Council) is established, within the Office of Manage-
ment and Budget for administrative purposes, to develop guidance for, and
facilitate the success of, each agency’s asset management plan. The Council
shall be composed exclusively of all agency Senior Real Property Officers,
the Controller of the Office of Management and Budget, the Administrator
of General Services, and any other full-time or permanent part-time Federal
officials or employees as deemed necessary by the Chairman of the Council.
The Deputy Director for Management of the Office of Management and
Budget shall also be a member and shall chair the Council. The Office
of Management and Budget shall provide funding and administrative support
for the Council, as appropriate.
(b) The Council shall provide a venue for assisting the Senior Real Property
Officers in the development and implementation of the agency asset manage-
ment plans. The Council shall work with the Administrator of General
Services to establish appropriate performance measures to determine the
effectiveness of Federal real property management. Such performance meas-
ures shall include, but are not limited to, evaluating the costs and benefits

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involved with acquiring, repairing, maintaining, operating, managing, and

disposing of Federal real properties at particular agencies. Specifically, the
Council shall consider, as appropriate, the following performance measures:
(i) life-cycle cost estimations associated with the agency’s prioritized
actions;
(ii) the costs relating to the acquisition of real property assets by pur-
chase, condemnation, exchange, lease, or otherwise;
(iii) the cost and time required to dispose of Federal real property as-
sets and the financial recovery of the Federal investment resulting
from the disposal;
(iv) the operating, maintenance, and security costs at Federal prop-
erties, including but not limited to the costs of utility services at
unoccupied properties;
(v) the environmental costs associated with ownership of property, in-
cluding the costs of environmental restoration and compliance ac-
tivities;
(vi) changes in the amounts of vacant Federal space;
(vii) the realization of equity value in Federal real property assets;
(viii) opportunities for cooperative arrangements with the commercial
real estate community; and
(ix) the enhancement of Federal agency productivity through an im-
proved working environment. The performance measures shall be
designed to enable the heads of executive branch agencies to track
progress in the achievement of Government-wide property manage-
ment objectives, as well as allow for comparing the performance
of executive branch agencies against industry and other public sec-
tor agencies.
(c) The Council shall serve as a clearinghouse for executive agencies
for best practices in evaluating actual progress in the implementation of
real property enhancements. The Council shall also work in conjunction
with the President’s Management Council to assist the efforts of the Senior
Real Property Officials and the implementation of agency asset management
plans.
(d) The Council shall be organized and hold its first meeting within
60 days of the date of this order. The Council shall hold meetings not
less often than once a quarter each fiscal year.
Sec. 5. Role of the General Services Administration. (a) The Administrator
of General Services shall, to the extent permitted by law and in consultation
with the Federal Real Property Council, provide policy oversight and guid-
ance for executive agencies for Federal real property management; manage
selected properties for an agency at the request of that agency and with
the consent of the Administrator; delegate operational responsibilities to
an agency where the Administrator determines it will promote efficiency
and economy, and where the receiving agency has demonstrated the ability
and willingness to assume such responsibilities; and provide necessary lead-
ership in the development and maintenance of needed property management
information systems.
(b) The Administrator of General Services shall publish common perform-
ance measures and standards adopted by the Council.
(c) The Administrator of General Services, in consultation with the Federal
Real Property Council, shall establish and maintain a single, comprehensive,
and descriptive database of all real property under the custody and control
of all executive branch agencies, except when otherwise required for reasons
of national security. The Administrator shall collect from each executive
branch agency such descriptive information, except for classified information,
as the Administrator considers will best describe the nature, use, and extent
of the real property holdings of the Federal Government.
(d) The Administrator of General Services, in consultation with the Federal
Real Property Council, may establish data and other information technology
(IT) standards for use by Federal agencies in developing or upgrading Federal

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agency real property information systems in order to facilitate reporting

on a uniform basis. Those agencies with particular IT standards and systems
in place and in use shall be allowed to continue with such use to the
extent that they are compatible with the standards issued by the Adminis-
trator.
Sec. 6. General Provisions. (a) The Director of the Office of Management
and Budget shall review, through the management and budget review proc-
esses, the efforts of departments and agencies in implementing their asset
management plans and achieving the Government-wide property management
policies established pursuant to this order.
(b) The Office of Management and Budget and the General Services Admin-
istration shall, in consultation with the landholding agencies, develop legisla-
tive initiatives that seek to improve Federal real property management
through the adoption of appropriate industry management techniques and
the establishment of managerial accountability for implementing effective
and efficient real property management practices.
(c) Nothing in this order shall be construed to impair or otherwise affect
the authority of the Director of the Office of Management and Budget with
respect to budget, administrative, or legislative proposals.
(d) Nothing in this order shall be construed to affect real property for
the use of the President, Vice President, or, for protective purposes, the
United States Secret Service.
Sec. 7. Public Lands. In order to ensure that Federally owned lands, other
than the real property covered by this order, are managed in the most
effective and economic manner, the Departments of Agriculture and the
Interior shall take such steps as are appropriate to improve their management
of public lands and National Forest System lands and shall develop appro-
priate legislative proposals necessary to facilitate that result.
Sec. 8. Executive Order 12512 of April 29, 1985, is hereby revoked.
Sec. 9. Judicial Review. This order is intended only to improve the internal
management of the executive branch and is not intended to, and does
not, create any right or benefit, substantive or procedural, enforceable at
law or in equity, against the United States, its departments, agencies, or
other entities, its officers or employees, or any other person.

THE WHITE HOUSE,

February 4, 2004.
W
[FR Doc. 04–2773
Filed 2–5–04; 9:19 am]
Billing code 3195–01–P

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Facility Management for the
st
21 Century
Resource Stewardship & Visitor Services
through Facility Management

April 2002
Facility Management for the
st
21 Century
Resource Stewardship & Visitor Services
through Facility Management
Table of Contents
Introduction 1
Facility Management Mission Statement 1
Overview 1

1. Recruitment, Retention, and Support of a Diverse and Highly Skilled Facility 3

Management Workforce
1.1 Recruitment, Retention, and Support of a Diverse and Highly Skilled 3
Facility Management Workforce
1.2 Orientation to Mission and Stewardship 4
1.3 Workforce Growth and Development 5
2. Facility Management in the NPS is a Model Safety Program that Values the 7
Health and Well-being of All Employees and Visitors
2.1 Risk Management Leadership and Involvement 7
2.2 Risk Management Capability 8
3. Commitment to Full Cost of Facilities Ownership 9
3.1 Facility Stewardship 9
3.2 Proactive Maintenance for NPS Facilities 10
3.3 Evaluation and Reporting Processes for NPS Facilities 11
3.4 Asset Management 12
4. Information Acceleration and New Technologies 13
4.1 Information 13
4.2 Technology 14
5. Environmental Leadership Through Sustainable Practices 15
5.1 Energy and Resource Conservation 15
5.2 Sustainable Design, Planning, and Construction 16
5.3 Sustainable Operations and Maintenance 17
Summary of Actions, Accomplishment Timeframes and Responsible Facilitators 18
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management
Introduction
This document provides a framework for the development of long- and short-range goals and
strategies, as well as a comprehensive catalogue of next steps. It is designed to help launch the
most effective planning, design, construction, operation, maintenance, repair, rehabilitation,
replacement and investment effort in our National Park System's facilities history.

Facility Management Mission Statement

The Facility Management Mission is to ensure that our nation’s natural and cultural resources are
sustained for the future by providing stewardship of assets through maintenance practices,
preservation techniques, and the utilization of new technologies.

Overview
The National Park Service (NPS) manages a diverse inventory of facilities which includes:
? 8,000 miles of roads (including 5,456 miles of paved roads)
? 1,804 bridges and tunnels
? 95 alternative transportation systems
? 763 miles of paved trails
? 12,250 miles of unpaved trails
? 7,580 administrative and public use buildings
? 5,771 historic buildings
? 4,700 concession occupied buildings
? 4,389 housing units (including approximately 1,000 historic housing units)
? 493 water treatment plants
? 187 wastewater treatment plants and associated utility systems
? 270 electrical generating systems
? 160,000 signs
? 8,505 monuments
? 483 NPS dams
? 26,830 campground sites
? 200 solid waste operations
? 300 radio systems

These facilities enable more than 285.9 million annual visitors to experience our unique
system of nationa l parks in a safe and accessible environment. They also help protect
natural, cultural, and scenic resources by limiting the impact of heavy visitation.
These priceless artifacts of our country’s heritage -- from buildings and byways to tunnels and
trails -- represent a significant and long-term public investment. As such, they command a
special effort to ensure their preservation for the next generation.

Much attention has been given to the cost associated with the construction of park facilities.
Congress has appropriated millions of dollars to create new facilities within the National Park
System, yet, the initial expense of construction represents only 5 to 10 percent of the full cost of
ownership during the life of a facility.

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To best protect these important resources, ongoing investments in annual and cyclic
maintenance, repair and revitalization, and disposal and non- historic assets, must be
considered as part of a long-term maintenance program. Together, these expenditures
account for 60 to 85 percent of the total cost of ownership.

We are experiencing the consequences of postponing the life-cycle care. In the short-
term, deferred maintenance lessens the quality of facility services. In the long-term, it
leads to reduced service life, diminished asset value, and decreased safety for visitors and
employees.

Picture 1: Yellowstone
National Park.
This photo is of the historic
Fort Yellowstone Jail built in
1911 by the U.S. Calvary. It is
of concrete construction, and
the damage shown is
representative of the condition
of approximately 50% of the
structure. The damage is
spalling of concrete caused by
water intrusion and subsequent
freeze/thaw action.

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Facility Management for the 21st Century presents a strategy for the long-term care of and
investment in NPS employees, and stewardship of natural and cultural resources, and
facilities, including:

1. Recruitment, Retention and Support of a Diverse and Highly Skilled Facility

Management Workforce
2. Facility Management in the NPS as a Model Safety Program that Values the Health
and Well-Being of All Employees and Visitors
3. NPS Commitment to Full Cost of Facilities Ownership
4. Information Acceleration and New Technologies
5. Environmental Leadership Through Sustainable Practices

These investments complement and reinforce the goals contained in Director’s Order 80
and the facility management program. Collectively, they establish a 10 to 15- year strategic
plan and provide a framework for 21st Century park facility management.

A long-term investment in people, practices, and places provides the foundation for
preserving public lands and facilities for future generations. Clearly, maintenance and
facility management within the NPS requires a significant commitment -- an ongoing
investment in human, natural, financial and cultural resources.

1. Recruitment, Retention, and Support of a Diverse and Highly Skilled

Facility Management Workforce

1.1 Recruitment and Retention of a Diverse and Highly Skilled Facility Management
Workforce

Objectives
1. To create, maintain, and manage a proactive recruitment campaign that attracts a
diverse, skilled and experienced pool of candidates, establishes clear performance
goals, and provides opportunities for all employees to pursue careers in the NPS.
2. To reward current staff for their contributions and commitment to NPS.

Background/Challenges
Current national unemployment levels are low, a factor that limits the pool of potential
candidates for NPS positions. In response, we must create a work environment that attracts
talented people from many backgrounds. The contrast between pay and benefits available
within the private sector and government affects recruitment and retention of quality
facility management employees.

There is a perception within the Service that NPS experience better equips candidates to fill
Positions. Therefore, much of the recruitment in facility management, especially in higher
graded positions, is geared toward the NPS ranks. To create a workforce that is accomplished,

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dynamic and diverse, in order to meet the challenges of the future, outreach must be expanded to
include non-traditional recruitment and hiring practices.

Current methods of performance review are constraining, and many supervisors do not
utilize all available forms of recognition. This can lead to inequities in the compensation
system. Employees need to feel that their contributions are acknowledged and rewarded in
a fair and timely manner.

Strategies
? Offer more opportunities for personal and professional growth including training,
job sharing, and continuing education, which help attract top candidates and retain
existing staff.
? Encourage and support facility management staff members to explore work that
falls outside traditional roles.
? Utilize the mid- level in- take training program to instruct and develop future facility
managers.
? Provide career counselors to advise facility management employees on career goals
and professional development.
? Develop a national recruitment plan to reach a larger more diverse pool of job
candidates.
? Expand outreach to under-represented populations by working with high schools,
trade schools and colleges to recruit students for Student Temporary Employment
Program (STEP) and Student Career Experience Program (SCEP) hiring.
? Streamline hiring practices by developing a library of benchmark Position
Descriptions in facility management.

Desired Results
? Facility management in the NPS attracts top candidates from government agencies,
not- for-profit institutions, trade schools, colleges and the private sector.
? Employees entering facility management have the support and resources to achieve
their career development goals.
? Benefits and quality of work- life create a positive work environment that rewards
and encourages employees to pursue fulfilling careers with the NPS.

1.2 Orientation to Mission and Stewardship

Objectives
1. To familiarize every maintenance employee with the Agency’s overarching
mission, history, current organizational structure, core values, and to connect with
the facility management program.
2. To define each staff members’ significant role in fulfilling the mission and clearly
outline the specific performance expectations linked with their current position.
3. To enhance the understand ing and appreciation of the many roles and
responsibilities that the professional facility management program has within NPS.

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Background/Challenges
Some aspects of facility management are routine and direct benefits to the public are not
always evident. The facility management staff does not always recognize the critical role
they play in achieving the NPS mission.

A curriculum of universal competency training is now offered through the NPS Learning
Place, yet few employees or supervisors use this opportunity. As a result, new and long-
time employees alike may never receive a proper orientation. Training must encompass the
fundamentals of maintenance and be easily accessible to all staff, especially facility
management employees. It is critical to develop the resources, materials and systems to
serve both new and seasoned employees of all divisions within the NPS.

Strategies
? Provide a comprehensive orientation to every new facility management employee
focusing on staff roles and functions and the fundamental connection between
mission and resource stewardship.
? Incorporate the universal competency-training curriculum, available through the
NPS Learning Place, into the comprehensive orientation.
? Design a continuing education curriculum to bolster the mission, define services
and foster mutual respect and understanding between NPS divisions.
? Develop a course for NPS managers on the role and function of the facility
management program to raise their awareness regarding scope and complexity.
? Assign each maintenance employee a mentor who will review the mission, explain
facility management basics, and work with colleagues to develop flexible and
accessible reference and training materials.

Desired Results
? Employees feel they are part of an important organization through which they
contribute to the preservation of America's greatest natural and cultural treasures.
? Every employee in facility management is familiar with the NPS mission, takes
pride in the important role they play within the Agency, and contributes to meeting
these shared goals.
? Managers throughout the NPS recognize and value the strengths that effective
facility management brings to resource protection while contributing to visitor
enjoyment of our park areas.

1.3 Workforce Growth and Development

Objective
To provide professional growth and learning for all facility management employees
through a training and development program that focuses on mission and competency.

Background/Challenges
Facility management requires the mastery of many new skills, familiarity with advanced

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technologies, and easy access to timely information. New compliance regulations require
today's facility managers and trades and crafts personnel to be well versed in a number of
laws and regulations. In order to fully meet the park’s mission, all managers must be aware
of the needs of other disciplines within the workforce.

Employees are expected to be more informed, more diligent, and more aware of potential
threats to resources and to take preventive measures. Over the years, added responsibilities
have increased the amount of planning and administrative duties associated with facility
management and decreased the amount of time actual maintenance work is performed.

While the job calls for more training and education, less and less time is provided to fulfill
this requirement. Further, ensuring that each employee receives the appropriate amount of
training and development each year creates an additional demand on fiscal resources.

Strategies
? Conduct a thorough occupational needs assessment to ensure that up-to-date skill
training is available to meet changing facility management demands.
? Enlist and train career counselors from within the Agency to advise facility
management staff on career goals, provide direction, and offer a formal mentoring
program that encourages the sharing of knowledge and experience.
? Formalize an apprenticeship process for trades and supervisory positions that
stresses skills, development and leadership.
? Update competencies for the 1640 series (Facility Manager) to reflect standards and
those measures used by International Facility Management Association (IFMA) to
accredit professional degrees in universities in facilities management.
? Certify that all Facility Managers in the NPS meet the minimum competencies for
the profession.
? Utilize the Office of Personnel Management (OPM) guide for rating and certifying
the 1640 series that reflect the growing complexities of the job.
? Take action to place the 1640 series into a professional pay scale comparable to
other licensed professionals, such as architects and engineers.
? Increase funding for training and development programs to ensure that all facility
management staff obtains necessary knowledge, skills and abilities to meet new
complexities.
? Create information sites illustrating the contributions of facility management within
the NPS.
? Develop and distribute materials describing careers and opportunities in facility
management.

Desired Results
? Employees recognize their abilities and address their development needs through
national, regional, and local providers.
? Employees receive advice and guidance from designated mentors and coaches from
within the NPS.

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2. Facility Management in the NPS is a Model Safety Program that

Values the Health and Well-Being of All Employees and Visitors

2.1 Risk Management Leadership and Involvement

Objectives
1. To reinforce the Agency’s commitment to create and maintain the safest
possible environments for both staff and park visitors.
2. To change at-risk behavior through training, effective leadership and
communication.

Background/Challenges
Facility management accounts for over half of the NPS workforce and budget. The
pressure on this population of employees to get the work done is great. Many of the
activities performed facility managers involve risk but too often the job has higher priority
than doing it safely. Corners are cut, unsafe behavior is ignored and accidents occur.
Facility management employees account for the majority of on-site accidents and lost time
injuries, and it is a fact that over 90percent of these incidents are a result of unsafe work
practices, not job hazards. Too often, employees go about their daily routine without
stopping to consider the danger involved in what may be considered a “simple” task. A
change in behavior and attitude is necessary to prevent mishaps that often lead to serious
injuries.

The measures required by the Occupational Safety and Health Administration (OSHA) and
the Environmental Protection Agency (EPA), Resource, Conservation and Recovery Act
(RCRA) and others, to establish safety and risk management programs for activities
involving such things as better work practices with emphasis on industrial hygiene,
confined space entry, respirators, lead paint, and medical monitoring, can be
overwhelming. Risk management requires skilled professionals to develop strategies and
assist NPS in developing programs that protect the health and safety of both employees
and visitors. This type of support is not readily available within the NPS and can be costly
to acquire.

Strategies
? Facilities managers are guided by the principle that employee accidents are barriers to
getting the job done, and through their leadership they establish a culture in which doing
the job right means doing it safely.
? Investigate all accidents, including close calls, to determine cause and recorded on the
Safety Management Information System.
? Utilize safety professionals to assist in the evaluation of risk and in determining methods
for improvement.
? Institute a comprehensive, timely and consistent safety training programs for all levels of
the facility management team.

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? Closely audit work practices to identify and correct at-risk behaviors while recognizing
and rewarding model safety conduct.

Desired Results
? Facility management employees are leaders and role models in safety practices,
resulting in a lower than average lost time accident rate.
? Maintenance employees throughout the Service view safety as the top priority
taking precedence over getting job done. Job safety is considered in advance of
any project or activity.
? The NPS works closely with outside organizations and other agencies to manage an
effective safety program.

2.2 Risk Management Capability

Objectives
1. To develop, implement and evaluate a model safety program.
2. Provide employees with training and information to know the risks of their tasks
and how to protect themselves and others from injury.
3. Provide resources such as equipment to ensure that employees can perform their tasks
efficiently and safely.
4. Ensure that all facilities management employment are highly qualified and physically
capable of performing their assigned tasks.

Background/Challenges
The National Park Service has struggled for years to develop effective safety management
programs. Park safety programs too often the program was developed without adequate
employee involvement and as a result there was little commitment to making it work. This is
particularly true for park facilities management where the employees are generally at higher risk.
The cha llenge is to create an effective process where “safety” becomes a component of the
facilities management culture and where resources are provided to ensure employees are trained
and equipment to effectively/safely do the job.

The NPS has not historically managed workers’ compensation cases well. When an employee is
injured and is off work there has been little effort to return that employee back to work as soon
as physically/medically qualified. The challenge is to maintain contact with employees who are
off work due to job-related injury or illness and arrange for him/her to return to work as soon as
possible.

Strategies
? Develop a model safety program that addresses the unique needs of facility management,
and provide the training and resour ces program success.
? Implement a comprehensive and aggressive Back-to-Work program to return injured
employees back to work as per Director’s Order 50A.

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? Develop medical/fitness standards for arduous duty facility management activities and
establish a medical surveillance and review process for these positions.
? Hire and maintain a workforce physically and medically qualified for their assigned
duties.
? Implement a comprehensive and aggressive Back-to-Work program Servicewide.
? Direct that all reportable information is recorded in the Safety Management
Information System (SMIS).
? Enhance employee wellness by instituting a formal physical fitness program, which
incorporates medical check-ups, prescribed fitness routines, and measures for achieving
fitness goals into the workday.

Desired Results
? The facilities management workforce throughout the NPS is physically capable, fully
training and equipped to perform their assigned tasks efficiently and safely.
? All parks use SMIS consistently.
? Accurate data is used to formulate reasonable goals, identify deficiencies, and develop
appropriate responses.

3. Commitment to Full Cost of Facilities Ownership

3.1 Facility Stewardship

Objective
To foster facility stewardship at all levels within the National Park Service.

Background/Challenges
In the report "Committing to the Cost of Ownership, The Maintenance and Repair of
Public Buildings", the Building Research Board National Research Council of the
American Public Works Association (1990) states that "Based on experience and
judgment, the committee proposes that the appropriate level of Maintenance and Repair
spending should be, on average, in the range of two to four percent of current replacement
value of the inventory." However, it is often difficult to confirm the funding appropriated
for the operation and maintenance of NPS facilities and infrastructure, or to measure the
benefits of those expenditures.

There is confusion about the inter-relationships among facilities operations, maintenance,

repair and rehabilitation, alteration and capital investment. Costs for these activities have
been intermingled and are not easily tracked or analyzed using existing NPS management
systems. Many maintenance activities are associated with natural and/or cultural
resources, other park operations, and visitor services. Yet resource stewardship and visitor
service goals are not always recognized as key components for NPS facility management.

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Strategies
? Establish a national policy for facility management processes within the NPS.
? Ensure that decision- making processes in facility management are inclusive of all
NPS disciplines and that facilities stewardship is incorporated into every aspect of
NPS programming.
? Promote and support Servicewide data system integration projects.
? Build a team approach to planning, including unified budget calls, team project
scoping, and management accountability.
? Promote the establishment of a professional network support unit for each region to
aid with health, safety, compliance, communications technology, environmental
leadership practices, data management, computer-aided design systems, energy
conservation, asset management, and integrated funding processes.
? Explore options for longer funding cycles (multiple year cycles) to account for the
long-term costs of facilities.

Desired Results :
? All managers employ a universal formula to earmark necessary resources for
the preservation and maintenance of existing assets, which guarantee an
effective and proactive maintenance program.
? The NPS adopts uniform guidelines for managing facilities, ensuring the
preservation of resources, and promoting best business practices.
? Together, managers and the workforce commit to the cost of ownership of these
facilities.

3.2 Proactive Maintenance for NPS Facilities

Objective
To promote proactive maintenance throughout the National Park System.

Background/Challenges
Recently, the NPS received substantial increases in project funding from the Recreational
Fee Demonstration, Federal Lands Highway and the Repair and Rehabilitation Programs.
While these allocations have begun to address the rehabilitation and reconstruction needs
of many park facilities, operational and preventive maintenance has fallen short of this
need.

Traditionally, park maintenance practices have focused primarily on operational demands

and facilities rehabilitation, often at the expense of ongoing preventive maintenance. In
light of increasing fixed costs such as utilities and overhead, operational needs have not
been fully funded.

Despite the introduction of more advanced equipment and technology, most NPS
maintenance operations still perform on a reactive basis. Very few park maintenance work
groups funds and implement a schedule of preventive and cyclic maintenance.

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The long-term consequences of short-term responses to facilities issues must be more fully
evaluated. Investments in future rehabilitation, reconstruction and preventive maintenance
must be considered during the annual budgetary process.

Regulations are critical to the protection of the unique ecosystems found within the
National Park System. With the delegation of primacy to States for enforcement of
environmental laws, the NPS is experiencing a dramatic increase in the number of State-
issued consent orders for no n-compliance with water, wastewater, and toxic substances.

Optimum staffing and other support resources are essential in order to implement an
effective preventive maintenance program.

Strategies
? Communicate the results and benefits of proactive maintenance management
systems over costly rehabilitation or reconstruction to both senior NPS
management and facility management supervisors.
? Observe operational manuals and preventive maintenance standards for all new
construction and rehabilitation projects.
? Implement preventive maintenance programs in all park units to avoid future
deterioration.
? Develop and implement standard work templates for recurring and preventive
maintenance activities.
? Develop, implement, and install Facility Management Software System (FMSS)
and maintenance management programs in all units of the NPS.
? Identify all facility requirements, present maintenance standards and activities, and
provide verifiable documentation.

Desired Results
? Park maintenance places special emphasis on cyclic and preventive maintenance,
thus keeping assets in good condition and eliminating the deferred maintenance
backlog.

3.3 Evaluation and Reporting Processes for NPS Facilities

Objective
To establish effective evaluation and reporting processes for NPS facilities.

Background/Challenges
Existing evaluation processes and practices for NPS facilities are not generally structured
to provide for the appropriate stewardship of those assets. For example, the NPS does not
yet have:
? A full inventory of assets
? Condition reports for all facilities
? Operations versus maintenance cost and work reports

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? Labor utilization reports

? Complete and verifiable deferred maintenance reports

There is a continuing need to support development and implementation of the FMSS at all
levels of management.

At this time, the NPS does not utilize uniform standards and benchmarks to evaluate the
distribution of available resources. Facility evaluation processes often fail to ensure a
balanced and uniform approach to meeting programmatic requirements for visitor services,
facility operations, maintenance and repair. However, many of the necessary systems
needed to ensure effective evaluation and reporting have been identified and are in various
stages of development and implementation.

Unfortunately, systematic failure, rather than proactive maintenance, has become the
trigger point for facilities upkeep. This approach makes it difficult to demonstrate effective
stewardship, accountability for programmatic compliance, and the cost-effective
preservation of the park facilities.

Strategies:
? Implement a Servicewide standard for tracking the real costs of facility ownership.
? Establish a series of performance measures to evaluate the effectiveness of facilities
and maintenance repair programs.
? Develop additional methodologies to ensure that:
? The condition of existing facilities does not further diminish.
? The maintenance backlog decreases.
? The adverse impact on natural and cultural resources is minimized.
? There is an enhanced value to visitors and the public.

Desired Results
? The reduction of the deferred maintenance backlog allows more time and resources
to be devoted to evaluating conditions and conducting needs assessments.
? More time and effort is placed on the planning and design process, thus ensuring
the best possible end product.

3.4 Asset Management

Objective
To develop and implement a comprehensive Asset Management Program in order to
provide effective stewardship of facilities.

Background/Challenges
The need for both activity-based and asset-based work program requirements (i.e.,
operations and maintenance) must be recognized.
NPS manages a diverse assortment of facilities without the benefit of a comprehensive

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asset inventory categorized by age, type, size and number. Moreover, the physical
condition, functionality, suitability, and life expectancy of facilities and the backlog of
deferred maintenance requirements must be better documented.

Information on asset management is not always readily available due to out-of-date,

inconsistent, or incomplete records and antiquated computer software. These factors
inhibit the Agency’s ability to properly plan, report, manage and request resources.

Strategies
? Provide training in the asset-based management philosophy that emphasizes the
link between facility investment, management, and Agency mission.
? Plan, design, develop and implement a system to collect detailed comprehensive
inventory data, annual condition assessment, needs assessment, and comprehensive
condition assessme nt data for park assets.
? Develop the information system’s capacity to provide standardized cost estimates,
identify backlog maintenance in Operations Financial System (OFS) and Project
Management Information System (PMIS), and report actual accomplishments and
changes in overall conditions.
? Identify and correct deficiencies as determined by annual and comprehensive
condition assessments.

Desired Results
? Facilities are constructed, operated, and maintained only when they can provide the
best protection or preservation of park resources; deliver essential visitor services;
support critical operations/functions in the park areas; or where the absence of
those facilities would substantially decrease the ability of the NPS to meet its
mission.
? All facility managers understand the need for comprehensive evaluation, including
a report on the condition and inventory of assets.
? Integrated systems help managers identify needs, estimate costs, outline priorities,
and streamline the flow of information from one user to the next.
? All park managers understand the intrinsic value of the assets and make more
effective decisions on management of the assets.

4. Information Acceleration and New Technologies

4.1 Information

Objectives
1. To compile, store, connect, access and share information more efficiently and
effectively.
2. To identify what information is and will be necessary for managing resources and
making sound decisions.

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3. To create systems to build and manage an integrated network of information and

new technologies.

Background/Challenges
The amount of information that is available to managers grows exponentially each year,
yet it can be difficult to locate what is needed. Many groups within the NPS have
developed their own databases, though these disparate programs do not always interface
with each other. At times, work is unnecessarily duplicated.

Information describing the condition, inventory, operation, and cost of assets that is readily
available is invaluable. Building a foundation to support such a system requires a major
investment of time and money. Managing the amount of information and verifying its
accuracy will be a critical function in both the long- and short-term. It is highly likely that
more staff, possessing different skills than most traditional facility management
employees, will be required to manage information and related systems.

The ability to access the most up-to-date information is critical to strategic planning,
effective management, and sound decision- making. Without the capacity to transfer and
share information through direct or indirect connections, the concept of real-time
information will not be possible. Sharing and consolidating information must begin
immediately to prevent problems in the future.

Strategies
? Build a solid infrastructure to create a network integrating technology in the form
of adequate bandwidth, fiber optics, and cabling into our facilities.
? Develop a database that contains information on all existing programs that can be
merged and integrated in future revisions.
? Provide references when building new programs to avoid redundant information.
? Encourage divisions to work more closely and develop joint needs and programs to
prevent a duplication of effort.

Desired Result
Information that contributes to the formulation of work plans, priorities, cost estimates, and
to facilities management on a day-to-day basis is easily available and accessible.

4.2 Technology

Objectives
1. To develop procedures to identify and fully integrate data and new technologies
within NPS systems.
2. To enable park managers to understand and embrace advances in science and
technology.

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Background/Challenges
Technology has become more powerful and more readily available. Upgrading and
improving technologies on a regular basis clearly impacts budgets. However, some
expenses can be offset by gains in efficiency and improved productivity, especially if the
technology can be quickly integrated Servicewide. Personnel costs and overhead may be
reduced through the use of improved technology.

Strategies
? Direct a core group to study the latest technologies, as well as test, evaluate,
introduce, monitor and update promising pilot programs.

? Systematically identify, research, evaluate, and introduce relevant technologies to

meet current and future challenges.
? Routinely revisit systems management to evaluate the use of robotics and other
mechanical technology and study its potential impact on the NPS.
? Phase relevant information into position descriptions, Knowledge, Skills and
Abilities, and recruitment announcements.

Desired Results
? A systematic process for introducing new technologies into the NPS is developed.
? Technology is used to our advantage and NPS has embraced non-traditional
methods for accomplishing work.

5. Environmental Leadership through Sustainable Practices

5.1 Energy and Resource Conservation

Objective
To gain knowledge and understanding of proven sustainable practices for conserving
energy and other resources through facility management.

Background/Challenges

It is imperative that the NPS explore all viable options for energy and fuel conservation.
The development of a database clearinghouse, for example, would provide NPS with a
resource for sharing pertinent information within and outside the agency. We must position
NPS as committed to energy management through sustainable practices and design. To
ensure success, NPS must aggressively reach out and form partnerships with other
members of the Federal Government and those corporations that are actively embracing
energy conservation, seeking new opportunities, and exploring alternative programs.

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Strategies
? Study and implement alternative energy systems and practices, where appropriate.
? Conduct building energy audits to evaluate facility performance.
? Retrofit existing facilities, during building rehabilitation, for water and energy
conservation measures.
? Inform NPS staff about new technological advances.
? Determine which products and processes are truly sustainable.

Desired Results
? NPS energy consumption drops dramatically due to the introduction of innovative
alternative energy sources.
? The NPS is a lead agency in the Federal Government, demonstrating energy saving
designs, alternative fueled vehicles, and new technologies.

5.2 Sustainable Design, Planning and Construction

Objective
To acquire knowledge and understanding of proven sustainable practices and introduce
these practices into planning, design and construction and rehabilitation.

Background/Challenges
The NPS mission pledges to protect and preserve natural and cultural resources for future
generations. In light of this commitment, the Agency has launched many efforts that
integrate sustainable practices and principles in planning, managing, designing,
constructing, preserving, and operating our capital assets.

However, these efforts have not yet been incorporated systematically throughout all parks.
In many cases, employees do not have access to the latest and most complete data and
training on sustainable materials, uses and practices.

At times, NPS embraces a procedure or policy before adequate research can validate its
merits. Consequently, many NPS activities and programs still employ practices that waste
materials and energy.

Strategies
? Review all planning, design, and blueprints to evaluate the inherent energy and
environmental costs associated with construction of new facilities.
? Identify and evaluate alternatives to new construction.
? Follow sustainable design guidelines and principles for all new construction and
major rehabilitation, and test and rate for energy performance.
? Incorporate construction contract documents into “green” building products and
sustainable construction practices.
? Educate visitors about sustainable building design through demonstrations.

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Desired Result
Sustainability is built into every operation and is factored into all management decisions.
Technology is available and inexpensive and information resources are plentiful.

5.3 Sustainable Operations and Maintenance

Objective
To integrate sustainable practices into operations and maintenance

Background/Challenges
By their very nature, facility operations and maintenance consume goods and produce
waste. There are real and measurable environmental costs associated with park visitation
and its impact on resources -- including solid and human waste management, water
treatment, and energy use. Additionally, NPS facilities maintenance activities, such as
construction, equipment and road repair, and painting, generate substantial waste streams,
many of which are hazardous. Not all individuals and parks in the system have the
expertise to substitute sustainable practices for environmentally insensitive operations.

Strategies
? Train Facility Managers to measure and evaluate the energy and environmental life
cycle costs associated with building products, maintenance and repair practices.
? Require Facility Managers to calculate the energy and environmental life cycle
costs associated with building products and processes and incorporate sustainable
practices.
? Evaluate vehicle fleet management practices to optimize energy efficiencies.
? Incorporate the best management practices for reducing waste and utilizing
recycled products into ongoing vehicle and equipment maintenance programs.
? Collaborate with General Service Administration (GSA) and other energy providers
to explore possibilities of increasing the number of alternative fueled vehicles that
are available to parks.
? Build partnerships with Department of Transportation (DOT), explore DOT efforts
to solve transportation issues, and review their continued evaluation of new
technologies.
? Develop Integrated Solid Waste Alternative Plans (ISWAP) so that all parks can
assess their waste stream and implement recycling efforts.
? Assist Facility Managers in purchasing environmentally sound products.

Desired Results
? Parks operate a wide variety of alternative fueled vehicles and employ innovative
techniques to generate the energy needed to operate their facilities.
? Parks become more self-sufficient; consuming less and producing less solid waste.

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Summary of Actions, Accomplishment Timeframes and Responsible

Facilitators

1.1. Recruitment, Retention, and Support of a Diverse and Highly Skilled Facility
Management Workforce
Action Item Timeframe (FY)* Responsibility**
Prepare career counselors to advise facility
management employees on career goals and 2002 - 2004 Facility Management
professional development.
Create a proactive recruitment program for
facility management focusing on high schools,
2004 – 2007 Facility Management
trade schools, and colleges with diverse
populations.
Study trade groups and the private sector
comparing all forms of compensation and 2004 – 2007 Facility Management
equity.
Prepare and distribute an informational guide on
career opportunities in facility management to 2004 – 2007 Facility Management
assist with recruitment and promotion activities.
Develop a library of benchmark position
Facility Management
descriptions for common facility management 2004 - 2007
& Personnel
positions..

1.2. Orientation to Mission and Stewardship

Action Item Timeframe (FY)* Responsibility**
Recruit and prepare mentors to familiarize new
employees with the mission of NPS (using
universal competency and compass training 2002 - 2004 Facility Management
courses) and the roles and responsibilities of
facility management.
Develop a course for NPS managers on the role Training and
2004 – 2007
and function of facility management. Development
Develop continuing education courses on
cultural and natural resources preservation Training and
2002 – 2004
policies and laws and their relationship to Development
facilities management practices.

* Indicates the anticipated timeframe for accomplishing the action

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

18
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management

1.3. Workforce Growth and Development

Action Item Timeframe (FY)* Responsibility**
Establish mentors within the NPS to guide the
growth and development of facility management 2002 – 2004 Facility Management
employees.
Conduct a comprehensive occupational needs
Facility Management
assessment to ensure training and development
2004 – 2007 & Training and
activities address changing job demands and
Development
complexities.
Work with OPM to update the rating guide for
Facility Management
the 1640 series (Facility Manager) to reflect 2004 – 2007
& OPM
growing complexities of the job.
Work with OPM to update the competencies for
the 1640 series (Facility Manager) to reflect
Facility Management
standards established by IFMA for accrediting 2004 – 2007 & OPM
universities offering 4- year degrees in facilities
management.
Establish an apprenticeship process for trades
Facility Management
and supervisory positions in facility 2008 – 2011 & Training and
management that emphasize skills and
Development
leadership development.

2.1. Risk Management Leadership and Involvement

Action Item Timeframe (FY)* Responsibility**
Create a guide for conducting regular audits and
inspections of facilities, work conditions and 2001 - 2003 Facility Management
practices.
Create a model database of Job Safety Analyses
(JHA) for all facility management tasks that 2004 – 2007 Facility Management
involve high degrees of risk and link them to
facility management software system.
Develop a reference section within the
Washington Office (WASO) Risk Management
website that identifies frequent accidents in 2004 - 2007 Facility Management
facility management work, their causes, and
appropriate corrective measures.
Develop a reference section within the WASO
Risk Management website that lists all safety 2004 - 2007 Facility Management
requirements from various programs in a quick-
reference format.

* Indicates the anticipated timeframe for accomplishing the action.

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

19
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management

2.2. Risk Management Capability

Action Item Timeframe (FY)* Responsibility**
Institute a reward system to acknowledge and Parks & Regional
2002 – 2004
encourage safety behavior. Offices
Increase the number of safety professionals in
Parks & Regional
parks and support offices to assist with 2004 – 2007
Offices
developing rigorous safety programs.
Create a library of safety presentations (video,
audio, and electronic) for use in tailgate safety 2004 – 2007 Facility Management
meetings.
Continue to make available “Safety for First Line
Training and
Supervisors” including an SMIS module and root 2002 – 2004
Development
cause analysis.
Require that Facility Managers and Supervisors
Parks & Regional
attend the National Safety Council (NSC) 2002 – 2007
Offices
“Leadership in Safety Excellence” Program.
Create a library of safety presentations (video,
Training and
audio, and electronic) for use in tailgate safety 2002 – 2004
Development
meetings.
Establish a physical fitness program for facility
management employees consistent with Parks & Regional
2004 – 2007
recommendations contained in Workforce Offices
Challenge.

3.1. Facility Stewardship

Action Plan, Timeframes* and Responsibility**
Action Item Timeframe (FY)* Responsibility**
Complete a Director’s Order and reference
2002 – 2004 Facility Management
manual to guide the facility management program
Develop a model decision-making process for
facility mana gement actions at all organizational 2002 – 2004 Facility Management
levels (including SMAC and Regional Mac’s).
Evaluate operational and professional services
Regional Offices &
provided by support offices and identify gaps in 2004 – 2007
Support Offices
needed services to better serve parks.
Develop multi- year budget planning programs to
Facility Management
better address long-term asset management 2004 – 2007
& WASO Budget
requirements.

* Indicates the anticipated timeframe for accomplishing the action

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

20
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management

3.2. Proactive Maintenance for NPS Facilities

Action Item Timeframe (FY)* Responsibility**
Fully implement the FMSS in all units of the
2001 – 2003 Facility Management
National Park Service.
Create model contract language requiring the
submission of operational manuals and 2001 – 2003 Facility Management
preventive maintenance programs for all new
construction.
Create a library of standard work templates for
2004 – 2007 Facility Management
recurring and preventive maintenance activities.
Incorporate a session on the benefits of
Training and
preventive maintenance into a course on facility 2004 – 2007
Development
management for park managers.

3.3. Evaluation and Reporting Processes for NPS Facilities

Action Item Timeframe (FY)* Responsibility**
Complete implementation of an FMSS and the
Asset Management Program to provide a
2001 – 2003 Facility Management
Servicewide standard for tracking real costs of
ownership.
Create uniform guidelines for use by parks to
evaluate facilities and management practices in 2004 – 2007 Facility Management
those areas.
3.4. Asset Management
Action Item Timeframe (FY)* Responsibility**
Develop Asset Management training for park Training and
2001 – 2003
managers. Development
Fully implement the Asset Management Program
in all park areas to provide verifiable estimates
for maintenance backlogs, asset inventories,
2001 – 2003 Facility Management
needs assessments, assessments, asset
replacement values, recurring maintenance costs,
and total life cycle costs.
Develop agreements, contacts, and internal teams
capable of identifying and evaluating assets in 2004 – 2007 Facility Management
park areas and entering data into the FMSS
Perform regular needs assessments on all existing
and proposed built facilities in national park areas
2001 – 2003 Facility Management
to determine whether they fall within the NPS
mission.

*Indicates the anti cipated timeframe for accomplishing the action

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

21
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management

3.4. Asset Management – cont’d.

Action Item Timeframe (FY)* Responsibility**
Develop a program for evaluating the NPS’
effectiveness in moving assets to acceptable
2004 – 2007 Facility Management
condition as determined by the Facility Condition
Index.
Integrate value assessment processes (i.e.
Choosing By Advantage, Value Analysis, and
Life Cycle Cost) into advanced planning
programs (i.e. Land Protection Plans, General 2004 – 2007 Facility Management
Management Plans, DCPs) to evaluate the impact
of acquiring new facilities on operational
resources.

4.1. Information
Action Item Timefra me (FY)* Responsibility**
Establish and update minimum standards for
Facility Management
information infrastructure in facility construction 2001 - 2003
& Information Mgmt
and rehabilitation.
Develop a system for compiling, storing,
accessing, evaluating and sharing facility 2004 – 2007 Facility Management
management information.
Integrate the FMSS with other NPS data
2004 - 2007 Facility Management
management systems.

4.2.Technology
Action Item Timeframe (FY)* Responsibility**
Establish a cadre of technical experts within and
outside NPS to research, develop, and evaluate 2004 – 2007 Facility Management
new technologies and potential applications.

5.1. Energy and Resource Conservation

Action Item Timeframe (FY)* Responsibility**
Identify potentia l funding sources for energy
conservation projects for facilities and vehicles 2001 - 2003 Facility Management
as recommended by formal energy audits.
Develop an informational guide for park
managers on the benefits of using energy 2004 – 2007 Facility Management
savings performance contracts.

* Indicates the anticipated timeframe for accomplishing the action.

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

22
Facility Management for the 21st Century
Resource Stewardship & Visitor Services through Facility Management

5.2 Sustainable Design, Planning and Construction

Action Item Timeframe (FY)* Responsibility**
Distribute information and provide assistance
for using the Leadership in Energy and
2001 - 2003 Facility Management
Environmental Design (LEED) rating criteria
for evaluating.
Establish a clearinghouse for information on
resource conservation technologies and
sustainable practices, including links to other
2004 – 2007 Facility Management
agencies, institutions, and private sector
businesses engaged in resource conservation
research and development.
Institute a “Buildings that Teach” program
containing a demonstration of energy and
resource conservation technologies and 2004 – 2007 Facility Management
sustainable practices for the public to view and
learn about.

5.3. Sustainable Operations and Maintenance

Action Item Timeframe (FY)* Responsibility**
Develop a resource list of best practices for
managing vehicles that conserve energy and 2001 - 2003 Facility Management
resources and reduce waste.
Distribute information and provide assistance
for using the LEED rating criteria for evaluating 2001 – 2003 Facility Management
rehabilitation of existing facilities to enhance
their energy performance.
Complete ISWAP in all park areas to
evaluate waste streams and institute waste 2004 – 2007 Facility Management
reductio n efforts.

* Indicates the anticipated timeframe for accomplishing the action.

** Indicates the lead group for facilitating the action; all actions will be accomplished using multi -disciplinary teams.

23
United States General Accounting Office

GAO Testimony
Before the Committee on Government
Reform, House of Representatives

For Release on Delivery

Expected at 10:00 a.m. EDT
June 5, 2003 FEDERAL REAL
PROPERTY
Executive and Legislative
Actions Needed to Address
Long-standing and Complex
Problems
Statement of Bernard L. Ungar
Director, Physical Infrastructure Issues

GAO-03-839T
June 5, 2003

FEDERAL REAL PROPERTY

Executive and Legislative Actions

Highlights of GAO-03-839T, a testimony Needed to Address Long-standing and
before the Committee on Government
Reform, House of Representatives Complex Problems

Long-standing problems with Over 30 agencies control hundreds of thousands of real property assets
excess and underutilized real worldwide, including facilities and land, which are worth hundreds of
property, deteriorating facilities, billions of dollars. Unfortunately, much of this vast, valuable portfolio
unreliable real property data, and reflects an infrastructure based on the business model and technological
costly space challenges are shared environment of the 1950s. Many of the assets are no longer effectively
by several agencies. These factors
have multibillion-dollar cost aligned with, or responsive to, agencies’ changing missions and are therefore
implications and can seriously no longer needed. Further, many assets are in an alarming state of
jeopardize agencies’ missions. deterioration; agencies have estimated restoration and repair needs to be in
Federal agencies face many the tens of billions of dollars. Compounding these problems are the lack of
challenges securing real property reliable governmentwide data for strategic asset management, a heavy
due to the threat of terrorism. This reliance on costly leasing instead of ownership to meet new needs, and the
testimony discusses long-standing, cost and challenge of protecting these assets against potential terrorism.
complex problems in the federal
real property area and what actions Resolving these problems will require high-level attention and effective
are needed to address them. leadership by both Congress and the administration. Also, because of the
breadth and complexity of the issues, the long-standing nature of the
problems, and the intense debate that will likely ensue, current structures
This testimony discusses and processes may not be adequate to address the problems. Thus, as we
recommendations that we have have reported, there is a need for a comprehensive, integrated
previously made in GAO reports. transformation strategy for real property that will focus on some of the
Generally, there is a need for a underlying causes that contribute to these problems, such as competing
comprehensive and integrated real stakeholder interests in real property decisions; various legal and budget-
property transformation strategy related disincentives to businesslike outcomes; inadequate capital planning
that could identify how best to and the lack of governmentwide focus on real property issues. It is equally
realign federal real property and
important that Congress and the administration work together to develop
dispose of unneeded assets;
address significant real property and enact needed reform legislation to give real property-holding agencies
repair and restoration needs; the tools they need to achieve better outcomes. This would also foster a
develop reliable, useful real more businesslike real property environment and provide for greater
property data; resolve the problem accountability for real property stewardship.
of heavy reliance on costly leasing;
and minimize the impact of
terrorism on real property.

An independent commission or
governmentwide task force may be
needed to develop this strategy and
legislative actions are needed to
provide agencies with tools—such
as retaining a portion of disposal
proceeds—to help them address
the problems.

www.gao.gov/cgi-bin/getrpt?GAO-03-839T. The Vacant L. Mendel Rivers Federal The U.S. Patent and Trademark
Building, Charleston, S.C. Office (PTO) Construction Project in
To view the full product, including the scope
and methodology, click on the link above.
Source: Ernst and Young. Alexandria, VA (February 2003)
For more information, contact Bernard Ungar Source: PTO.
at (202) 512-4232 or [email protected].
Mr. Chairman and Members of the Committee:

We welcome the opportunity to testify on the executive and legislative

branch actions that are needed to address the long-standing and complex
problems that led to our designation of federal real property as a high-risk
area. As you know, at the start of each new Congress since 1999, we have
issued a special series of reports, entitled the Performance and
Accountability Series: Major Management Challenges and Program
Risks. In January 2003, we designated federal real property a high-risk
area as part of this series.1 My testimony is based on our January 2003
high-risk report; work we have done to update information on some of the
example properties from our January 2003 high-risk report; and other GAO
reports on real property issues, including public-private partnerships.2 My
testimony focuses on the problems with federal real property and what
needs to be done to address them.

Summary

Over 30 agencies control hundreds of thousands of real property assets

worldwide, including facilities and land. These assets are worth hundreds
of billions of dollars. Unfortunately, much of this vast, valuable portfolio
reflects an infrastructure based on the business model and technological
environment of the 1950s. Many of the assets are no longer effectively
aligned with, or responsive to, agencies’ changing missions and are
therefore no longer needed. Further, many assets are in an alarming state
of deterioration; agencies estimate that restoration and repair needs are in
the tens of billions of dollars. Compounding these problems are the lack of
reliable governmentwide data for strategic asset management, a heavy
reliance on costly leasing instead of ownership to meet new space needs,

1
U.S. General Accounting Office, High-Risk Series: Federal Real Property, GAO-03-122
(Washington, D.C.; Jan. 2003); the report on real property is a companion to GAO’s 2003
high-risk update, U.S. General Accounting Office, High-Risk Series: An Update,
GAO-03-119 (Washington, D.C.: Jan. 2003); these reports are intended to help the new
Congress focus its attention on the most important issues and challenges facing the federal
government.
2
Under a public-private partnership, a contractual arrangement is formed between public
and private sector partners that can include a variety of activities that involve the private
sector in the development, financing, ownership, and operation of a public facility or
service. In the case of real property, the federal government typically would contribute the
property and a private sector entity contributes financial capital and borrowing ability to
redevelop or renovate the property.

Page 1 GAO-03-839T
and the cost and challenge of protecting these assets against potential
terrorism.

Resolving these long-standing problems will require high-level attention

and effective leadership by both Congress and the administration. Also,
because of the breadth and complexity of the issues, the long-standing
nature of the problems, and the intense debate that will likely ensue,
current structures and processes may not be adequate to address the
problems. Thus, there is a need for a comprehensive, integrated
transformation strategy for real property. This strategy should also reflect
lessons learned and leading practices of public and private organizations.
Realigning the government’s real property, considering the future federal
role and workplace needs, will be critical to improving the government’s
performance and ensuring accountability within expected resource limits.

The federal real property environment has many stakeholders and involves
The Federal Real a vast and diverse portfolio of assets that are used for a wide variety of
Property Environment missions. Real property is generally defined as facilities; land; and
anything constructed on, growing on, or attached to land. The U.S.
government’s fiscal year 2002 financial statements show an acquisition
cost of more than $335 billion for real property assets held by the federal
government on September 30, 2002.3 In terms of facilities, the latest
available governmentwide data from the General Services Administration
(GSA) indicated that, as of September 30, 2002, the federal government
owned and leased approximately 3.4 billion square feet of building floor
area worldwide.4 The Department of Defense (DOD), U.S. Postal Service
(USPS), GSA, and the Department of Veterans Affairs (VA) hold the
majority of the owned facility space.

Federal real property managers operate in a complex and dynamic

environment. Numerous laws and regulations govern the acquisition,
management, and disposal of federal real property. The Federal Property

3
This value does not include stewardship assets, which are not reported on the
government’s balance sheet. These assets include wilderness areas, scenic river systems,
monuments, defense facilities (including military bases), and national defense assets. Also,
real property data contained in the financial statements of the U.S. government have been
problematic. As discussed in more detail later, we were unable to express an opinion on
the U.S. government’s consolidated financial statements for fiscal year 2002.
4
U.S. General Services Administration, Federal Real Property Profile, as of September 30,
2002 (Washington, D.C.).

Page 2 GAO-03-839T
and Administrative Services Act of 1949, as amended (Property Act), and
the Public Buildings Act of 1959, as amended, are the laws that generally
apply to real property held by federal agencies; and GSA is responsible for
the acts’ implementation.5 Agencies are subject to these acts, unless they
are specifically exempted from them, and some agencies may also have
their own statutory authority related to real property. Agencies must also
comply with numerous other laws related to real property.

Despite significant changes in the size and mission needs of the federal
The Federal government in recent years, the federal portfolio of real property assets in
Government Has many ways still largely reflects the business model and technological
environment of the 1950s. In the last decade alone, the federal government
Many Assets It Does has reduced its workforce by several hundred thousand personnel, and
Not Need several federal agencies have had major mission changes. With these
personnel reductions and mission changes, the need for existing space,
including general-purpose office space, has declined overall and
necessitated the need for different kinds of space. At the same time,
technological advances have changed workplace needs, and many of the
older buildings are not configured to accommodate new technologies.
Furthermore, the advent of electronic government is starting to change
how the public interacts with the federal government. These changes will
have significant implications for the type and location of property needed
in the 21st century.

One reason the government has many unneeded assets is that some of the
major real property-holding agencies have undergone significant mission
shifts that have affected their real property needs. For example, after the
Cold War, DOD’s force structure was reduced by 36 percent. Despite four
rounds of base closures, DOD projects that it still has considerably more
property than it needs. The National Defense Authorization Act for Fiscal
Year 2002,6 which became law in December 2001, gave DOD the authority
for another round of base realignments and military installation closures
in 2005. In the mid-1990s, VA began shifting its role from being a
traditional hospital-based provider of medical services to an integrated
delivery system that emphasizes a full continuum of care with a significant

5
For the Property Act, see 40 U.S.C. § 101 et. seq.; the Property Act excludes certain types
of property, such as public domain assets and land reserved or dedicated for national forest
or national park purposes; for the Public Buildings Act, see 40 U.S.C. § 3301 et. seq.
6
P.L. 107-107, 115 Stat. 1012, 1342 (2001).

Page 3 GAO-03-839T
shift from inpatient to outpatient services. Subsequently, VA has struggled
to reduce its large inventory of buildings, many of which are underutilized
or vacant. Although the Department of Energy (DOE) is no longer
producing new nuclear weapons, it still maintains a facilities
infrastructure largely designed for this purpose.

The magnitude of the problem with underutilized or excess federal

property puts the government at significant risk for wasting taxpayers’
money and missed opportunities. First, underutilized or excess property is
costly to maintain. DOD estimates that it is spending $3 billion to $4 billion
each year maintaining facilities that are not needed. In July 1999, we
reported that vacant VA space was costing as much as $35 million to
maintain each year.7 Costs associated with excess DOE facilities, primarily
for security and maintenance, exceed $70 million annually.8 It is likely that
other agencies that continue to hold excess or underutilized property are
also incurring significant costs for staff time spent managing the
properties and on maintenance, utilities, security, and other building
needs. Second, in addition to day-to-day operational costs, holding these
properties has opportunity costs for the government, because these
buildings and land could be put to more cost-beneficial uses, exchanged
for other needed property, or sold to generate revenue for the government.
Finally, continuing to hold property that is unneeded does not present a
positive image of the federal government in local communities. Instead, it
presents an image of waste and inefficiency that erodes taxpayers’
confidence. It also can have a negative impact on local economies if the
property is occupying a valuable location and is not used for other
purposes, sold, or used in a public-private partnership.

Appendix I discusses some examples of vacant, highly visible properties

that are in the federal inventory—the L. Mendel Rivers Federal Building in
Charleston, S.C., St. Elizabeths Hospital in Washington, D.C., and the
former main post office building in downtown Chicago, Ill. These
examples demonstrate the challenges agencies face in disposing of
unneeded property.

7
U.S. General Accounting Office, VA Health Care: Challenges Facing VA in Developing an
Asset Realignment Process, GAO/T-HEHS-99-173 (Washington, D.C.: July 22, 1999).
8
DOE Office of the Inspector General, Disposition of the Department’s Excess Facilities,
DOE/IG-0550 (Washington, D.C.: Apr. 3, 2002).

Page 4 GAO-03-839T
Restoration, repair, and maintenance backlogs in federal facilities are
The Federal Portfolio significant and reflect the federal government’s ineffective stewardship
Is in an Alarming over its valuable and historic portfolio of real property assets. The state of
deterioration is alarming because of the magnitude of the repair backlog—
State of Deterioration current estimates show that tens of billions of dollars will be needed to
restore these assets and make them fully functional. This problem has
accelerated in recent years because much of the federal portfolio was
constructed over 50 years ago, and these assets are reaching the end of
their useful lives. As with the problems related to underutilized or excess
property, the challenges of addressing facility deterioration are also
prevalent at major real property-holding agencies. For example:

• Over the last decade, DOD reports that it has been faced with the major
challenge of adequately maintaining its facilities to meet its mission
requirements. Although DOD no longer reports data on backlog of repairs
and maintenance, it reported in 2001 that the cost of bringing its facilities
to a minimally acceptable condition was estimated at $62 billion; the cost
of correcting all deficiencies was estimated at $164 billion.9

• The Department of the Interior (Interior) has a significant deferred

maintenance backlog that the Interior Inspector General (IG) estimated in
April 2002 to be as much as $8 billion to $11 billion. This backlog has
affected numerous national treasures, such as Ellis Island, Independence
Hall, Yellowstone National Park, and Mount Rushmore, just to name a few.

• GSA has struggled over the years to meet the repair and alteration
requirements identified at its buildings. In March 2000, we reported that
GSA data showed that over half of GSA’s approximately 1,700 buildings
needed repairs estimated at about $4 billion.10 More recently, in August
2002, we reported that this estimated backlog of identified repair and
alteration needs was up to $5.7 billion.11

9
U.S. Department of Defense, Report to Congress: Identification of the Requirements to
Reduce the Backlog of Maintenance and Repair of Defense Facilities (Washington, D.C.:
Apr. 2001).
10
U.S. General Accounting Office, Federal Buildings: Billions Are Needed for Repairs and
Alterations, GAO/GGD-00-98 (Washington, D.C.: Mar. 30, 2000).
11
U.S. General Accounting Office, Financial Condition of Federal Buildings Owned by the
General Services Administration, GAO-02-854R (Washington, D.C.: Aug. 8, 2002).

Page 5 GAO-03-839T
Other agencies with repair backlogs that we highlighted in our high-risk
report include the Department of State (State), DOE, the Smithsonian
Institution, and USPS. Since issuing our high-risk report, we have updated
our assessment of facility conditions at DOD and State.

• In February 2003, we reported that although the amount of money the

active forces have spent on facility maintenance had increased recently,
DOD and service officials said that these amounts had not been sufficient
to halt the deterioration of facilities.12 Too little funding to adequately
maintain facilities is also aggravated by DOD’s acknowledged retention of
facilities in excess of its needs. Furthermore, there is a lack of consistency
in the services’ information on facility conditions, making it difficult for
Congress, DOD, and the services to direct funds to facilities where they
are most needed and to accurately gauge facility conditions. And, although
DOD has a strategic plan for facilities, it lacks comprehensive information
on the specific actions, time frames, responsibilities, and funding needed
to reach its goals. In May 2003, we also reported on a similar problem with
Guard and Reserve facilities.13

• In March 2003, we reported that many of the primary office buildings at

overseas embassies and consulates were in poor condition.14 In 2002, State
estimated that its repair backlog was $736 million. In addition, the primary
office building at more than half of the posts does not meet certain fire/life
safety standards. State officials stated that maintenance costs would
increase over time because of the age of many of the buildings, and
overcrowding has become a problem at several posts.

Our work over the years has shown that the deterioration problem leads to
increased operational costs, has health and safety implications that are
worrisome, and can compromise agency missions. In addition, we have
reported that the ultimate cost of completing delayed repairs and
alterations may escalate because of inflation and increases in the severity

12
U.S. General Accounting Office, Defense Infrastructure: Changes in Funding Priorities
and Strategic Planning Needed to Improve the Condition of Military Facilities,
GAO-03-274 (Washington, D.C.: Feb. 19, 2003).
13
U.S. General Accounting Office, Defense Infrastructure: Changes in Funding Priorities
and Management Processes Needed to Improve Condition and Reduce Costs of Guard
and Reserve Facilities, GAO-03-516 (Washington, D.C.: May15, 2003).
14
U.S. General Accounting Office, Overseas Presence: Conditions of Overseas Diplomatic
Facilities, GAO-03-557T (Washington, D.C.: Mar. 20, 2003).

Page 6 GAO-03-839T
of the problems caused by the delays.15 As discussed above, the overall
cost could also be affected by government realignment. That is, to the
extent that unneeded property is also in need of repair, disposing of such
property could reduce the repair backlog. Another negative effect, which
is not readily apparent but nonetheless significant, is the effect that
deteriorating facilities have on employee recruitment, retention, and
productivity. This human capital element is troublesome because the
government is often at a disadvantage in its ability to compete in the job
market in terms of the salaries agencies are able to offer. Poor physical
work environments exacerbate this problem and can have a negative
impact on potential employees’ decisions to take federal positions.
Furthermore, research has shown that quality work environments make
employees more productive and improve morale. Finally, as with excess
or underutilized property, deteriorated property presents a negative image
of the federal government to the public. This is particularly true when
many of the assets the public uses and visits the most—such as national
parks and museums—are deteriorated and in generally poor condition.

Compounding the problems with excess and deteriorated property is the

Key Decisionmakers lack of reliable and useful real property data that are needed for strategic
Lack Reliable and decisionmaking. GSA’s worldwide inventory database and related reports
are the only central source of descriptive data on the makeup of the real
Useful Data on Real property inventory, such as property address, square footage, acquisition
Property Assets date, and property type. However, in April 2002, we reported that the
worldwide inventory contained data that were unreliable and of limited
usefulness.16 GSA agreed with our findings and has recently revamped this
database and produced a new report on the federal inventory, as of
September 30, 2002.17

In addition to problems with the worldwide inventory, real property data

contained in the financial statements of the U.S. government have been

15
U.S. General Accounting Office, Federal Buildings: Funding Repairs and Alterations
Has Been a Challenge—Expanded Financing Tools Needed, GAO-01-452 (Washington,
D.C.: Apr. 12, 2001).
16
U.S. General Accounting Office, Federal Real Property: Better Governmentwide Data
Needed for Strategic Decisionmaking, GAO-02-342 (Washington, D.C.: Apr. 16, 2002).
17
U.S. General Services Administration, Federal Real Property Profile as of September 30,
2002 (Washington, D.C.).

Page 7 GAO-03-839T
problematic.18 In April 2003, we reported that—for the sixth consecutive
year—we were unable to express an opinion on the U.S. government’s
consolidated financial statements for fiscal year 2002.19 We have reported
that because the government lacked complete and reliable information to
support asset holdings—including real property—it could not
satisfactorily determine that all assets were included in the financial
statements, verify that certain reported assets actually existed, or
substantiate the amounts at which they were valued. Aside from the
problematic financial data, some of the major real property-holding
agencies—including DOD, State, GSA, and Interior—have faced challenges
in developing quality management data on their real property assets. The
problems at these agencies are discussed in more detail in our high-risk
report.

As a general rule, building ownership options through construction or

Reliance on Costly purchase are the least expensive ways to meet agencies’ long-term
Leasing requirements for space. Lease-purchases—where payments are spread out
over time and ownership of the asset is eventually transferred to the
government— are generally more expensive than purchase or
construction but are generally less costly than using ordinary operating
leases to meet long-term space needs.20 However, over the last decade, we
have reported that GSA—as the central leasing agent for most agencies—
relies heavily on operating leases to meet new long-term needs because it
lacks funds to pursue ownership. In 1999, we reported that for nine major
operating lease acquisitions that GSA had proposed, construction would
have been the least-cost option in eight cases and would have saved an
estimated $126 million. Lease-purchase would have saved an estimated
$107 million, compared with operating leases but would have cost $19

18
The Chief Financial Officers Act of 1990 (CFO Act), as expanded by the Government
Management Reform Act, required the annual preparation and audit of individual financial
statements for the federal government’s 24 major agencies. The Department of the
Treasury was also required to compile consolidated financial statements for the U.S.
government annually, which we audit.
19
U.S. General Accounting Office, Fiscal Year 2002 U.S. Government Financial
Statements: Sustained Leadership and Oversight Needed for Effective Implementation of
Financial Management Reform, GAO-03-572T (Washington, D.C.: Apr. 8, 2003).
20
In an operating lease, the government makes periodic lease payments over the specified
length of the lease in exchange for the use of the property.

Page 8 GAO-03-839T
million more than construction.21 A prime example of this problem was the
Patent and Trademark Office’s long-term requirements in northern
Virginia, where the cost of meeting this need with an operating lease was
estimated to be $48 million more than construction and $38 million more
than lease-purchase. In August 2001, we also reported that GSA reduced
the term of a proposed 20-year lease for the Department of Transportation
headquarters building to 15 years so that it could meet the definition of an
operating lease. GSA’s fiscal year 1999 prospectus for constructing a new
facility for this need showed the cost of construction was estimated to be
$190 million less than an operating lease.

Operating leases have become an attractive option in part because they

generally look cheaper in any given year. Pursuant to the scoring rules
adopted as a result of the Budget Enforcement Act of 1990, the budget
authority to meet the government’s real property needs is to be scored—
meaning recorded in the budget—in an amount equal to the government’s
total legal commitment. For example, for lease-purchase arrangements,
the net present value of the government’s legal obligations over the life of
the lease contract is to be scored in the budget in the first year. For
construction or purchase, the budget authority for the full construction
costs or purchase price is to be scored in the first year. However, for many
of the government’s operating leases—including GSA leases, which,
according to GSA, account for over 70 percent of the government’s leasing
expenditures and are self-insured in the event of cancellation—only the
budget authority to cover the government’s commitment for an annual
lease payment is required to be scored in the budget.22 Given this, although
operating leases are generally more costly over time, compared with other
options, they add much less to a single year’s appropriation total than
these other arrangements, making an operating lease a more attractive
option from an annual budget perspective, particularly when funds for
ownership are not available. Although the requirement for “up-front
funding” permits disclosure of the full costs to which the government is
being committed, the budget scorekeeping rules allow costly operating

21
U.S. General Accounting Office, General Services Administration: Comparison of Space
Acquisition Alternatives—Leasing to Lease-Purchase and Leasing to Construction,
GAO/GGD-99-49R (Washington, D.C.: Mar. 12, 1999).
22
According to the scoring rules (OMB Circular A-11, app. B), in cases where the operating
lease does not have a cancellation clause or is not paid for with federal funds that are self-
insuring, budget authority to cover the total costs expected over the life of the lease is to be
scored in the first year of the lease.

Page 9 GAO-03-839T
leases to “look cheaper” in the short term and have encouraged an
overreliance on them for satisfying long-term space needs.

Decisionmakers have struggled with this matter since the scoring rules
were established and the tendency for agencies to choose operating leases
instead of ownership became apparent. We have suggested the alternative
of scoring all operating leases up-front on the basis of the underlying time
requirement for the space so that all options are treated equally.23 Although
this could be a viable alternative, there would be implementation
challenges if this were pursued, including the need to evaluate the validity
of agencies’ stated space requirements. Another option—which was
recommended by the President’s Commission to Study Capital Budgeting
in 1999 and discussed by GAO24—would be to allow agencies to establish
capital acquisition funds to pursue ownership where it is advantageous,
from an economic perspective. To date, none of these options has been
implemented, and debate continues among decisionmakers about what
should be done. Finding a solution for this problem has been difficult;
however, change is needed because the current practice of relying on
costly leasing to meet long-term space needs results in excessive costs to
taxpayers and does not reflect a sensible approach to capital asset
management.

Terrorism is a major threat to federally owned and leased real property

Security Against assets, the civil servants and military personnel who work in them, and the
Terrorism Is an public who visits them. This was evidenced by the 1995 Oklahoma City
bombing; the 1998 embassy bombings in Africa; the September 11, 2001,
Overarching Concern attacks on the World Trade Center and Pentagon; and the anthrax attacks
in the fall of 2001. Since the Oklahoma City bombing, the federal
government has spent billions of dollars on security upgrades within the
country and overseas. A study of federal facilities done by the Justice
Department in 1995 resulted in minimum-security standards and an
evaluation of security conditions in the government’s facilities. In October
1995, the President signed Executive Order 12977, which established an
Interagency Security Committee (ISC) to enhance the quality and

23
U.S. General Accounting Office, Supporting Congressional Oversight: Budgetary
Implications of Selected GAO Work for Fiscal Year 2003, GAO-02-576 (Washington, D.C.:
Apr. 26, 2002).
24
U.S. General Accounting Office, Accrual Budgeting: Experiences of Other Nations and
Implications for the United States, GAO/AIMD-00-57 (Washington, D.C.: Feb. 18, 2000).

Page 10 GAO-03-839T
effectiveness of security in nonmilitary federal facilities. Since the attacks
on the World Trade Center and the Pentagon, the focus on security in
federal buildings has been heightened considerably. Real property-holding
agencies have gone on high alert and are employing such measures as
searching vehicles that enter federal facilities, restricting parking, and
installing concrete barricades. As the government’s security efforts
intensify, the government will be faced with important questions regarding
the level of security needed to adequately protect federal facilities and
how the security community should proceed. Furthermore, the 1995
Justice study placed an emphasis on increasing security where large
numbers of personnel are located. However, a risk-based approach—
which GSA is using for the federal buildings it controls—appears to be
more desirable in light of this new round of threats. In September 2001, we
reported that DOD uses a risk-based approach to reduce installation
vulnerabilities, but this approach was applied primarily to installations
with 300 or more personnel assigned on a daily basis.25 We recommended
that DOD improve this approach by ensuring all critical military facilities
receive a periodic vulnerability assessment conducted by their higher
headquarters regardless of the number of personnel assigned. DOD
concurred and began taking action.

Since 1996, we have produced more than 60 reports and testimonies on the
federal government’s efforts to combat terrorism. Several of these reports
have recommended that the federal government use risk management as
an important element in developing a national strategy.26 We have also
reported extensively on the security problems and challenges at individual
real property-holding agencies. Our high-risk report identifies the
problems and challenges faced by State, DOD, Interior, GSA, USPS, and
the ISC. More recently, we testified on security conditions of overseas
diplomatic facilities.27 We found that State has done much over the last 4
years to improve physical security at overseas posts by, for example,
constructing perimeter walls, anti-ram barriers, and access controls at
many facilities. However, even with these improvements, most office
facilities do not meet security standards. As a result, thousands of U.S.

25
U.S. General Accounting Office, Combating Terrorism: Actions Needed to Improve DOD
Antiterrorism Program Implementation and Management, GAO-01-909 (Washington,
D.C.: Sept. 19, 2001).
26
U.S. General Accounting Office, Homeland Security: A Risk Management Approach Can
Guide Preparedness Effort, GAO-02-208T (Washington, D.C.: Oct. 31, 2001).
27
GAO-03-557T.

Page 11 GAO-03-839T
government employees may be vulnerable to terrorist attacks.
Furthermore, our work has shown that agency coordination is critical to
addressing security challenges. In our February 2003 report on threats to
selected agencies’ critical computer and physical infrastructures, selected
agencies identified challenges, including coordinating security efforts with
GSA, which may often be responsible for protecting facilities that house
critical assets.28 We recommended that steps be taken to complete the
identification and analysis of their critical assets and their dependencies,
including setting milestones, developing plans to address vulnerabilities,
and monitoring progress.

In addition to the clear challenges agencies will continue to face in

securing real property assets, the security issue has an impact on the other
problems that we have discussed. To the extent that more funding will be
needed to increase security, funding availability for repair and restoration,
preparing excess property for disposal, and improving real property data
systems may be further constrained. Furthermore, real property managers
will have to dedicate significant staff time and other human capital
resources to security issues and thus may have less time to manage other
problems. Another broader effect is the impact that increased security will
have on the public’s access to government offices and other assets. Debate
arose in the months after September 11, 2001, and continues to this day on
the challenge of providing the proper balance between public access and
security. In November 2002, legislation was enacted establishing the
Department of Homeland Security (DHS).29 DHS was given responsibility
to protect buildings, grounds, and property owned, occupied, or secured
by the federal government that were previously under the Federal
Protective Service, which was part of GSA. In addition, the Act provided
DHS with authority to protect the buildings, grounds, and property of any
other agency whose functions were transferred under the Act. In
September 2002, we reported on the implications that the creation of DHS
would have on ISC. We concluded that the need to address the ISC’s lack

28
U.S. General Accounting Office, Critical Infrastructure Protection: Challenges for
Selected Agencies and Industry Sectors, GAO-03-233 (Washington, D.C.: Feb. 28, 2003); the
agencies reviewed were the Departments of Health and Human Services, Energy, and
Commerce, and the Environmental Protection Agency.
29
P.L. 107-296; 116 Stat. 2135 (2002).

Page 12 GAO-03-839T
of progress in fulfilling its responsibilities should be taken into account in
establishing this new department.30

Although the federal government faces significant, long-standing problems

Various Efforts in the real property area, it is important to give Congress, Office of
Initiated, but Real Management and Budget (OMB), GSA, and the major real property-holding
agencies credit for proposing several reform efforts and other initiatives in
Property Problems recent years. Legislative proposals in the 107th Congress (S. 161231 and
Persist Due to Factors H.R. 394732) were aimed at improving real property data, establishing
senior real property managers at agencies, developing asset management
that Require High- principles, and identifying specific conditions under which GSA and other
Level Attention agencies can enter into real property partnerships with the private sector.
In July 2001, we reported that public-private partnership authority could
be an important management tool to address problems in deteriorating
federal buildings, but that further study of this tool was needed.33
Appendix II summarizes this report and discusses two examples of public-
private partnership opportunities. Another initiative in the National
Defense Authorization Act for fiscal year 2002 gave DOD the authority for
another round of base realignment and military installation closures in
2005. DOD officials testified that these actions could result in recurring
annual net savings of about $3 billion. Despite these and other initiatives
agencies have undertaken and the sincerity with which the federal real
property community has embraced the need for reform, the problems have
persisted and have been exacerbated by several factors that will require
high-level attention from Congress and the administration. These factors
include competing stakeholder interests in real property decisions; various
legal and budget-related disincentives to businesslike outcomes; the need
for improved capital planning; and the lack of a strategic, governmentwide
focus on federal real property issues. More specifically:

30
U.S. General Accounting Office, Building Security: Interagency Security Committee Has
Had Limited Success in Fulfilling Its Responsibilities, GAO-02-1004 (Washington, D.C.:
Sept. 17, 2002).
31
Title III of the Managerial Flexibility Act of 2001 (2001) is entitled Federal Property Asset
Management Reforms.
32
The Federal Property Asset Management Reform Act of 2002 (2002).
33
U.S. General Accounting Office, Public-Private Partnerships: Pilot Program Needed to
Demonstrate the Actual Benefits of Using Partnerships, GAO-01-906 (Washington, D.C.:
July 25, 2001).

Page 13 GAO-03-839T
• Competing Stakeholder Interests - In addition to Congress, OMB, and the
real property-holding agencies themselves, several other stakeholders also
have an interest in how the federal government carries out its real
property acquisition, management, and disposal practices. These include
foreign and local governments; business interests in the communities
where the assets are located; private sector construction and leasing firms;
historic preservation organizations; various advocacy groups; and the
public in general, which often views the facilities as the physical face of
the federal government in local communities. As a result of competing
stakeholder interests, decisions about real property often do not reflect
the most cost-effective or efficient alternative that is in the interests of the
agency or the government as a whole but instead reflect other priorities.

• Legal and Budgetary Disincentives - The complex legal and budgetary

environment in which real property managers operate has a significant
impact on real property decisionmaking and often does not lead to
businesslike outcomes. For example, we have reported that public-private
partnerships might be a viable option for redeveloping obsolete federal
property when they provide the best economic value for the government,
compared with other options, such as federal financing through
appropriations or sale of the property. However, most agencies—except
for DOD, VA, and USPS—are precluded from entering into such
arrangements.34 Resource limitations, in general, often prevent agencies
from addressing real property needs from a strategic portfolio perspective.
When available funds for capital investment are limited, Congress must
weigh the need for new, modern facilities with the need for renovation,
maintenance, and disposal of existing facilities, the latter of which often
gets deferred. In the disposal area, a range of laws intended to address
other objectives—such as laws related to historic preservation and
environmental remediation—make it challenging for agencies to dispose
of unneeded property.

• Need for Improved Capital Planning - Over the years, we have reported
that prudent capital planning can help agencies to make the most of
limited resources, and failure to make timely and effective capital

34
When agencies have additional flexibilities, we have found that they can still face
impediments. For example, VA is required to use the proceeds from disposal of property
for nursing home construction and DOD has lacked personnel with sufficient experience to
undertake complex real estate transactions. See U.S. General Accounting Office, VA Health
Care: Improved Planning Needed for Management of Excess Real Property, GAO-03-326
(Washington, D.C.: Jan. 29, 2003); U.S. General Accounting Office, Defense Infrastructure:
Greater Management Emphasis Needed to Increase the Services’ Use of Expanded
Leasing Authority, GAO-02-475 (Washington, D.C.: June 6, 2002).

Page 14 GAO-03-839T
acquisitions can result in increased long-term costs. GAO, Congress, and
OMB have identified the need to improve federal decisionmaking
regarding capital investment. Our Executive Guide,35 OMB’s Capital
Programming Guide and its revisions to Circular A-11 have attempted to
provide guidance to agencies for making capital investment decisions.
However, the guidance is not required to be used by agencies.
Furthermore, agencies have not always developed overall goals and
strategies for implementing capital investment decisions, nor has the
federal government generally planned or budgeted for capital assets over
the long term.

• Lack of a Strategic, Governmentwide Focus on Real Property Issues -

Historically, there has not been a strategic, governmentwide focus on real
property issues among decisionmakers. Although some efforts in recent
years have attempted to address real property issues with some limited
success, the problems have persisted and will continue to grow in
magnitude unless they are adequately addressed from a governmentwide
standpoint. Resolving the long-standing problems will require high-level
attention and effective leadership by Congress and the administration and
a governmentwide, strategic focus on real property issues. Also, it is
important that key stakeholders develop an effective system to measure
results. Having quality data would be critical to evaluate the progress of
various reforms as they evolve.

The magnitude of real property-related problems and the complexity of

A Transformation the underlying factors that cause them to persist put the federal
Strategy Is Needed government at significant risk in this area. Real property problems related
to unneeded property and the need for realignment; deteriorating
conditions, unreliable data, costly space, and security concerns have
multibillion-dollar cost implications, and can seriously jeopardize mission
accomplishment. Because of the breadth and complexity of the issues
involved, the long-standing nature of the problems, and the intense debate
about potential solutions that will likely ensue, current structures and
processes may not be adequate to address the problems. Given this, we
concluded in our high-risk report that a comprehensive and integrated
transformation strategy for federal real property is needed, and that an
independent commission or governmentwide task force may be needed to
develop this strategy. Such a strategy, based on input from agencies, the

35
U.S. General Accounting Office, Executive Guide: Leading Practices in Capital
Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: Dec. 1998).

Page 15 GAO-03-839T
private sector, and other interested groups, could comprehensively
address these long-standing problems with specific proposals on how best
to

• realign the federal infrastructure and dispose of unneeded property, taking

into account mission requirements, changes in technology, security needs,
costs, and how the government conducts business in the 21st century;

• address the significant repair and restoration needs of the federal

portfolio;

• ensure that reliable governmentwide and agency-specific real property

data—both financial and program related—are available for informed
decisionmaking;

• resolve the problem of heavy reliance on costly leasing; and

• consider the impact that the threat of terrorism will have on real property
needs and challenges, including how to balance public access with safety.

To be effective in addressing these problems, it would be important for the

strategy to focus on

• minimizing the negative effects associated with competing stakeholder

interests in real property decisionmaking;

• providing agencies with appropriate tools and incentives that will facilitate
businesslike decisions—for example, consideration should be given to
what financing options should be available; how disposal proceeds should
be handled; what process would permit comparisons between
rehabilitation/renovation and replacement and among construction,
purchase, lease-purchase, and operating lease; and how public-private
partnerships should be evaluated;

• addressing federal human capital issues related to real property by

recognizing that real property conditions affect the federal government’s
ability to attract and retain high-performing individuals and the
productivity and morale of employees;

• improving real property capital planning in the federal government by

helping agencies to better integrate agency mission considerations into the
capital decisionmaking process, make businesslike decisions when
evaluating and selecting capital assets, evaluate and select capital assets

Page 16 GAO-03-839T
by using an investment approach, evaluate results on an ongoing basis,
and develop long-term capital plans; and

• ensuring credible, long-term budget planning for facility sustainment,

modernization, or recapitalization.

The transformation strategy should also reflect the lessons learned and
leading practices of organizations in the public and private sectors that
have attempted to reform their real property practices. Over the past
decade, leading organizations in both the public and private sectors have
been recognizing the impact that real property decisions have on their
overall success. Better managing real property assets in the current
environment calls for a significant departure from the traditional way of
doing business. Solutions should not only correct the long-standing
problems we have identified but also be responsive to and supportive of
agencies’ changing missions, security concerns, and technological needs in
the 21st century. If actions resulting from the transformation strategy
comprehensively address the problems and are effectively implemented,
agencies will be better positioned to recover asset values, reduce
operating costs, improve facility conditions, enhance safety and security,
and achieve mission effectiveness.

In addition to developing a transformation strategy, it is critical that all the

key stakeholders in government—Congress, OMB, and real property-
holding agencies—continue to work diligently on the efforts planned and
already under way that are intended to promote better real property
capital decisionmaking, such as enacting reform legislation, assessing
infrastructure and human capital needs, and examining viable funding
options. Congress and the administration could work together to develop
and enact reform legislation to give real property-holding agencies the
tools they need to achieve better outcomes, foster a more businesslike real
property environment, and provide for greater accountability for real
property stewardship. These tools could include, where appropriate, the
ability to retain a portion of the proceeds from disposal and the use of
public-private partnerships in cases where they represent the best
economic value to the government. Congress and the administration could
also elevate the importance of real property in policy debates and
recognize the impact that real property decisions have on agencies’
missions. Solving the problems in this area will undeniably require a
reconsideration of funding priorities at a time when budget constraints
will be pervasive. However, experimenting with creative financing tools
where they provide the best economic value for the government and
allocating sufficient funding will likely result in long-term benefits.

Page 17 GAO-03-839T
Without effective tools; top management accountability, leadership, and
commitment; adequate funding; and an effective system to measure
results, long-standing real property problems will continue and likely
worsen. However, the overall risk to the government and taxpayers could
be substantially reduced if an effective transformation strategy is
developed and successfully implemented, reforms are made, and property-
holding agencies effectively implement current and planned initiatives.
Since our high-risk report was issued, OMB has informed us that it is
taking steps to address the federal government’s problems in the real
property area. Specifically, it has formed a team within OMB to determine
how to approach the resolution of these long-standing issues. To assist
OMB with its efforts, we have agreed to meet regularly to discuss progress
and are providing OMB with specific suggestions on the types of actions
and results that could be helpful in justifying the removal of real property
from the high-risk list.

Mr. Chairman, this concludes my prepared statement. I would be happy to

respond to any questions you or other members of the Committee may
have at this time.

For further information on this testimony, please contact Bernard L. Ungar

Contacts and on (202) 512-2834 or at [email protected]. Key contributions to this
Acknowledgments testimony were made by Kevin Bailey, Christine Bonham, John Brummett,
Maria Edelstein, Anne Kidd, Mark Little, Susan Michal-Smith,
David Sausville, and Gerald Stankosky.

Page 18 GAO-03-839T
Appendix I: Examples of Vacant Federal
Property

Three examples of vacant, highly visible federal properties are the L.

Mendel Rivers Federal Building in Charleston, S.C., St. Elizabeths Hospital
in Washington, D.C.; and the former main post office in downtown
Chicago.

L. Mendel Rivers Federal The Charleston building, held by the General Services Administration
Building, Charleston, S.C. (GSA), is a 7-story, 100,000-square-foot office building on just over 2 acres
(see fig. 1). The building is contaminated with asbestos and has been
unoccupied since it sustained damage in 1999, from Hurricane Floyd. In
July 2001, we reported that although there was a weak federal demand for
space where the property is located, the property is located in a highly
desirable location and that there was a strong potential for private sector
demand.1 Although the building is vacant, in fiscal year 2002, GSA still
incurred almost $28,000 in costs related to operations and maintenance,
such as utilities and fire protection. GSA receives a minimal amount of
revenue by occasionally renting out the parking lot. According to GSA,
although it may be advantageous for the government to retain the
property, there are limited options for redevelopment; and funding has not
been made available. Furthermore, GSA lacks authority to pursue a public-
private partnership to address the needs of the property.

Given this situation, GSA has been in discussion with the city of
Charleston officials for the last few years to exchange the Rivers building
for a new building. Under the proposal, the city would construct a 27,000
square foot building for the federal government in the historic downtown
business area adjacent to the existing federal building-courthouse in
exchange for the Rivers building. GSA would also get use of 60 parking
spaces in a city parking garage. Although the new building would be
smaller than the Rivers building, data from GSA have shown that the
exchange sites are of comparable value because of the new building’s
location in the central business district where land values are high.
According to a GSA official, as of April 2003, GSA and the city of
Charleston developed a memorandum of understanding (MOU) that
outlines the conditions under which the L. Mendel Rivers Building would
be exchanged. The MOU is currently with the city of Charleston and is
expected to be signed shortly. Figure 1 shows the vacant Charleston
building and its rear parking lot. The federal government owns the lot on
the left side where the tent is located.

1
GAO-01-906.

Page 19 GAO-03-839T
Figure 1: The Vacant L. Mendel Rivers Federal Building and Parking Lot in Charleston, S.C.

St. Elizabeths Hospital, The west campus of St. Elizabeths, which has 61 mostly vacant buildings
Washington, D.C. containing about 1.2 million square feet of space on 182 acres, is held by
the Department of Health and Human Services (HHS). During the Civil
War, the hospital was used to house soldiers recuperating from
amputations, and the property contains a civil war cemetery. In 1990, the
property—which contains magnificent vistas of the rivers and the city—
was designated a national historic landmark. This is the same designation
given to the White House, the U.S. Capitol building, and other buildings
that have historic significance. HHS has not needed the property for many
years. In April 2001, we reported that the property had significantly
deteriorated and had environmental and historic preservation issues that

Page 20 GAO-03-839T
would need to be addressed in order for the property to be disposed of or
transferred to another federal agency.2

In the last year, GSA, the District of Columbia (the District), HHS, and
various public interest groups have been working to resolve the situation
at St. Elizabeths. In May 2002, the Urban Land Institute formed an advisory
panel that reported on several options for redeveloping the site.3 The panel
recommended that the federal government transfer the west campus to the
District and that the District should identify a master developer for the
site. The panel further recommended that the master developer consider
redeveloping the site into four campus areas without changing the
character of the surrounding neighborhoods and without displacing
existing residents. The panel recommended preserving the historic
buildings through adaptive use and sensitive addition of new buildings. In
addition to the panel, an executive steering committee and a working
group, each consisting of representation from the District, HHS, GSA, and
public interest groups, have been established and HHS and GSA have
proceeded with a number of actions to prepare the property for disposal.
These include preparing the property for “mothballing,” which is work
done to minimize further deterioration of the property while the disposal
process proceeds; determining the extent of environmental remediation
needed; and conducting community outreach. Figure 2 shows the vacant,
boarded-up Center Building, which opened in 1855 and served as the main
hospital building.

2
U.S. General Accounting Office, St. Elizabeths Hospital: Real Property Issues Related to
the West Campus, GAO-01-434 (Washington, D.C.: Apr. 16, 2001).

3
Urban Land Institute, An Advisory Services Panel Report: Saint. Elizabeths Campus,
Washington, D.C. (Washington, D.C.: May 2002).

Page 21 GAO-03-839T
Figure 2: The Vacant Center Building, St. Elizabeths Hospital, District of Columbia

Note: Photograph taken in January 2001.

Former Chicago Main Post The former Chicago main post office is a 2.5 million square foot facility
Office that was vacated when it was replaced with a new facility in 1997. The U.S.
Postal Service (USPS) is incurring about $2 million in annual holding costs
for the property. According to USPS, the property was listed for sale and
publicly offered. About five offers were received and the property was
placed under contract of sale for $17 million. According to USPS,
completion of the sale has been delayed due to the weakness of the
Chicago real estate market and the lack of an agreement between the

Page 22 GAO-03-839T
developer and the city of Chicago that would abate real estate taxes on a
portion of the redevelopment cost for a number of years. According to
USPS, this situation has created a “chicken and egg” situation for the
developer. Potential tenants are unwilling to commit to the project unless
they are sure it will go ahead. The city appears unwilling to grant the tax
abatement until the users of the building are known. USPS is hopeful that
the city will begin to address the issue.

In addition to the holding costs USPS is incurring, a deteriorating façade

will add additional repairs costs to USPS’s annual budget. Furthermore,
deterioration of the system that funnels train exhaust up through eight
shafts to the roof of the building is a problem that will have to be
addressed. The estimated cost of repair is about $10 million and is a
condition of the sale. According to USPS, another factor, which bears on
the cost of redevelopment, is that the State Historic Preservation Office
wants to impose requirements on the redevelopment of the building.
Currently, according to USPS, these requirements will add millions of
dollars to the redevelopment costs and the buyer and USPS are reviewing
them. USPS said that this project is challenging because of the large
amount of space that needs to be developed. According to USPS, a
breakthrough in current market conditions will have to be achieved,
together with an agreement with the city before this project can move
forward. Figure 3 shows downtown Chicago with the vacant post office
building highlighted.

Page 23 GAO-03-839T
Figure 3: The Former Main Post Office in Downtown Chicago

Page 24 GAO-03-839T
Appendix II: Use of Public-Private
Partnerships to Redevelop Federal Property

Under a public-private partnership, a contractual arrangement is formed

between public and private sector partners that can include a variety of
activities that involve the private sector in the development, financing,
ownership, and operation of a public facility or service. In the case of real
property, the federal government typically would contribute the property
and a private sector entity contributes financial capital and borrowing
ability to redevelop or renovate the property. Public-private partnerships
can be a viable option for redeveloping obsolete federal property if they
provide the best economic value for the government, compared with other
options, such as federal financing through appropriations or sale of the
property. However, most agencies are precluded from entering into such
arrangements. DOD, VA, and USPS, however, have this authority.
Proposed real property reform legislation in the last Congress—S. 1612
and H.R. 3947—would have allowed most agencies to enter into such
partnerships. In May 2002, the Congressional Budget Office concluded that
the partnerships, like lease-purchase arrangements, should be recorded up
front in the budget. S.1612 and H.R. 3947 were not enacted by the 107th
Congress.

Public-private partnerships need to be carefully evaluated to determine

whether they offer the best economic value for the government, compared
with other available options. In July 2001,1 we reported that 8 of 10 GSA
properties were strong to moderate candidates for a partnership because
there were potential benefits for both the private sector and the
government. The potential internal rates of return (IRR)2 for the private
partner ranged from 13.7 to 17.7 percent. It should be noted that we did
not calculate the IRR for the government if the government had financed
the entire project. Furthermore, public-private partnerships will not
necessarily work or be the best option available to address the problems
in all federal properties. Two examples of properties that were strong
candidates for a partnership were the Internal Revenue Service (IRS)
Service Center in Andover, MA and an office building in Portland, Ore. that
houses the Immigration and Naturalization Service known as the 511
Building. Since we profiled these properties in 2001, GSA officials said that
they have been unable to pursue public-private partnerships for these

1
GAO-01-906.
2
IRR is the present value interest rate received for an investment consisting of payments
and income that occur at regular periods; IRR measures the return, expressed as an
interest rate, that an investor would earn on an investment.

Page 25 GAO-03-839T
properties because GSA continues to lack authority to enter into such
arrangements.

IRS Service Center, The Andover Service Center was a strong candidate for a partnership in
Andover, Mass. terms of strong federal demand, moderate private sector interest in
development, and strong nonfederal demand for use of the property. The
property is a 375,000 square foot, single story, highly secured building that
is in need of capital repairs on 37 acres. At the time of our review, the IRS
was leasing about 336,000 square feet in additional space in the area. GSA
and IRS would like to consolidate IRS’s operations, and the property
would be desirable for the city of Andover and local developers to
develop. The redevelopment strategy involved a partnership to develop a
small office park consisting of six, 5-acre pads. Under this plan, the project
could progress as follows:

• Year 1: Build a new 4-story, 700,000 square foot IRS facility and parking
structure for current and expiring IRS leases; the complex would be at
rear of site to allow for security and a phased development of the rest of
the site.

• Year 2: IRS moves into the new facility and the old building is demolished;
the partnership constructs another 250,000 square foot federal office
building for non-IRS expiring leases.

• Years 3 and 4: Partnership constructs two more 250,000 square foot federal
office buildings for compatible agency and private sector occupancy.
The analysis of this strategy projected a 14.4 percent lifetime IRR for the
private partner and a 9.4 percent lifetime IRR for the government. Figure 4
is an aerial view of the IRS Service Center in Andover, Mass.

Page 26 GAO-03-839T
Figure 4: IRS Service Center, Andover, Mass.

Portland, Ore., 511 The 511 building was also a strong candidate for a partnership in terms of
Building strong federal demand, strong private sector interest in development, and
moderate nonfederal demand for use of the property. The 511 building is
an historic, 6-floor building in a desirable location between downtown
Portland and the trendy “Pearl District” that housed offices of the
Immigration and Naturalization Service. The property includes a parking
lot that was sought by the city for a pedestrian mall. The redevelopment
strategy included renovating the existing historic office building, to
include storage use in the basement and retail or restaurant on the first
floor. In addition, the strategy included acquiring an additional site for
construction of a 240,000 square foot, federal office building across the
street. This strategy projected a 15.7 percent lifetime IRR for the private
partner and a 12.7 percent lifetime IRR for the government. Figure 5 shows
the 511 building (building in center of the picture).

Page 27 GAO-03-839T
Figure 5: 511 Building, Portland, Ore.

If the federal government were to completely finance the Andover and

Portland projects, it would not have to share returns with a private sector
partner. However, we did not determine what the returns would be in such
a situation and how the returns would compare to the returns under a
partnership arrangement.

(543064)
Page 28 GAO-03-839T
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Government Performance Results Act of 1993

Contents:

• SECTION 1. SHORT TITLE.

• SECTION 2. FINDINGS AND PURPOSES.

• SECTION 3. STRATEGIC PLANNING.

• SECTION 4. ANNUAL PERFORMANCE PLANS AND REPORTS.

• SECTION 5. MANAGERIAL ACCOUNTABILITY AND FLEXIBILITY.

• SECTION 6. PILOT PROJECTS.

• SECTION 7. UNITED STATES POSTAL SERVICE.

• SECTION 8. CONGRESSIONAL OVERSIGHT AND LEGISLATION.

• SECTION 9. TRAINING.

• SECTION 10. APPLICATION OF ACT.

• SECTION 11. TECHNICAL AND CONFORMING AMENDMENTS.

One Hundred Third Congress

of the

United States of America

Begun and held at the City of Washington on Tuesday, the

fifth day of January, one thousand nine hundred and

ninety-three.

An Act

To provide for the establishment of strategic planning and

performance measurement in the Federal Government, and for

other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "Government Performance

and Results Act of 1993".

SECTION 2. FINDINGS AND PURPOSES.

(a) Findings.-The Congress finds that-

(1) waste and inefficiency in Federal programs

undermine the confidence of the American people in the

Government and reduces the Federal Government's ability to

address adequately vital public needs;

(2) Federal managers are seriously disadvantaged in

their efforts to improve program efficiency and

effectiveness, because of insufficient articulation of

program goals and inadequate information on program

performance; and

(3) congressional policymaking, spending decisions and

program oversight are seriously handicapped by insufficient

attention to program performance and results.

(b) Purposes.-The purposes of this Act are to-

(1) improve the confidence of the American people in

the capability of the Federal Government, by systematically

holding Federal agencies accountable for achieving program

results;

(2) initiate program performance reform with a series

of pilot projects in setting program goals, measuring

program performance against those goals, and reporting

publicly on their progress;

(3) improve Federal program effectiveness and public

accountability by promoting a new focus on results, service

quality, and customer satisfaction;

(4) help Federal managers improve service delivery, by

requiring that they plan for meeting program objectives and

by providing them with information about program results and

service quality;

(5) improve congressional decisionmaking by providing

more objective information on achieving statutory

objectives, and on the relative effectiveness and efficiency

of Federal programs and spending; and

(6) improve internal management of the Federal

Government.

SECTION 3. STRATEGIC PLANNING.

Chapter 3 of title 5, United States Code, is amended by

adding after section 305 the following new section:

"Sec. 306. Strategic plans

"(a) No later than September 30, 1997, the head of

each agency shall submit to the Director of the Office of

Management and Budget and to the Congress a strategic plan

for program activities. Such plan shall contain-

"(1) a comprehensive mission statement covering the

major functions and operations of the agency;

"(2) general goals and objectives, including outcome-

related goals and objectives, for the major functions and

operations of the agency;

"(3) a description of how the goals and objectives are

to be achieved, including a description of the operational

processes, skills and technology, and the human, capital,

information, and other resources required to meet those

goals and objectives;

"(4) a description of how the performance goals

included in the plan required by section 1115(a) of title 31

shall be related to the general goals and objectives in the

strategic plan;

"(5) an identification of those key factors external

to the agency and beyond its control that could

significantly affect the achievement of the general goals

and objectives; and

"(6) a description of the program evaluations used in

establishing or revising general goals and objectives, with

a schedule for future program evaluations.

"(b) The strategic plan shall cover a period of not

less than five years forward from the fiscal year in which

it is submitted, and shall be updated and revised at least

every three years.

"(c) The performance plan required by section 1115 of

title 31 shall be consistent with the agency's strategic

plan. A performance plan may not be submitted for a fiscal

year not covered by a current strategic plan under this

section.

"(d) When developing a strategic plan, the agency

shall consult with the Congress, and shall solicit and

consider the views and suggestions of those entities

potentially affected by or interested in such a plan.

"(e) The functions and activities of this section

shall be considered to be inherently Governmental functions.

The drafting of strategic plans under this section shall be

performed only by Federal employees.

"(f) For purposes of this section the term 'agency'

means an Executive agency defined under section 105, but

does not include the Central Intelligence Agency, the

General Accounting Office, the Panama Canal Commission, the

United States Postal Service, and the Postal Rate

Commission.".

SECTION 4. ANNUAL PERFORMANCE PLANS AND REPORTS.

(a) Budget Contents and Submission to Congress.-Section

1105(a) of title 31, United States Code, is amended by

adding at the end thereof the following new paragraph:

"(29) beginning with fiscal year 1999, a Federal

Government performance plan for the overall budget as

provided for under section 1115.".

(b) Performance Plans and Reports.-Chapter 11 of title

31, United States Code, is amended by adding after section

1114 the following new sections:

"Sec. 1115. Performance plans

"(a) In carrying out the provisions of section

1105(a)(29), the Director of the Office of Management and

Budget shall require each agency to prepare an annual

performance plan covering each program activity set forth in

the budget of such agency. Such plan shall-

"(1) establish performance goals to define the level

of performance to be achieved by a program activity;

"(2) express such goals in an objective, quantifiable,

and measurable form unless authorized to be in an

alternative form under subsection (b);

"(3) briefly describe the operational processes,

skills and technology, and the human, capital, information,

or other resources required to meet the performance goals;

"(4) establish performance indicators to be used in

measuring or assessing the relevant outputs, service levels,

and outcomes of each program activity;

"(5) provide a basis for comparing actual program

results with the established performance goals; and

"(6) describe the means to be used to verify and

validate measured values.

"(b) If an agency, in consultation with the Director

of the Office of Management and Budget, determines that it

is not feasible to express the performance goals for a

particular program activity in an objective, quantifiable,

and measurable form, the Director of the Office of

Management and Budget may authorize an alternative form.

Such alternative form shall-

"(1) include separate descriptive statements of-

"(A)(i) a minimally effective program, and

"(ii) a successful program, or

"(B) such alternative as authorized by the Director of

the Office of Management and Budget,

with sufficient precision and in such terms that would

allow for an accurate, independent determination of whether

the program activity's performance meets the criteria of the

description; or

"(2) state why it is infeasible or impractical to

express a performance goal in any form for the program

activity.

"(c) For the purpose of complying with this section,

an agency may aggregate, disaggregate, or consolidate

program activities, except that any aggregation or

consolidation may not omit or minimize the significance of

any program activity constituting a major function or

operation for the agency.

"(d) An agency may submit with its annual performance

plan an appendix covering any portion of the plan that-

"(1) is specifically authorized under criteria

established by an Executive order to be kept secret in the

interest of national defense or foreign policy; and

"(2) is properly classified pursuant to such Executive

order.

"(e) The functions and activities of this section

shall be considered to be inherently Governmental functions.

The drafting of performance plans under this section shall

be performed only by Federal employees.

"(f) For purposes of this section and sections 1116

through 1119, and sections 9703 and 9704 the term-

"(1) 'agency' has the same meaning as such term is

defined under section 306(f) of title 5;

"(2) 'outcome measure' means an assessment of the

results of a program activity compared to its intended

purpose;

"(3) 'output measure' means the tabulation,

calculation, or recording of activity or effort and can be

expressed in a quantitative or qualitative manner;

"(4) 'performance goal' means a target level of

performance expressed as a tangible, measurable objective,

against which actual achievement can be compared, including

a goal expressed as a quantitative standard, value, or rate;

"(5) 'performance indicator' means a particular value

or characteristic used to measure output or outcome;

"(6) 'program activity' means a specific activity or

project as listed in the program and financing schedules of

the annual budget of the United States Government; and

"(7) 'program evaluation' means an assessment, through

objective measurement and systematic analysis, of the manner

and extent to which Federal programs achieve intended

objectives.

"Sec. 1116. Program performance reports

"(a) No later than March 31, 2000, and no later than

March 31 of each year thereafter, the head of each agency

shall prepare and submit to the President and the Congress,

a report on program performance for the previous fiscal

year.

"(b)(1) Each program performance report shall set

forth the performance indicators established in the agency

performance plan under section 1115, along with the actual

program performance achieved compared with the performance

goals expressed in the plan for that fiscal year.

"(2) If performance goals are specified in an

alternative form under section 1115(b), the results of such

program shall be described in relation to such

specifications, including whether the performance failed to

meet the criteria of a minimally effective or successful

program.

"(c) The report for fiscal year 2000 shall include

actual results for the preceding fiscal year, the report for

fiscal year 2001 shall include actual results for the two

preceding fiscal years, and the report for fiscal year 2002

and all subsequent reports shall include actual results for

the three preceding fiscal years.

"(d) Each report shall-

"(1) review the success of achieving the performance

goals of the fiscal year;

"(2) evaluate the performance plan for the current

fiscal year relative to the performance achieved toward the

performance goals in the fiscal year covered by the report;

"(3) explain and describe, where a performance goal

has not been met (including when a program activity's

performance is determined not to have met the criteria of a

successful program activity under section 1115(b)(1)(A)(ii)

or a corresponding level of achievement if another

alternative form is used)-

"(A) why the goal was not met;

"(B) those plans and schedules for achieving the

established performance goal; and

"(C) if the performance goal is impractical or

infeasible, why that is the case and what action is

recommended;

"(4) describe the use and assess the effectiveness in

achieving performance goals of any waiver under section 9703

of this title; and

"(5) include the summary findings of those program

evaluations completed during the fiscal year covered by the

report.

"(e) An agency head may include all program

performance information required annually under this section

in an annual financial statement required under section 3515

if any such statement is submitted to the Congress no later

than March 31 of the applicable fiscal year.

"(f) The functions and activities of this section

shall be considered to be inherently Governmental functions.

The drafting of program performance reports under this

section shall be performed only by Federal employees.

"Sec. 1117. Exemption

"The Director of the Office of Management and Budget

may exempt from the requirements of sections 1115 and 1116

of this title and section 306 of title 5, any agency with

annual outlays of $20,000,000 or less.".

SECTION 5. MANAGERIAL ACCOUNTABILITY AND FLEXIBILITY.

(a) Managerial Accountability and Flexibility.-Chapter

97 of title 31, United States Code, is amended by adding

after section 9702, the following new section:

"Sec. 9703. Managerial accountability and flexibility

"(a) Beginning with fiscal year 1999, the performance

plans required under section 1115 may include proposals to

waive administrative procedural requirements and controls,

including specification of personnel staffing levels,

limitations on compensation or remuneration, and

prohibitions or restrictions on funding transfers among

budget object classification 20 and subclassifications 11,

12, 31, and 32 of each annual budget submitted under section

1105, in return for specific individual or organization

accountability to achieve a performance goal. In preparing

and submitting the performance plan under section

1105(a)(29), the Director of the Office of Management and

Budget shall review and may approve any proposed waivers. A

waiver shall take effect at the beginning of the fiscal year

for which the waiver is approved.

"(b) Any such proposal under subsection (a) shall

describe the anticipated effects on performance resulting

from greater managerial or organizational flexibility,

discretion, and authority, and shall quantify the expected

improvements in performance resulting from any waiver. The

expected improvements shall be compared to current actual

performance, and to the projected level of performance that

would be achieved independent of any waiver.

"(c) Any proposal waiving limitations on compensation

or remuneration shall precisely express the monetary change

in compensation or remuneration amounts, such as bonuses or

awards, that shall result from meeting, exceeding, or

failing to meet performance goals.

"(d) Any proposed waiver of procedural requirements or

controls imposed by an agency (other than the proposing

agency or the Office of Management and Budget) may not be

included in a performance plan unless it is endorsed by the

agency that established the requirement, and the endorsement

included in the proposing agency's performance plan.

"(e) A waiver shall be in effect for one or two years

as specified by the Director of the Office of Management and

Budget in approving the waiver. A waiver may be renewed for

a subsequent year. After a waiver has been in effect for

three consecutive years, the performance plan prepared under

section 1115 may propose that a waiver, other than a waiver

of limitations on compensation or remuneration, be made

permanent.

"(f) For purposes of this section, the definitions

under section 1115(f) shall apply.".

SECTION 6. PILOT PROJECTS.

(a) Performance Plans and Reports.-Chapter 11 of title

31, United States Code, is amended by inserting after

section 1117 (as added by section 4 of this Act) the

following new section:

"Sec. 1118. Pilot projects for performance goals

"(a) The Director of the Office of Management and

Budget, after consultation with the head of each agency,

shall designate not less than ten agencies as pilot projects

in performance measurement for fiscal years 1994, 1995, and

1996. The selected agencies shall reflect a representative

range of Government functions and capabilities in measuring

and reporting program performance.

"(b) Pilot projects in the designated agencies shall

undertake the preparation of performance plans under section

1115, and program performance reports under section 1116,

other than section 1116(c), for one or more of the major

functions and operations of the agency. A strategic plan

shall be used when preparing agency performance plans during

one or more years of the pilot period.

"(c) No later than May 1, 1997, the Director of the

Office of Management and Budget shall submit a report to the

President and to the Congress which shall-

"(1) assess the benefits, costs, and usefulness of the

plans and reports prepared by the pilot agencies in meeting

the purposes of the Government Performance and Results Act

of 1993;

"(2) identify any significant difficulties experienced

by the pilot agencies in preparing plans and reports; and

"(3) set forth any recommended changes in the

requirements of the provisions of Government Performance and

Results Act of 1993, section 306 of title 5, sections 1105,

1115, 1116, 1117, 1119 and 9703 of this title, and this

section.".

(b) Managerial Accountability and Flexibility.-Chapter

97 of title 31, United States Code, is amended by inserting

after section 9703 (as added by section 5 of this Act) the

following new section:

"Sec. 9704. Pilot projects for managerial

accountability and flexibility

"(a) The Director of the Office of Management and

Budget shall designate not less than five agencies as pilot

projects in managerial accountability and flexibility for

fiscal years 1995 and 1996. Such agencies shall be selected

from those designated as pilot projects under section 1118

and shall reflect a representative range of Government

functions and capabilities in measuring and reporting

program performance.

"(b) Pilot projects in the designated agencies shall

include proposed waivers in accordance with section 9703 for

one or more of the major functions and operations of the

agency.

"(c) The Director of the Office of Management and

Budget shall include in the report to the President and to

the Congress required under section 1118(c)-

"(1) an assessment of the benefits, costs, and

usefulness of increasing managerial and organizational

flexibility, discretion, and authority in exchange for

improved performance through a waiver; and

"(2) an identification of any significant difficulties

experienced by the pilot agencies in preparing proposed

waivers.

"(d) For purposes of this section the definitions

under section 1115(f) shall apply.".

(c) Performance Budgeting.-Chapter 11 of title 31,

United States Code, is amended by inserting after section

1118 (as added by section 6 of this Act) the following new

section:

"Sec. 1119. Pilot projects for performance budgeting

"(a) The Director of the Office of Management and

Budget, after consultation with the head of each agency

shall designate not less than five agencies as pilot

projects in performance budgeting for fiscal years 1998 and

1999. At least three of the agencies shall be selected from

those designated as pilot projects under section 1118, and

shall also reflect a representative range of Government

functions and capabilities in measuring and reporting

program performance.
"(b) Pilot projects in the designated agencies shall

cover the preparation of performance budgets. Such budgets

shall present, for one or more of the major functions and

operations of the agency, the varying levels of performance,

including outcome-related performance, that would result

from different budgeted amounts.

"(c) The Director of the Office of Management and

Budget shall include, as an alternative budget presentation

in the budget submitted under section 1105 for fiscal year

1999, the performance budgets of the designated agencies for

this fiscal year.

"(d) No later than March 31, 2001, the Director of the

Office of Management and Budget shall transmit a report to

the President and to the Congress on the performance

budgeting pilot projects which shall-

"(1) assess the feasibility and advisability of

including a performance budget as part of the annual budget

submitted under section 1105;

"(2) describe any difficulties encountered by the

pilot agencies in preparing a performance budget;

"(3) recommend whether legislation requiring

performance budgets should be proposed and the general

provisions of any legislation; and

"(4) set forth any recommended changes in the other

requirements of the Government Performance and Results Act

of 1993, section 306 of title 5, sections 1105, 1115, 1116,

1117, and 9703 of this title, and this section.

"(e) After receipt of the report required under

subsection (d), the Congress may specify that a performance

budget be submitted as part of the annual budget submitted

under section 1105.".

SECTION 7. UNITED STATES POSTAL SERVICE.

Part III of title 39, United States Code, is amended by

adding at the end thereof the following new chapter:

"CHAPTER 28-STRATEGIC PLANNING AND PERFORMANCE

MANAGEMENT

"Sec.

"2801. Definitions.

"2802. Strategic plans.

"2803. Performance plans.

"2804. Program performance reports.

"2805. Inherently Governmental functions.

"Sec. 2801. Definitions

"For purposes of this chapter the term-

"(1) 'outcome measure' refers to an assessment of the

results of a program activity compared to its intended

purpose;

"(2) 'output measure' refers to the tabulation,

calculation, or recording of activity or effort and can be

expressed in a quantitative or qualitative manner;

"(3) 'performance goal' means a target level of

performance expressed as a tangible, measurable objective,

against which actual achievement shall be compared,

including a goal expressed as a quantitative standard,

value, or rate;

"(4) 'performance indicator' refers to a particular

value or characteristic used to measure output or outcome;

"(5) 'program activity' means a specific activity

"(6) 'program evaluation' means an assessment, through

objective measurement and systematic analysis, of the manner

and extent to which Postal Service programs achieve intended

objectives.

"Sec. 2802. Strategic plans

"(a) No later than September 30, 1997, the Postal

Service shall submit to the President and the Congress a

strategic plan for its program activities. Such plan shall

contain-

"(1) a comprehensive mission statement covering the

major functions and operations of the Postal Service;

"(2) general goals and objectives, including outcome-

related goals and objectives, for the major functions and

operations of the Postal Service;

"(3) a description of how the goals and objectives are

to be achieved, including a description of the operational

processes, skills and technology, and the human, capital,

information, and other resources required to meet those

goals and objectives;

"(4) a description of how the performance goals

included in the plan required under section 2803 shall be

related to the general goals and objectives in the strategic

plan;

"(5) an identification of those key factors external

to the Postal Service and beyond its control that could

significantly affect the achievement of the general goals

and objectives; and

"(6) a description of the program evaluations used in

establishing or revising general goals and objectives, with

a schedule for future program evaluations.

"(b) The strategic plan shall cover a period of not

less than five years forward from the fiscal year in which

it is submitted, and shall be updated and revised at least

every three years.

"(c) The performance plan required under section 2803

shall be consistent with the Postal Service's strategic

plan. A performance plan may not be submitted for a fiscal

year not covered by a current strategic plan under this

section.

"(d) When developing a strategic plan, the Postal

Service shall solicit and consider the views and suggestions

of those entities potentially affected by or interested in

such a plan, and shall advise the Congress of the contents

of the plan.

"Sec. 2803. Performance plans

"(a) The Postal Service shall prepare an annual

performance plan covering each program activity set forth in

the Postal Service budget, which shall be included in the

comprehensive statement presented under section 2401(g) of

this title. Such plan shall-

"(1) establish performance goals to define the level

of performance to be achieved by a program activity;

"(2) express such goals in an objective, quantifiable,

and measurable form unless an alternative form is used under

subsection (b);
"(3) briefly describe the operational processes,

skills and technology, and the human, capital, information,

or other resources required to meet the performance goals;

"(4) establish performance indicators to be used in

measuring or assessing the relevant outputs, service levels,

and outcomes of each program activity;

"(5) provide a basis for comparing actual program

results with the established performance goals; and

"(6) describe the means to be used to verify and

validate measured values.

"(b) If the Postal Service determines that it is not

feasible to express the performance goals for a particular

program activity in an objective, quantifiable, and

measurable form, the Postal Service may use an alternative

form. Such alternative form shall-

"(1) include separate descriptive statements of-

"(A) a minimally effective program, and

"(B) a successful program,

with sufficient precision and in such terms that would

allow for an accurate, independent determination of whether

the program activity's performance meets the criteria of

either description; or
"(2) state why it is infeasible or impractical to

express a performance goal in any form for the program

activity.

"(c) In preparing a comprehensive and informative plan

under this section, the Postal Service may aggregate,

disaggregate, or consolidate program activities, except that

any aggregation or consolidation may not omit or minimize

the significance of any program activity constituting a

major function or operation.

"(d) The Postal Service may prepare a non-public annex

to its plan covering program activities or parts of program

activities relating to-

"(1) the avoidance of interference with criminal

prosecution; or

"(2) matters otherwise exempt from public disclosure

under section 410(c) of this title.

"Sec. 2804. Program performance reports

"(a) The Postal Service shall prepare a report on

program performance for each fiscal year, which shall be

included in the annual comprehensive statement presented

under section 2401(g) of this title.

"(b)(1) The program performance report shall set forth

the performance indicators established in the Postal Service

performance plan, along with the actual program performance

achieved compared with the performance goals expressed in

the plan for that fiscal year.

"(2) If performance goals are specified by descriptive

statements of a minimally effective program activity and a

successful program activity, the results of such program

shall be described in relationship to those categories,

including whether the performance failed to meet the

criteria of either category.

"(c) The report for fiscal year 2000 shall include

actual results for the preceding fiscal year, the report for

fiscal year 2001 shall include actual results for the two

preceding fiscal years, and the report for fiscal year 2002

and all subsequent reports shall include actual results for

the three preceding fiscal years.

"(d) Each report shall-

"(1) review the success of achieving the performance

goals of the fiscal year;

"(2) evaluate the performance plan for the current

fiscal year relative to the performance achieved towards the

performance goals in the fiscal year covered by the report;

"(3) explain and describe, where a performance goal

has not been met (including when a program activity's

performance is determined not to have met the criteria of a

successful program activity under section 2803(b)(2))-

"(A) why the goal was not met;

"(B) those plans and schedules for achieving the

established performance goal; and

"(C) if the performance goal is impractical or

infeasible, why that is the case and what action is

recommended; and

"(4) include the summary findings of those program

evaluations completed during the fiscal year covered by the

report.

"Sec. 2805. Inherently Governmental functions

"The functions and activities of this chapter shall be

considered to be inherently Governmental functions. The

drafting of strategic plans, performance plans, and program

performance reports under this section shall be performed

only by employees of the Postal Service.".

SECTION 8. CONGRESSIONAL OVERSIGHT AND LEGISLATION.

(a) In General.-Nothing in this Act shall be construed

as limiting the ability of Congress to establish, amend,

suspend, or annul a performance goal. Any such action shall

have the effect of superseding that goal in the plan

submitted under section 1105(a)(29) of title 31, United

States Code.

(b) GAO Report.-No later than June 1, 1997, the

Comptroller General of the United States shall report to

Congress on the implementation of this Act, including the

prospects for compliance by Federal agencies beyond those

participating as pilot projects under sections 1118 and 9704

of title 31, United States Code.

SECTION 9. TRAINING.

The Office of Personnel Management shall, in

consultation with the Director of the Office of Management

and Budget and the Comptroller General of the United States,

develop a strategic planning and performance measurement

training component for its management training program and

otherwise provide managers with an orientation on the

development and use of strategic planning and program

performance measurement.

SECTION 10. APPLICATION OF ACT.

No provision or amendment made by this Act may be

construed as-

(1) creating any right, privilege, benefit, or

entitlement for any person who is not an officer or employee

of the United States acting in such capacity, and no person

who is not an officer or employee of the United States

acting in such capacity shall have standing to file any

civil action in a court of the United States to enforce any

provision or amendment made by this Act; or

(2) superseding any statutory requirement, including

any requirement under section 553 of title 5, United States

Code.

SECTION 11. TECHNICAL AND CONFORMING AMENDMENTS.

(a) Amendment to Title 5, United States Code.-The table

of sections for chapter 3 of title 5, United States Code, is

amended by adding after the item relating to section 305 the

following:

"306. Strategic plans.".

(b) Amendments to Title 31, United States Code.-

(1) Amendment to chapter 11.-The table of sections for

chapter 11 of title 31, United States Code, is amended by

adding after the item relating to section 1114 the

following:

"1115. Performance plans.

"1116. Program performance reports.

"1117. Exemptions.

"1118. Pilot projects for performance goals.

"1119. Pilot projects for performance budgeting.".

(2) Amendment to chapter 97.-The table of sections for

chapter 97 of title 31, United States Code, is amended by

adding after the item relating to section 9702 the

following:

"9703. Managerial accountability and flexibility.

"9704. Pilot projects for managerial accountability

and flexibility.".

(c) Amendment to Title 39, United States Code.-The

table of chapters for part III of title 39, United States

Code, is amended by adding at the end thereof the following

new item:

"28. Strategic planning and performance management

2801".

Speaker of the House of Representatives.

Vice President of the United States and President of

the Senate.

Source: Office of Management and Budget

Government Performance Results Act of 1993
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INVESTMENTS
IN FEDERAL
FACILITIES
Asset Management Strategies
for the 21st Century

Committee on Business Strategies for Public Capital Investment

Board on Infrastructure and the Constructed Environment

Division on Engineering and Physical Sciences

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001

NOTICE: The project that is the subject of this report was approved by the Governing
Board of the National Research Council, whose members are drawn from the councils of
the National Academy of Sciences, the National Academy of Engineering, and the Insti-
tute of Medicine. The members of the committee responsible for the report were chosen
for their special competences and with regard for appropriate balance.

This study was supported by Contract No. SLMAQM00C6017 between the National Acad-
emy of Sciences and the Department of State on behalf of the Federal Facilities Council.
Any opinions, findings, conclusions, or recommendations expressed in this publication are
those of the authors and do not necessarily reflect the views of the organizations or agen-
cies that provided support for this project.

International Standard Book Number 0-309-08919-0 (Book)

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of

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furtherance of science and technology and to their use for the general welfare. Upon the
authority of the charter granted to it by the Congress in 1863, the Academy has a mandate
that requires it to advise the federal government on scientific and technical matters. Dr.
Bruce M. Alberts is president of the National Academy of Sciences.

The National Academy of Engineering was established in 1964, under the charter of
the National Academy of Sciences, as a parallel organization of outstanding engineers. It
is autonomous in its administration and in the selection of its members, sharing with the
National Academy of Sciences the responsibility for advising the federal government.
The National Academy of Engineering also sponsors engineering programs aimed at
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COMMITTEE ON BUSINESS STRATEGIES FOR

PUBLIC CAPITAL INVESTMENT
ALBERT A. DORMAN, NAE, Chair, AECOM, Los Angeles
DAVID NASH, RADM, CEC USN (retired), Vice Chair, BE & K,
Birmingham, Alabama
ADJO AMEKUDZI, Georgia Institute of Technology, Atlanta
KIMBALL J. BEASLEY, Wiss, Janey, Elstner Associates, Inc., New York
JEFFERY CAMPBELL, Brigham Young University, Provo, Utah
ERIC T. DILLINGER, Carter and Burgess, Inc., Fort Worth, Texas
JAMES R. FOUNTAIN, JR., Governmental Accounting Standards Board,
Norwalk, Connecticut
THOMAS K. FRIDSTEIN, Hillier, New York
LUCIA E. GARSYS, Quality Services Officer, Hillsborough County, Florida
DAVID L. HAWK, New Jersey Institute of Technology, Newark
RALPH L. KEENEY, NAE, Duke University, Durham, North Carolina
STEPHEN J. LUKASIK, Independent Consultant, Los Angeles
CAROL Ó’CLÉIREACÁIN, Brookings Institution and Independent Consultant,
New York
CHARLES SPRUILL, Fannie Mae, Washington, D.C.

Staff
LYNDA STANLEY, Study Director
RICHARD LITTLE, Director, Board on Infrastructure and the Constructed
Environment
CAMERON GORDON, Program Officer
JASON DREISBACH, Research Associate
DANA CAINES, Financial Associate
PAT WILLIAMS, Senior Project Assistant

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BOARD ON INFRASTRUCTURE AND THE

CONSTRUCTED ENVIRONMENT
PAUL GILBERT, Chair, Parsons, Brinckerhoff, Quade, and Douglas, Seattle
MASSOUD AMIN, University of Minnesota, Minneapolis
RACHEL DAVIDSON, Cornell University, Ithaca, New York
REGINALD DESROCHES, Georgia Institute of Technology, Atlanta
DENNIS DUNNE, California Department of General Services, Sacramento
PAUL FISETTE, University of Massachusetts, Amherst
WILLIAM H. HANSMIRE, Parsons, Brinckerhoff, Quade, and Douglas,
San Francisco
HENRY HATCH, U.S. Army Corps of Engineers (retired), Oakton, Virginia
AMY HELLING, Georgia State University, Atlanta
SUE McNEIL, University of Illinois, Chicago
DEREK PARKER, Anshen+Allen, San Francisco
DOUGLAS SARNO, The Perspectives Group, Inc., Alexandria, Virginia
HENRY G. SCHWARTZ, JR., Washington University, St. Louis
DAVID SKIVEN, General Motors Corporation, Detroit
MICHAEL STEGMAN, University of North Carolina, Chapel Hill
WILLIAM WALLACE, Rensselaer Polytechnic Institute, Troy, New York
ZOFIA ZAGER, Fairfax County, Virginia
CRAIG ZIMRING, Georgia Institute of Technology, Atlanta

Staff
RICHARD LITTLE, Director, Board on Infrastructure and the Constructed
Environment
LYNDA STANLEY, Executive Director, Federal Facilities Council
MICHAEL COHN, Program Officer
DANA CAINES, Financial Associate
PAT WILLIAMS, Senior Project Assistant

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Chairman’s Foreword

Many segments of government have come to believe that an opportunity

exists to introduce more objectivity into the politically sensitive issues and pro-
cesses surrounding public investment in federal facilities. The U.S. General Ac-
counting Office’s designation of federal real property as a government-wide high-
risk area on January 30, 2003, now makes it urgent to seize the opportunity. This
committee, while recognizing the daunting complexities of the challenge, has
nonetheless attempted to indicate some directions such a quest might take.
In accordance with its designation as the Committee on Business Strate-
gies for Public Capital Investment, the committee reviewed principles, policies,
and practices used by a range of private-sector organizations (“businesses”) in
making decisions about facilities investments. The committee recognized early
on that government and for-profit organizations have inherently different mis-
sions and service orientations and different ways of operating, making decisions,
and measuring success. Within government, the same types of differences exist
among departments and agencies. The committee concluded that there is no single
solution from the private sector that could apply to all federal facilities invest-
ment and management, nor should we expect that one will be found. Neverthe-
less, there are private-sector principles, policies, and practices integral to suc-
cessful facilities investment and management decisions that appear suitable for
conversion into equivalent federal precepts. This report enumerates these pre-
cepts, elaborates on them, and suggests techniques for adapting them to the fed-
eral operating environment.
Just as there is no panacea for federal facilities investment and management,
there is no substitute for good decision makers. Decision theories and processes,
criteria, rules and regulations, no matter how advanced, are only tools. The fed-

vii

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viii CHAIRMAN’S FOREWORD

eral operating environment is a complex system of differing value judgments, a

wide array of justifiable goals and objectives, changing missions, interlocking
authorities and responsibilities, and legitimate constituency pressures that must
always be balanced against the resources judged available. Therefore, the com-
mittee also emphasizes the human resources aspects: the development of good
decision makers at all levels and the creation of an atmosphere of mutual respect
and trust between them.
In further recognition of this complex environment, the committee has out-
lined an implementation program that suggests how elected officials and the many
dedicated and competent career public servants might together develop legisla-
tion and guidelines to improve public investment in federal facilities. The effect
on the economy of properly directing the billions of dollars expended annually
for federal facilities, coupled with recognition of the impact that these facilities
investments have on shaping the environment of 280 million Americans, man-
dates an early, continuous, and collaborative effort to transform current decision-
making processes.

Albert A. Dorman
Chair, Committee on Business Strategies for
Public Capital Investment

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Preface

At a fundamental level, choices made today about investments in facilities

and infrastructure1 directly affect the future quality of shelter, workplaces, and
the delivery of services. When, where, and how to invest in facilities are critical
variables for determining that quality.
During the past 20 years, numerous studies have focused on the deteriorating
condition of infrastructure throughout the United States, including the deteriorat-
ing condition of facilities owned and leased by the federal government. Over the
same period, the operating environments of both private and public-sector orga-
nizations have been evolving in response to rapid advances in technologies,
changes in demographics, and increasingly rapid changes in society at large.
These changes both require and make possible new approaches to facilities and
infrastructure investment and management.
Under successive administrations, there has been a concerted effort to make
the federal government more responsive to its citizens, more accountable for what
it does, more performance- and results-oriented, and more open to innovative
approaches, with all of these attributes being seen as “businesslike.” Elected offi-
cials, senior agency executives, and facilities managers have asked, Can the ex-
perience of private-sector organizations with facilities investment and manage-
ment provide insight for similar decisions and responsibilities facing the federal
government?

1In this report, facilities investments are defined as new construction, renewal, maintenance, retro-

fitting, acquiring, leasing, and decommissioning or disposing of buildings, structures, and their sup-
porting infrastructure.

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x PREFACE

STUDY APPROACH
The sponsoring agencies of the Federal Facilities Council (FFC)2 formu-
lated the request for the current study with these questions in mind. In 2002, the
National Research Council (NRC) appointed the Committee on Business Strate-
gies for Public Capital Investment to undertake the following task:
Develop guidelines for making improved public investment decisions about fa-
cilities and supporting infrastructure, their maintenance, renewal, replacement,
and decommissioning. As part of this task, the committee was asked to review
and appraise current practices used to support facilities decision-making in both
the private and public sectors and identify objectives, practices, and performance
measures to help determine appropriate levels of investment.
In discharging its task, the committee recognized at the outset that there are
inherent differences in the missions, goals, and operating environments of pri-
vate-sector organizations and those of the federal government, and it elaborates
on these and other differences throughout this report. Nonetheless, there are also
many similarities in regard to facilities investments. Large organizations of any
type must answer two different but related questions: What facilities are needed
to support the organization’s mission? How should decisions about facilities in-
vestments be made if organizational goals and objectives are to be met?
The 14 committee members have expertise in the operation and management
of large private and public-sector organizations, capital investment, facilities pro-
gramming and management, corporate real estate, building performance and ser-
viceability, government budgeting and finance, decision sciences, economics, and
architecture and engineering. In addition, many of the committee members are
involved in professional organizations that focus on facilities-related issues, in-
cluding the American Institute of Architects, the American Planning Association,
the American Society of Civil Engineers, the Society of American Military Engi-
neers, the Association of Higher Education Facilities Officers, the International
Facility Management Association, the National Society of Professional Engineers,
and the Transportation Research Board. Biographical information about the com-
mittee members is provided in Appendix A.
As one of its research activities, the committee interviewed representatives
of private-sector corporations, federal agencies, other public entities, and not-for-
profit organizations who are responsible for facilities investment decisions. Per-
sons interviewed and their affiliations and other persons who provided informa-
tion to the committee are listed in Appendix B. Appendix C contains the interview
discussion outline.

2The FFC is a cooperative association of 24 federal departments and agencies operating under the

aegis of the National Research Council. The FFC’s mission is to identify and advance technologies,
processes, and management practices that improve the performance of federal facilities over their
entire life cycle, from planning to disposal.

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PREFACE xi

During 22 months of committee, subcommittee, individual, and staff work

and five deliberative 2-day meetings, the committee also independently collected,
studied, analyzed, and compared federal, other public, private, and not-for-profit
sector facilities investment and management principles, policies, and practices.
Based on this research and on their individual and collective experience, the com-
mittee identified a set of principles and policies that it believes are highly effec-
tive and could be beneficially adapted for use within the federal government.

CONTENTS OF THE REPORT

This study reviews how decisions for private- and public-sector facilities
investments are being made in today’s operating environments and the roles of
the various groups and individuals who make the decisions. The intent of the
committee is to provide specific recommendations to improve decision-making
and management processes so that the resources available for federal facilities
investments can be allocated more effectively and the results can be measured.
To this end, the study addresses such questions as, How can the various parties to
federal facilities decisions be motivated to act in the public’s long-term interest,
given short-term election cycles and budgets and the recognition that the results
of decisions made today may not be apparent for many years? Are there better
methods to align federal departments’ and agencies’ portfolios of facilities with
their missions? Can the climate for making investment decisions about federal
facilities be improved? When should federal facilities be owned or leased or dis-
posed of?
This report is addressed to a wide audience: decision makers in Congress,
federal departments, agencies, and their advisors; federal facilities program man-
agers, operating groups, and their contractors; and program and budget analysts
throughout the federal government. Decision makers, facilities program manag-
ers, and program and budget analysts in public agencies at the state and local
levels may also find value in the report since they face many of the same issues as
their federal counterparts. Because this report addresses multiple audiences, dif-
ferent readers will find different chapters to be of greatest interest. For those with
limited time, the Executive Summary and Chapter 6 should be read together.
Chapter 1, “Context,” quantifies the ongoing investment in federal facilities,
identifies some fundamental characteristics of the private sector and the federal
government that affect facilities investments, looks at the dynamic nature of fa-
cilities requirements as compared with the longevity and life cycles of facilities,
and discusses some conceptual shifts in facilities investment decision making.3

3In this and other chapters, a number of sources are cited in regard to the value of facilities and the

level of investments in facilities made by public and private-sector organizations. No attempt has
been made to reconcile the numbers across the various sources. For this report, the numbers are
primarily cited to convey the magnitude of the investments involved.

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xii PREFACE

Chapter 2, “Facilities Asset Management,” describes how facilities management

practices are evolving to better support organizational objectives and decision
making and to better manage portfolios of facilities, as well as the additional
skills that are now required of facilities asset managers. Chapter 3, “Decision
Making to Support Organizational Missions,” describes how best-practice orga-
nizations use their mission as guidance for facilities investment decisions; why
and how they create frameworks for facilities investment decision making and
management; basic issues related to facilities investments; and decision-making
processes. Chapter 4, “Environments for Effective Decision Making,” focuses on
how best-practice organizations foster open communications and build trust
among the various stakeholder groups to create an environment for effective de-
cision making. The use of performance measures, continuous feedback proce-
dures, accountability, and incentives to evaluate and improve the outcomes of
decision-making processes are featured. Chapter 5, “Alternative Approaches for
Acquiring Federal Facilities,” describes public-private partnerships and a range
of other approaches that could be tested more widely to leverage funding for
federal facilities investments. Chapter 6, “Adapting Principles and Policies from
Best-Practice Organizations to the Federal Operating Environment,” reviews is-
sues and obstacles when adapting principles and policies from best-practice orga-
nizations for use in the federal operating environment. The committee sets forth
15 recommendations for adapting and implementing these principles and policies
and concludes by offering an overall strategy for their implementation.

TERMS USED IN THIS REPORT

Terminology varies across the fields of facilities management, finance, bud-
geting, accounting, and economics. For example, terms like “capital” are used in
all of these fields but defined differently. This can sometimes lead to confusion
and miscommunication when engineers, financial and budget analysts, accoun-
tants, economists, and elected officials work together. In an effort to clearly com-
municate the committee’s intent, key terms used in this report are explained be-
low. Where the committee has used a definition from another source, the source
is cited.

Best-practice organizations. Private-sector, not-for-profit, and public orga-

nizations that use principles, policies, and practices that the committee—through
its research, interviews, collective and individual experience, and systematic

Similarly, there were many sources of data on the amount of facility space owned and leased by the
federal government and the types of space. Again, the numbers are cited to convey the magnitude and
diversity of the federal government’s holdings, with no attempt to reconcile data differences across
the sources.

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PREFACE xiii

analysis—has determined to be highly effective for facilities investment decision

making and asset management.

Business case analysis. Tool for planning and decision making that projects
the financial implications and other organizational consequences of a proposed
action (Schmidt, 2003b). A business case analysis is used to ensure that the ob-
jectives for a proposed facility-related investment are clearly defined; that a broad
range of alternatives for meeting the objectives is developed; that the alternatives
are evaluated to determine how well the objectives will be met; and that trade-
offs are explicit. It is a living tool that is continually revisited, refined, and up-
dated. Although at its heart the business case is a financial analysis, it also con-
tains information on organizational impacts that cannot be quantified in monetary
terms, such as mission-readiness or fulfillment, customer satisfaction, and public
image.

Facilities asset management. Systematic process of maintaining, upgrading,

and operating physical assets cost-effectively. It combines engineering principles
with sound business practices and economic theory and provides tools to achieve
a more organized, logical approach to decision making (FHWA, 1999). A facili-
ties asset management approach allows for both program- or network-level man-
agement and project-level management and thereby supports both executive-level
(portfolio of facilities) and field-level decision making.

Facilities investments. New construction, renewal, maintenance, retrofitting,

acquiring, leasing, and decommissioning or disposing of buildings, structures,
and their supporting infrastructure. Investments in land are excluded.

Not-for-profit organizations. Groups organized for purposes other than gen-

erating profit and in which no part of the organization’s net earnings may inure to
the benefit of any private shareholder or individual. Not-for-profit organizations
may take many forms, including that of a corporation, an individual enterprise, an
unincorporated association, a partnership, or a charitable foundation. They must
be designated as not-for-profit at their inception and are governed by state laws.

Private-sector organizations. Enterprises formed to engage in activities that

generate profit for their owners or shareholders. They can take a number of forms
and legal definitions—sole proprietorships, general partnerships, limited partner-
ships, joint ventures, C corporations, limited liability corporations, and S corpo-
rations, among others.

Pro forma statement. Strictly financial analysis included in a business case

analysis.

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Acknowledgments of
Committee Members and Reviewers

The Committee on Business Strategies for Public Capital Investment ac-

knowledges and thanks all those representatives of private-sector organizations,
federal agencies, other public entities, and not-for-profit institutions who pro-
vided background information and shared their personal expertise through brief-
ings and interviews.
The chair of the committee expresses his personal appreciation to all of the
committee members for sharing their expertise, views, and opinions; for making
substantial contributions to concepts and text; and for giving generously of their
time.
This report has been reviewed in draft form by individuals chosen for their
diverse perspectives and technical expertise, in accordance with procedures ap-
proved by the National Research Council’s Report Review Committee. The pur-
pose of this independent review is to provide candid and critical comments that
will assist the institution in making its published report as sound as possible and
to ensure that the report meets institutional standards for objectivity, evidence,
and responsiveness to the study charge. The review comments and draft manu-
script remain confidential to protect the integrity of the deliberative process. We
wish to thank the following individuals for their review of this report:

David G. Cotts, author and management consultant,

Dennis D. Dunne, California Department of General Services (retired),
Carl Ference, Trammell Crow Company,
Amy Helling, Georgia State University,
James C. Hershauer, Arizona State University,
Steven Kelman, Harvard University, and
Morris Tanenbaum, AT&T Corporation (retired).

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xvi ACKNOWLEDGMENTS OF COMMITTEE MEMBERS AND REVIEWERS

Although the reviewers listed above have provided many constructive com-
ments and suggestions, they were not asked to endorse the conclusions or recom-
mendations, nor did they see the final draft of the report before its release. The
review of this report was overseen by Dale F. Stein, President Emeritus, Michi-
gan Technological University. Appointed by the National Research Council, he
was responsible for making certain that an independent examination of this report
was carried out in accordance with institutional procedures and that all review
comments were carefully considered. Responsibility for the final content of this
report rests entirely with the authoring committee and the institution.

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Contents

EXECUTIVE SUMMARY 1

1 CONTEXT 13
Background, 13
The Ongoing Investment in Federal Facilities, 14
Some Characteristics of Private-Sector Organizations That Affect
Facilities Investment and Management, 16
Some Characteristics of the Federal Government That Affect Facilities
Investment and Management, 20
Facilities Requirements, Longevity, and Life-Cycle Costs, 25
Conceptual Shifts in Facilities Investment Decision Making, 28

2 FACILITIES ASSET MANAGEMENT 30

Background, 30
Facilities Asset Management, 32
Components of a Facilities Asset Management Approach, 32
Facilities Asset Managers, 37
Examples of Facilities Asset Management Systems, 40
Principles and Policies from Best-Practice Organizations, 43

3 DECISION MAKING TO SUPPORT 44

ORGANIZATIONAL MISSIONS
Background, 44
The Roles of Analysis and Values in Decision Making, 45
Management Approaches for Achieving a Mission, 47

xvii

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xviii CONTENTS

Information for Decision Making, 50

Decision-Making Processes, 55
Principles and Policies from Best-Practice Organizations, 59

4 ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 62

Background, 62
Open Communications, Trust, and Credible Information, 62
Performance Measures, 65
Evaluations and Continuous Feedback, 68
Forms of Feedback, 69
Accountability, 72
Incentives, 73
Principles and Policies from Best-Practice Organizations, 73

5 ALTERNATIVE APPROACHES FOR ACQUIRING 76

FEDERAL FACILITIES
Background, 76
Issues Related to Full Up-front Funding of Facilities, 77
Issues Related to the Use of Alternative Approaches for
Acquiring Facilities, 78
Summary and a Recommendation, 88

6 ADAPTING PRINCIPLES AND POLICIES FROM 89

BEST-PRACTICE ORGANIZATIONS TO THE
FEDERAL OPERATING ENVIRONMENT
Background, 89
Special Aspects of the Federal Operating Environment, 90
Adapting Best-Practice Principles and Policies to the
Federal Environment, 93
An Overall Strategy for Implementation, 113

BIBLIOGRAPHY 118

APPENDIXES

A Biographical Sketches of Committee Members 127

B Committee Interviews and Briefings 134
C Interview Discussion Outline 137

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List of Figures and Tables

FIGURES
1.1 Federal agencies’ facilities holdings in millions of square feet, 15
1.2 Distribution of federal government space by type of use, 15
1.3 Distribution of total assets for a typical corporate organization, 17
1.4 The various stakeholders in facilities investments and their diverse
and overlapping objectives, 22
1.5 Facility life cycle, 27

2.1 The evolving focus of facilities asset management, 30

2.2 Factors driving the evolution of facilities management, 31
2.3 Components of a facilities asset management system, 33
2.4 Linking organizational goals with facilities investment and
operations, 33
2.5 A facilities asset management structure (BYU), 41
2.6 A facilities asset management framework (BYU), 42

3.1 Typical decision-making process for facilities investments, 56

6.1 A sociotechnical system view for decision making, 114

6.2 A model for integrating scientific and social values in
decision making, 115

xix

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xx LIST OF TABLES AND FIGURES

TABLES
2.1 Skills Required by Facilities Asset Managers, 38
2.2 Business Skills for the Facility Manager, 39

3.1 An Approach for Nonmanufacturing Facilities (GM), 50

4.1 Strategic Assessment Model Matrix of the Association of Higher

Education Facilities Officers (APPA), 67

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Executive Summary

Federal facilities investments are matters of public policy. The facilities ac-
quired by the federal government provide a means to produce and distribute pub-
lic goods and services to 280 million Americans, create jobs, strengthen the na-
tional economy, and support the missions of federal departments and agencies,
including the defense and security missions. Such investments also support poli-
cies for public transportation, urban revitalization, and historic preservation,
among others.
Hundreds of billions of dollars have been invested in federal facilities and
their associated infrastructure. As of September 2000, the federal government
owned or leased 3.3 billion square feet of space worldwide, distributed across
more than 500,000 facilities, conservatively valued at $328 billion. Annually, it
spends upwards of $21 billion for the acquisition and renovation of facilities,
approximately $4.5 billion to power, heat, and cool its buildings, and more than
$500 million for water and waste disposal. Additional expenditures for facilities
maintenance, repair, renewal, demolition, and security upgrades probably amount
to billions of dollars per year but are not readily identifiable under the current
budget structure.
Despite the magnitude of this ongoing investment, federal facilities continue
to deteriorate, backlogs of deferred maintenance continue to increase, and excess,
underutilized, and obsolete facilities continue to consume limited resources. Many
departments and agencies have the wrong facilities, too many or not enough fa-
cilities, or facilities that are poorly sited to support their missions. Such facilities
constitute a drain on the federal budget in actual costs and in foregone opportuni-
ties to invest in other public resources and programs.
On January 30, 2003, the U.S. General Accounting Office (GAO) designated

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2 INVESTMENTS IN FEDERAL FACILITIES

federal real property as a government-wide high-risk area1 because current trends

“have multibillion dollar cost implications and can seriously jeopardize mission
accomplishment” and because “federal agencies face many challenges securing
real property due to the threat of terrorism.” It declared that “current structures
and processes may not be adequate to address the problems,” so that “a compre-
hensive, integrated transformation strategy” may be required.

PRINCIPLES AND POLICIES FOR FACILITIES

INVESTMENTS AND MANAGEMENT
As the committee reviewed the types of analyses, the processes, and the deci-
sion-making environments that private-sector and other organizations use for fa-
cilities investments and management, it focused on identifying principles and
policies used by best-practice organizations, as defined by the committee. The
committee found that, in matters of facilities investment and management, best-
practice organizations do the following:
Principle/Policy 1. Establish a framework of procedures, required in-
formation, and valuation criteria that aligns the goals, objectives, and
values of their individual decision-making and operating groups to
achieve the organization’s overall mission; create an effective decision-
making environment; and provide a basis for measuring and improving
the outcomes of facilities investments. The components of the frame-
work are understood and used by all leadership and management levels.

Principle/Policy 2. Implement a systematic facilities asset management

approach that allows for a broad-based understanding of the condition
and functionality of their facilities portfolios—as distinct from their in-
dividual projects—in relation to their organizational missions. Best-
practice organizations ensure that their facilities and infrastructure
managers possess both the technical expertise and the financial analysis
skills to implement a portfolio-based approach.

Principle/Policy 3. Integrate facilities investment decisions into their or-

ganizational strategic planning processes. Best-practice organizations
evaluate facilities investment proposals as mission enablers rather than
solely as costs.

1GAO’s high-risk update is provided at the start of each new Congress. The reports are intended to

help the new Congress “focus its attention on the most important issues and challenges facing the
federal government.” (GAO, 2003f)

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EXECUTIVE SUMMARY 3

Principle/Policy 4. Use business case analyses to rigorously evaluate

major facilities investment proposals and to make transparent a
proposal’s underlying assumptions; the alternatives considered; a full
range of costs and benefits; and the potential consequences for their or-
ganizations.

Principle/Policy 5. Analyze the life-cycle costs of proposed facilities, the

life-cycle costs of staffing and equipment inherent to the proposal, and
the life-cycle costs of the required funding.

Principle/Policy 6. Evaluate ways to disengage from, or exit, facilities

investments as part of the business case analysis and include disposal
costs in the facilities life-cycle cost to help select the best solution to meet
the requirement.

Principle/Policy 7. Base decisions to own or lease facilities on the level of

control required and the planning horizon for the function, which may
or may not be the same as the life of the facility.

Principle/Policy 8. Use performance measures in conjunction with both

periodic and continuous long-term feedback to evaluate the results of
facilities investments and to improve the decision-making process itself.

Principle/Policy 9. Link accountability, responsibility, and authority

when making and implementing facilities investment decisions.

Principle/Policy 10. Motivate employees as individuals and as groups to

meet or exceed accepted levels of performance by establishing incentives
that encourage effective decision making and reward extraordinary per-
formance.

ADAPTING THE PRINCIPLES AND POLICIES TO THE

FEDERAL OPERATING ENVIRONMENT
Adapting the aforementioned principles and policies for facilities investments
for use by the federal government requires consideration of and compensation for
a number of special aspects of the federal operating environment. These aspects
include the goals and missions of the federal government, its departments, and
agencies; the organizational structure and decision-making environment; the na-
ture of federal facilities investments; and the annual budget process and its atten-
dant procedures. They are described more fully in Chapters 1 and 6.
Despite the inherent differences, the committee’s overall conclusion is that
aspects of all of the identified principles and policies used by best-practice orga-

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4 INVESTMENTS IN FEDERAL FACILITIES

nizations can be adapted in varying form to the federal operating environment. It

has therefore made recommendations to aid in developing an overall framework
based on suitable adaptations of the identified principles and policies.
The committee also concluded that there is no single solution from the pri-
vate sector that can be applied to all issues related to federal facilities investment
and management, nor should there be an expectation that one will be found. The
committee points to the number of missions and the variation in size, resources,
culture, and political support of the many federal agencies with facilities-related
responsibilities and urges all involved not to attempt to create one-size-fits-all
solutions to different problems.
Instead, the committee recommends that efforts be made to concurrently and
collaboratively develop top-down and bottom-up approaches while keeping in
mind differences among various agency missions and cultures as well as similari-
ties in many specifics of facility investment and management. Varying practices
within common principles and policies should be expected.
RECOMMENDATION 1. The federal government should adopt
a framework of procedures, required information, and valuation crite-
ria for federal facilities investment decision making and management
that incorporates all of the principles and policies enumerated by this
committee.
Implementation of a framework that incorporates the identified principles
and policies will align the goals, objectives, and values of individual federal deci-
sion-making and operating groups with overall missions; create an effective deci-
sion-making environment; and provide a basis for measuring and improving the
outcomes of federal facilities investments. Because such a framework represents
a significant departure from current operating procedures, it may be advisable to
establish one or more pilot projects. A small government agency with a diverse
portfolio of facilities might provide the environment in which to test the applica-
tion of the committee’s recommendations.
RECOMMENDATION 2(a). Each federal department and agency
should update its facilities asset management program to enable it to
make investment and management decisions about individual projects
relative to its entire portfolio of facilities.
Federal departments and agencies have begun implementing facilities asset
management approaches that allow for a broad-based understanding of the condi-
tion and functionality of their facilities portfolios. An updated approach should
incorporate life-cycle decision making that accounts for all the inherent operating
costs (i.e., facilities, staffing, equipment, and information technologies); accurate
databases; condition assessments; performance measures; feedback processes;
and appropriately adapted business practices.

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EXECUTIVE SUMMARY 5

RECOMMENDATION 2(b). Each federal department and agency

should ensure it has the requisite technical and business skills to imple-
ment a facilities asset management approach by providing specialized
training for its incumbent facilities asset management staff and by re-
cruiting individuals with these skills.
Most federal departments and agencies currently have staff with the requisite
technical skills to implement asset management approaches. Less likely to be
found are facilities management staff also versed in financial theory, practices,
and management. Departments and agencies should provide their incumbent fa-
cilities asset management staff with training in business concepts such as finan-
cial theory and analysis. Training can be in the form of coursework, seminars,
rotational assignments, and other appropriate methods. As job vacancies occur in
facilities management operating groups, departments and agencies should seek to
recruit and hire staff with the requisite technical and business skills.
RECOMMENDATION 2(c). To facilitate the alignment of each
department’s and agency’s existing facilities portfolios with its missions,
Congress and the administration should jointly lead an effort to consoli-
date and streamline government-wide policies, regulations, and pro-
cesses related to facilities disposal, which would encourage routine dis-
posal of excess facilities in a timely manner.
Eighty-one separate policies applicable to the disposal of federal facilities
have been identified. These include agency-specific legislative mandates and
directives and government-wide socioeconomic and environmental policies. The
number of policies related to facilities disposal hinders government-wide efforts
to expeditiously dispose of unneeded facilities in response to changing require-
ments.
RECOMMENDATION 2(d). For departments and agencies with many
more facilities than are needed for their missions—the Departments of
Defense, Energy, State, and Veterans Affairs, the General Services Ad-
ministration, and possibly others—Congress and the administration
should jointly consider implementing extraordinary measures like the
process used for military base realignment and closure (BRAC), modi-
fied as required to reflect actual experience with BRAC.
Federal agencies are incurring significant costs by operating and maintaining
facilities they no longer need to support today’s missions. The Department of
Defense (DoD) alone estimates it spends $3 to $4 billion each year maintaining
excess facilities. The lack of alignment between a department’s or agency’s mis-
sion and its facilities portfolio, coupled with the cost of operating and maintain-
ing excess facilities, may require extraordinary measures to effect improvement,
such as the BRAC process used for closing DoD facilities. The government as a

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6 INVESTMENTS IN FEDERAL FACILITIES

whole and the DoD in particular have 15 years of experience and lessons from
BRAC. Such lessons can be used to make adjustments to the process to improve
it and adapt it to other departments and agencies, as appropriate.
RECOMMENDATION 3. Each federal department and agency should
use its organizational mission as guidance for facilities investment deci-
sions and should then integrate facilities investments into its organiza-
tional strategic planning processes. Facilities investments should be
evaluated as mission enablers, not solely as costs.
Organizational strategic planning that does not include facilities consider-
ations up front fails to account for a potentially substantial portion of the total
cost of a program or initiative. Integrating facilities considerations into evalua-
tions of strategic planning alternatives will provide decision makers with better
information about the total long-term costs, considerations, and consequences of
a particular course of action. To this end, the senior facilities program manager
for a department or agency should be directly and continuously involved in the
organization’s strategic planning processes. This person should be responsible
for providing the translation between the agency’s mission and its physical as-
sets; identifying alternatives for meeting the mission; identifying the costs, ben-
efits, and potential consequences of the alternatives; and suggesting facilities in-
vestments that will reduce overall—that is, portfolio—costs.
RECOMMENDATION 4(a). Each federal department and agency
should develop and use a business case analysis for all significant facili-
ties investment proposals to make clear the underlying assumptions, the
alternatives considered, the full range of costs and benefits, and poten-
tial consequences for the organization and its missions.
There is no standard format for a business case analysis that can be readily
adapted directly for use by all federal departments and agencies. However, the
committee believes that such an analysis can and should be developed by each
federal department and agency and refined over time through repeated, consistent
use by the relevant stakeholders and decision makers. At a minimum, a federally
adapted business case analysis should explicitly include and clearly state the fol-
lowing: (1) the organization’s mission; (2) the basis for the facility requirement;
(3) the objectives to be met by the facility investment and its potential effect on
the entire facilities portfolio; (4) performance measures for each objective to indi-
cate how well objectives have been met; (5) identification and analysis of a full
range of alternatives to meet the objectives, including the alternative of no action;
(6) descriptions of the data, information, and judgments necessary to measure the
anticipated performance of the alternatives; (7) a list of the value judgments (i.e.,
value trade-offs) made to balance achievement on competing objectives; (8) a
rationale for the overall evaluation of the alternatives using the information above;

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EXECUTIVE SUMMARY 7

(9) strategies for exiting the investment; and (10) the names of the individuals
and operating units responsible for the analysis and accountable for the proposed
facility’s subsequent performance. The business case format to be used by the
department or agency should be agreed to by the pertinent oversight constituen-
cies in Congress, the Office of Management and Budget, and the GAO.
RECOMMENDATION 4(b). To promote more effective communica-
tion and understanding, each federal department and agency should
develop a common terminology agreed upon with its oversight constitu-
encies for use in facilities investment deliberations. In addition, each
should train its asset management staff to effectively communicate with
groups such as congressional committees having widely different sets of
objectives and values. Mirroring this, oversight constituencies should
have the capacity and skills to understand the physical aspects of facili-
ties management as practiced in the field.
Engineers, lawyers, accountants, economists, technologists, military person-
nel, senior executives, and elected officials lack a common vocabulary and style
of interaction and do not necessarily share a common set of interests or time
frames they consider important. To improve communications among the various
stakeholders in facilities investments, each federal department or agency, in col-
laboration with the appropriate program examiners and congressional representa-
tives, should develop and consistently use a common terminology for the con-
cepts routinely used in facilities investment decision making and applicable to its
organizational culture. With the wide variety of missions, cultures, and proce-
dures that exist among federal departments and agencies, a standard set of gov-
ernment-wide definitions is not to be expected.
Training is necessary to ensure that the concepts underlying the terms have
meaning and are understood by all. Facilities asset management staff should have
the capacity and skills to understand the relationship of facilities to the big picture
of an organization’s overall mission and to communicate that understanding to
others. They should also be able to solve problems by considering all sides of
issues and to negotiate a solution that will best meet the organizational require-
ment. Financial, budget, and program analysts should receive some basic training
in facilities investment and management.
RECOMMENDATION 5(a). Each federal department and agency
should use life-cycle costing for all significant facilities investment deci-
sions to better inform decision makers about the full costs of a proposed
investment. A life-cycle cost analysis should be completed for (1) a full
range of facilities investment alternatives, (2) the staff, equipment, and
technologies inherent to the alternatives, and (3) the costs of the required
funding.

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8 INVESTMENTS IN FEDERAL FACILITIES

For some very expensive project proposals, federal departments and agen-
cies conduct life-cycle analyses internally to understand the total costs and ben-
efits of the facility itself over the long term and to prioritize their requests for
funding. However, in its research and interviews, the committee was not made
aware of any instance in which a department or agency also conducted a life-
cycle analysis for the staffing, equipment, and technologies inherent to the pro-
posal, or for the life-cycle costs of the required funding.
RECOMMENDATION 5(b). Congress and the administration should
jointly lead an effort to revise the budget scorekeeping rules to support
facilities investments that are cost-effective in the long term and recog-
nize a full range of costs and benefits, both quantitative and qualitative.
Under federal budget scorekeeping procedures, the budget authority associ-
ated with requests to design and construct a new facility, to fund the major reno-
vation of an existing facility, to purchase a facility outright, or to fund operating
and capital leases is “scored” up front in the year requested, even though the
actual costs may be incurred over several years.
Scoring facilities’ costs up front is intended to provide the transparency
needed for effective congressional and public oversight. However, implementa-
tion of the budget scorekeeping procedures as they relate to facilities investments
has resulted in some unintended consequences, including disincentives for cost-
effective, long-term decision making and some gamesmanship.
Amending the scorekeeping rules such that they meet congressional over-
sight objectives for transparency and take into account the long-term interests of
departments, agencies, and the public will not be easy. Amending them specifi-
cally to account only for life-cycle costs would probably create an even greater
disincentive for facilities investments. The committee believes that a collabora-
tive effort that encompasses a wide range of objectives, goals, and values is re-
quired. Some possible revisions to the rules could be tested through pilot projects.
RECOMMENDATION 6. Every major facility proposal should include
the strategy and costs for exiting the investment as part of its business
case analysis. The development and evaluation of exit strategies during
the programming process will provide insight into the potential long-
term consequences for the organization, help to identify ways to mitigate
the consequences, and help to reduce life-cycle costs.
The development of exit strategies for facilities investment alternatives as
part of a business case analysis will help federal decision makers to better under-
stand the potential consequences of the alternative approaches. Evaluation of exit
strategies can provide a basis for determining whether it is best to own or lease
the required space in a particular situation and whether specialized or more ge-
neric “flexible” space is the best solution to meet the requirement. For those in-
vestment proposals in which the only exit strategy is demolition and cleanup,

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EXECUTIVE SUMMARY 9

evaluating the costs of disposal may lead to better decisions about the design of
the facility, its location, and the choice of materials, resulting in lower life-cycle
costs.
RECOMMENDATION 7. Each federal department and agency should
base its decisions to own or lease facilities on the level of control desired
and on the planning horizon for the function, which may not be the same
as the life of the facility.
Based on the committee’s interviews and research activities, the criteria that
departments and agencies use to determine if it is more cost-effective to own or
lease facilities to support a given function are not clear or uniform. The commit-
tee believes that federal departments and agencies should base the “own” versus
“lease” decision on a clearly stated rationale linked to support of the organiza-
tional mission, the level of control desired, and the planning horizon for the func-
tion to be supported.
RECOMMENDATION 8. Each federal department and agency should
use performance measures in conjunction with both periodic and con-
tinuous long-term feedback and evaluation of investment decisions to
monitor and control investments, measure the outcomes of facilities in-
vestment decisions, improve decision-making processes, and enhance
organizational accountability.
Because the results of many federal programs or services are qualitative and
occur over long periods of time, measuring them can be challenging. However,
efforts are under way in various departments and agencies to develop indices and
measures that can be applied to evaluate various aspects of facilities portfolios.
Some or all of these indices could be adapted for use by other federal departments
and agencies and used in combination with other metrics to measure the perfor-
mance of their facilities’ portfolios.
Short-term feedback procedures for facility projects are commonly used.
However, to the committee’s knowledge, no federal department or agency col-
lected long-term feedback to determine if facilities investments met overall orga-
nizational objectives, solved operational problems, or reduced long-term operat-
ing costs. Long-term feedback is essential if the outcomes of facilities investments
and management processes are to be measured and the decision-making process
itself is to be improved.
RECOMMENDATION 9. To increase the transparency of its decision-
making process and to enhance accountability, each federal department
and agency should develop a decision process diagram that illustrates
the many interfaces and points at which decisions about facilities invest-
ments are made and the parties responsible for those decisions. Imple-
mentation of facilities asset management approaches and consistent use

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10 INVESTMENTS IN FEDERAL FACILITIES

of business case analyses will further enhance organizational account-

ability.
In the federal government, responsibility and authority for making decisions
and executing programs often are not directly linked. Instead, decision-making
authority and decision-making responsibility are spread throughout the executive
and legislative branches, leading to lack of clear-cut accountability for facilities
investment outcomes.
A diagram that illustrates the many interfaces and decision points among the
various federal decision-making and operating groups involved in facilities in-
vestment decision making can serve as a first step toward increasing the transpar-
ency of the process and enhancing accountability. Implementation of a facilities
asset management approach, the use of performance measures and feedback pro-
cesses, and the consistent use of business case analyses will further enhance orga-
nizational accountability for federal facilities investments.
RECOMMENDATION 10. Congress and the administration and fed-
eral departments and agencies should institute appropriate incentives to
reward operating units and individuals who develop and use innovative
and cost-effective strategies, procedures, or programs for facilities asset
management.
In the federal system, the multiple-objective nature of laws and policies and
the sheer volume of procedures sometimes result in unintended consequences,
sometimes creating disincentives for good decision making and cost-effective
behavior. Potential incentives to support more cost-effective decision making and
management by facilities asset management groups could include programs that
allow savings from one area of operations to be applied to needs in another area,
if the savings are carefully documented; allow the carryover of unobligated funds
from one fiscal year to the next for capital improvements, if doing so can be
shown to be cost-effective; and establish meaningful awards for operating units
with high levels of performance.
RECOMMENDATION 11 (from Chapter 5). In order to leverage fund-
ing, Congress and the administration should encourage and allow more
widespread use of alternative approaches for acquiring facilities, such
as public-private partnerships and capital acquisition funds.
A number of alternative approaches for acquiring facilities are being used by
federal departments and agencies, on a case-by-case basis under agency-specific
legislation. Each approach has advantages and disadvantages for particular types
of organizations and types of facilities. None of the identified alternative ap-
proaches can guarantee effective management absent agreed-upon performance
measures, feedback procedures, and well-trained staff.
Allowing the use of alternative approaches on a government-wide basis raises

Copyright © National Academy of Sciences. All rights reserved.

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EXECUTIVE SUMMARY 11

concerns about the transparency of funding relationships and concerns about

whether the approaches sufficiently account for the perspectives of state and local
governments and constituencies. Despite these concerns the committee supports
more widespread use of alternative approaches to leverage funding and supports
using pilot programs to test the effectiveness of various approaches and to evalu-
ate their outcomes from national, state, and local perspectives. If changes to the
budget scorekeeping rules are required to expand the range of alternative ap-
proaches, such changes should be tested through the pilot programs.

AN OVERALL STRATEGY FOR IMPLEMENTATION

Transforming decision-making processes, outcomes, and the decision-mak-
ing environment for federal facilities investments will require sponsorship, lead-
ership, and a commitment of time and resources from many people at all levels of
government and from some people outside the government. Implementation of
some of the committee’s recommendations can begin immediately within federal
departments and agencies that invest in and manage significant portfolios of fa-
cilities. However, implementing an overall framework of principles and policies
will require collaborative, continuing, and concerted efforts among the various
legislative and executive branch decision makers and operating groups. These
include the President and Congress, senior departmental and agency executives,
facilities program managers, operations staff, and budget and management ana-
lysts within departments and agencies and from the Congressional Budget Office,
the Office of Management and Budget, and the GAO.
Having noted this, the committee is well aware that similar recommenda-
tions made by other learned panels advocating long-term, life-cycle stewardship
of facilities and infrastructure have achieved only limited success and have failed
to move all of the involved stakeholders to action. The committee believes that a
new dynamic can and must be instituted and recommends herewith a program it
believes practicable.
RECOMMENDED IMPLEMENTATION STRATEGY: The commit-
tee recommends that legislation be enacted and executive orders be is-
sued that would do two things:
(1) Establish an executive-level commission with representatives from
the private sector, academia, and the federal government to determine how
the identified principles and policies can be applied in the federal govern-
ment to improve the outcomes of decision-making and management pro-
cesses for federal facilities investments within a time certain. The executive-
level commission should include representatives from nonfederal organizations
acknowledged as leaders in managing large organizations, finance, engineering,
facilities asset management, and other appropriate areas. The commission should
also include representatives of Congress, federal agencies with large portfolios of

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12 INVESTMENTS IN FEDERAL FACILITIES

facilities, oversight agencies, and others as appropriate. The commission should

be tasked to gather relevant information from inside and outside the federal gov-
ernment; hold public hearings; and submit a report to the President and Congress
outlining its recommendations for change, an implementation plan, a timetable,
and a feedback process for measuring, monitoring, and reporting on the results;
all within a time certain.
(2) Concurrently establish department and agency working groups to
collaborate with and provide recommendations to the executive-level com-
mission for use in its deliberations. The working groups within each depart-
ment and agency should collaborate with the executive-level commission. Staff
in the departments and agencies are in the best position to communicate their
organizational culture and identify practices for implementing the principles and
policies that will work for their organization. In addition, they can provide the
commission with information related to the characteristics of their facilities port-
folios; issues related to aligning their portfolios with their missions; facilities
investment trends; good or best practices for facilities investment and manage-
ment; performance measures for monitoring and measuring the results of invest-
ments; and other relevant information.

The committee believes that such sponsorship, leadership, and commitment

to this effort will result in

• Improved alignment between federal facilities portfolios and missions, to

better support our nation’s goals.
• Responsible stewardship of federal facilities and federal funds.
• Substantial savings in facilities investments and life-cycle costs.
• Better use of available resources—people, facilities, and funding.
• Creation of a collaborative environment for federal facilities investment
decision making.

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Context

BACKGROUND
The built environment in the United States is the result of several centuries of
investment decisions about buildings and infrastructure. Generations of individu-
als and multitudes of public and private organizations have contributed to this
evolving environment by making investments in the buildings (houses, offices,
warehouses, factories, stores, museums, public safety stations, recreation centers,
libraries, schools, hospitals, and research facilities) and infrastructure systems
(water, waste disposal, energy, transportation, and telecommunications) that are
the physical basis of our communities. This built environment and the services it
provides directly affect the quality of life for more than 280 million U.S. resi-
dents as well as the strength of the national economy.
The magnitude of this investment is large. In 2000 the value of structures
and utilities in the United States amounted to almost $22 trillion (USDOC, 2002).
Seventy-seven per cent of these assets are owned by individuals, private, and
not-for-profit organizations, while government (federal, state, local, and re-
gional) owns about 23 percent (USDOC, 2002). And the investment is ongoing:
Every year new facilities are built and existing ones are operated, maintained,
and renovated.
The federal government also provides loans and grants to all 50 states and
the District of Columbia, 38,000 local governments, and 36,000 special districts
(U.S. Government, 2002) to finance the construction and operation of roads, tran-
sit systems, airports, housing, hospitals, schools, and utilities.1 In 2001 such grants

1In addition to federal loans and grants, state and local governments raise funds through income,

personal, and real property taxes and borrow money through bond sales repaid by these taxes.

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14 INVESTMENTS IN FEDERAL FACILITIES

and loans totaled approximately $145 billion (OMB, 2002). This report focuses
on one aspect of the national investment in the built environment—the facilities
that the federal government owns, leases, and operates directly.
To provide a context for Chapters 2 through 6, Chapter 1 describes the ongo-
ing magnitude of the federal government’s investment in facilities; reviews some
fundamental characteristics of private-sector organizations and the federal gov-
ernment that affect facilities investment and management; and discusses drivers
of change and conceptual shifts in facilities investment and management.

THE ONGOING INVESTMENT IN FEDERAL FACILITIES

As of September 2000, the federal government owned and leased approxi-
mately 3.3 billion square feet of space worldwide (GAO, 2003f). This space is
distributed over more than 500,000 facilities, including military installations,
courthouses, embassies, hospitals, administrative offices, museums, recreation
complexes, and research campuses. The total value of federal facilities is conser-
vatively estimated at $328 billion, with defense-related facilities accounting for
about two-thirds of that total (GAO, 2003f). Annually, the federal government
spends upwards of $21 billion for the direct acquisition of new facilities and the
renovation of existing ones.2 In fiscal year (FY) 2001, the federal government
paid approximately $4.5 billion to power, heat, and cool its buildings (FEMP,
2003a). Federal agencies collectively spend more than $500 million per year for
water and waste disposal (WBDG, 2003). Total government-wide expenditures
for the operation, maintenance, repair, and disposal of federal facilities cannot be
readily identified under the existing budget structure. However, annual expendi-
tures are probably in the billions.
Figure 1.1 shows federal agencies’ facilities holdings in millions of square
feet as of September 2000. These figures do not include the 630 million acres of
federal land holdings, including national parks, forests, and other uses, which
make up 27.7 percent of the total land in the United States (USDOC, 2002).
Figure 1.2 shows the distribution of all types of facility space by use; infra-
structure such as runways is not included. Office space, housing, and service
space accounted for 60 percent of total federal government space (GAO, 2002b).
The General Services Administration (GSA) owned or leased approximately 300
million square feet of the more than 728 million square feet of office space in-
cluded in the federal inventory (GAO, 2002b).
Individual departments and agencies own and lease a wide range of facility
types to shelter and support the people and equipment required to carry out their

2This figure is based on historic estimates. Line items for construction in the departmental appro-

priations bills were totaled for FY 2001.

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GSA
(312.4) Other–383.7
10%
USDA–51.1
USPS–247.6
VA–140.6

Army–778.5

Other
Agencies Navy–620.7
(2864.5)
90%
DOT–39.1

Air Force–603.2

FIGURE 1.1 Federal agencies’ facilities holdings in millions of square feet. SOURCE:
GAO, 2001d.

R&D Hospital Industrial

School 5% 4% 4%
5%
Other Institutional
All Other 3%
6%

Storage Office Space

13% 23%

Service
15%

Housing
22%

FIGURE 1.2 Distribution of federal government space by type of use. SOURCE: GAO,
2001d.

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16 INVESTMENTS IN FEDERAL FACILITIES

activities, programs, and missions. Some with narrowly focused missions—for

example, the International Broadcasting Bureau and the Immigration and Natu-
ralization Service—primarily use office space and a limited range of facility types
such as radio transmission towers or border stations. The majority use specialized
space—courthouses, embassies, museums, hospitals, prisons—in combination
with office, warehousing, and research/laboratory space. The military services
have the most diverse portfolios: Military installations contain all the types of
facilities and infrastructure typically found in a small city, including airports, in
addition to specialized facilities that support the defense mission.

SOME CHARACTERISTICS OF PRIVATE-SECTOR

ORGANIZATIONS THAT AFFECT
FACILITIES INVESTMENT AND MANAGEMENT
In the U.S. market economy, private-sector organizations are relied on to
supply a wide variety of goods and services, and their activities are subject to
regulation by many different governmental entities. Although the “private sec-
tor” is often referred to as if it is a monolithic entity, in actuality it is made up of
tens of thousands of organizations with a myriad of purposes, operating with
varying degrees of success. Some characteristics of private-sector organizations
that affect their approaches to facilities investment and management are discussed
below.

Mission and Goals

A private-sector organization is established to carry out a specific mission—
its overriding “business.” It is afforded latitude to achieve its mission through
self-determined principles, policies, and practices within a public regulatory struc-
ture. Organizational missions are as wide ranging as the goods and services pro-
duced, from providing hospitality (hotel chains) and personal mobility (auto
manufacturers), to solving complex business and technical issues for clients (con-
sulting firms).
The goal of a private-sector organization, as opposed to its mission, is typi-
cally to achieve financial returns by selling goods and services at a higher price
than the cost of producing them. A study of 146 multinational corporations found
that 54 percent of the respondents chose “maximizing stockholder wealth” as
their primary goal. The remaining respondents identified other goals, such as
maximizing return on assets, maximizing growth in revenue, and maximizing
growth in earnings per share (Block, 2000).3

3Other studies confirm this finding: Drury and Tayles (1997); Pike (1988); and the original, “clas-

sic” article by Mao (1970).

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For private-sector organizations, decisions to lease, own, build, renovate,

renew, or dispose of facilities are driven primarily, but not exclusively, by market
and financial considerations. Investments in facilities are made to ensure that
operations are ongoing and efficient, a condition essential to the survival and
growth of the organization in the marketplace. An organization’s entire inventory
of facilities typically is viewed and systematically managed as a “portfolio” of
physical assets. Investments are made in these assets to support the organization’s
operational requirements.

Funding Facilities Investments

In 2001, U.S. businesses invested approximately $362 billion in new and
existing structures and $748 billion in new equipment (U.S. Census Bureau,
2003). As illustrated in Figure 1.3, facilities typically account for almost one-
quarter of a corporation’s assets and its second or third highest operating cost
(Brandt, 1994; O’Mara, 1999; Erdener, 2003), after people—salaries and ben-
efits—and sometimes after technologies. New facilities or renovations of exist-
ing ones can cost tens to hundreds of millions of dollars, take two or more years
to complete, and require annual investments for operations and maintenance over

Miscellaneous

Facilities
Finances
5%

15% 23%

17%
Products/
Services
40%

People

FIGURE 1.3 Distribution of total assets for a typical corporate organization. SOURCE:
Adapted from Brandt, 1994.

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18 INVESTMENTS IN FEDERAL FACILITIES

a period of 30 years or longer. Millions of dollars may be spent annually to lease

space.
Private-sector firms raise money for expenditures by (1) selling goods and
services, (2) borrowing from a bank or other lender at a certain interest rate, and
(3) selling stock in the company. When making investment decisions, they must
look at the relationship between risk—the time uncertainty and volatility of a
project—and returns—the expected receipts or cash flow (Groppelli and
Nikbakht, 2000). The longer the cash flow is at risk, the greater the return must
be. The value of financial capital must also be accounted for, because it changes
over time: Money today is worth more than money in the future. Factors that
influence the time value of money are inflation, risk (uncertainty of the future),
and liquidity (how easily assets can be converted to cash).
Private-sector firms typically budget for two types of expenditures: operat-
ing and capital. Operating expenditures (e.g., wages, salaries, administrative, and
other current costs) are short-term and are written off in the same year as they
occur. Capital expenditures (e.g., buildings, equipment, patent rights) are long-
term and are amortized over a period of years, as determined by tax regulations
(Groppelli and Nikbakht, 2000). Budgets for both types of expenditures are linked
by an overall management plan.
Private-sector organizations make decisions about capital expenditures sepa-
rately from decisions about operating expenditures. Capital spending decisions
are made based primarily on how they affect shareholders and are evaluated pre-
dominately in monetary terms (PCSCB, 1999). In capital decision making and
budgeting, there is no such thing as a risk-free project, because future cash flows
may decline at any time owing to inflation, loss of market share, increased costs
for raw materials, labor, or other resources, new environmental regulations, or
higher interest rates, among other factors.
When considering a potential facilities investment, private-sector standard
practice is to first conduct a financial analysis. The analysis, embodied in a pro
forma statement, typically evaluates the net present value (NPV) of the potential
investment by projecting the revenues the investment is likely to generate, dis-
counting the future cash flow by the time value of money, accounting for risk,
and subtracting the initial costs. Under such a process, it makes economic sense
to proceed with a more detailed evaluation of a facilities investment only if the
NPV is positive. Facilities investment analyses, decision making, and evaluation
processes are discussed in detail in Chapter 3.

Response to Change
In a competitive marketplace, the organizations that survive are those that
can adapt to continual and often rapid change. For-profit organizations with long-
term success are constantly modifying factors such as cost, availability, and the
characteristics and qualities of goods and services to meet market conditions and

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to prepare themselves for meeting new competitors. They also tailor their mul-
tiple offerings of goods and services to fit specific market segments so as to
realize the maximum yield (profits, short-term market share, or market segment
control) for the dollars invested.4
As long as profits ensue, a private-sector organization’s mission, values, and
leadership can remain relatively unchanged for years. However, its principles,
policies, and practices for meeting its mission may be adjusted continually or
adapted in response to dynamic changes in the operating environment. Adjust-
ments such as internal reorganization to eliminate unproductive overhead costs or
to address underperforming business units may be necessary as a start-up busi-
ness becomes a more mature, stable organization and as the scale of its operations
grows or declines. When change requires the acquisition of new skills or access
to newly developing markets, the acquisition of one company by another or the
merger of two is not uncommon. For private-sector organizations, the issue fre-
quently is not whether change is needed but when and how to change. Few ele-
ments are fixed in the drive to improve organizational performance in order to
meet financial goals and achieve strategic objectives. Timing is critical since or-
ganizations that are slow to sense the need for change or to make adjustments are
disadvantaged in the subsequent time period.

Flexibility
Successful private-sector organizations are able to respond to market or other
changes relatively rapidly because they build flexibility into their decision-mak-
ing processes, their procedures, their culture, and the strategies used for deliver-
ing and acquiring space. They use a mix of ownership, leasing, lease-purchase,
and other financial arrangements to acquire facilities depending on how the space
will be used to support their operational requirements.
Some private-sector organizations also build flexibility directly into their
facilities: buildings with components and furniture that can be relatively easily
reconfigured to accommodate new uses or new technologies, thereby allowing
changes to be made in the physical environment relatively rapidly and at a rela-
tively low cost. This is important in an environment where the turnover of em-
ployees can necessitate the reconfiguration of workspace on a 12- or 18-month
(or shorter) cycle. Flexible facilities are also built as a hedge against change: If a
facility is being built to meet a particular requirement and that requirement
changes soon after the facility is operational, it can be adapted to other uses.
Flexibility in design can also make a facility more marketable to other users if
and when the organization chooses to sell it.

4For example, the Marriott Corporation has developed distinct lines of hotel accommodations dif-

ferentiated by ownership, quality, level of service, and cost per night that can be matched to local
markets.

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As important, if not more important, to meeting the organizational mission

are the people within the organization, the quality of the leadership and manage-
ment, and the skills of the workforce. Private-sector organizations have consider-
able flexibility to adjust their workforce to achieve their organizational mission
and goals. They can adjust their compensation packages to the market, offering
high salaries and a range of benefits to attract those who possess the leadership,
management, and technical skills required to execute the organization’s core busi-
ness lines. Within labor practice constraints, they can lay off workers in response
to changing markets, mergers, or other factors and can dismiss on short notice
those who do not perform satisfactorily.

SOME CHARACTERISTICS OF THE FEDERAL GOVERNMENT

THAT AFFECT FACILITIES INVESTMENT AND MANAGEMENT
In addition to the President, Congress, and the judicial branch, the federal
government’s executive and legislative branches today comprise 15 departments,
40 independent agencies, 22 corporations and commissions, and approximately
1.7 million civilian employees (U.S. Government, 2003). This structure incorpo-
rates a system of checks and balances that ensures that many aspects and possible
outcomes and consequences of policies and decisions are identified, considered,
and accommodated in some fashion.
Decision-making authority and responsibility for establishing missions, ob-
jectives, policies, and practices are spread throughout the executive and legisla-
tive branches—the President and the Cabinet, the Congress, senior executives
and a multitude of managers in operating and oversight agencies and, ultimately,
the voting public. The judicial branch acts as another check on the system by
ruling on the constitutionality of decisions made or actions taken.
Because of its size and organizational structure, the federal government does
not act as a single, independent, monolithic entity. Instead, it operates more like a
network of distinct but interdependent organizations with multiple missions, cul-
tures, structures, and decision-making processes.
One distinction between nongovernmental and governmental organizations
is the beneficiary of their respective investments in facilities and infrastructure.
Nongovernmental organizations directly reap most of the benefits, or losses, from
spending on their facilities, buildings, and equipment. When the federal govern-
ment invests in facilities, the public at large benefits or loses. Investments that
confer benefits on a wide class of parties are referred to by economists as “public
goods,” because no private person or firm can capture all of the benefits. Public
goods and services are distributed universally, that is, to all segments of society
regardless of whether it is economically efficient to do so.5 Thus, decisions about
federal facilities investments must take into account the benefits to the public at
large, not just the benefits to a specific organization, agency, or department. In

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CONTEXT 21

many cases, these benefits are nonfinancial in nature—for example, preservation

of a historic structure.
However, it is difficult for the public at large to directly influence facilities
investment decisions at the federal level.6 Those who most directly influence
federal facilities investment include department and agency senior executives,
facilities program managers, budgeting and financial analysts, Congress, the
President, other policy makers, and special interest constituencies. The President
and Congress are responsible for providing leadership and vision, setting poli-
cies, enacting legislation, establishing regulations, and authorizing and appropri-
ating public funds. Civil service employees and political appointees within the
various federal departments and agencies are responsible for administering pro-
grams, establishing and executing processes, analyzing their results, recommend-
ing initiatives, enforcing regulations, and expending public funds efficiently, ef-
fectively, and legally.
In this decision-making structure, the various government entities have di-
verse but overlapping objectives. As shown in Figure 1.4, some decision-making
and operating groups, such as the Office of Management and Budget (OMB) and
the Congressional Budget Office (CBO), focus on government-wide issues, like
balancing the budget. Departments and agencies focus on issues related to their
specific missions.

Goals and Missions

At the highest level, the goal of the federal government is to promote the
public’s health, safety, and welfare. Individual agencies have specific missions
designed to support achievement of this goal. Their missions include, but are not
limited to, providing national defense and homeland security; conducting foreign
policy; protecting wilderness areas, national parks, and national landmarks; con-
serving the nation’s historical documents and cultural artifacts; supporting public
education; and regulating businesses, transportation safety, and the quality of
food, water, workplaces, and the environment. These missions are viewed as in-
herently governmental, although some of the activities of all of them are per-
formed by private-sector organizations.7

5An example is the provision of mail delivery by the U.S. Postal Service to all residents, even in

sparsely settled and isolated areas, where the per capita costs of providing such services result in
operating losses. In addition, the price to the consumer of a first-class stamp is the same anywhere in
the United States although the cost to the Postal Service for delivering a letter varies greatly, depend-
ing on distance and location.
6At state and local levels, the public can have a direct say in facility investment decisions by voting

for or against bond referendums and by directly influencing the setting of tax rates.
7For example, although the government is responsible for providing national defense, it contracts

with private-sector organizations to produce the weapons systems required to achieve that mission.

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22 INVESTMENTS IN FEDERAL FACILITIES

U.S. Public

Agency Management OMB and CBO President

and Congress
Programs
Facility Managers
Human Administration
Building
Operating Resources Budgetary Vision
Condition
Costs Goals
Mission Fiscal
Regulatory
Compliance Objectives Policy
Projects
Facilities and
Life-Cycle Infrastructure Legislative
Management Mandates
New
Initiatives Constituent
Concerns

FIGURE 1.4 The various stakeholders in facilities investments and their diverse and over-
lapping objectives.

Funding Facilities Investments

The U.S. government primarily collects taxes and sells debt instruments, such
as Treasury bonds and notes, to raise funds to support its activities.8 All expendi-
tures, both operating and capital, are accounted for in the annual Budget of the
United States Government.9 Since 1945, a number of actions and studies have
been initiated to determine if the federal government should institute procedures
to allow for separate consideration of operating and capital expenditures.10 To
date, such procedures have not been implemented, and the government continues
to make decisions about and budget for operating and capital expenditures to-
gether, unlike private-sector organizations. Thus, facilities investment decision
making in the federal government is driven in large part by the annual budget
process and its associated time frames and procedures. These processes and pro-
cedures drive a short-term perspective, one that focuses on current expenditures
as opposed to long-term investments.
Federal budgeting is a continual process that has specified milestone dates,

8The government also raises funds by charging for some services and leasing properties to outside

interests.
9The federal government first instituted a central budget under the Budget and Accounting Act of

1921. Prior to 1921, federal departments and agencies submitted individual budgets to Congress.
10These initiatives include the Hoover Commission (1949); the President’s Commission on Budget

Concepts (1967); and the President’s Commission to Study Capital Budgeting (1999).

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CONTEXT 23

usually annual, by which time a formal budget must be presented. Two parallel
processes and two time cycles are at work: the Presidential budgeting process and
the Congressional budgeting process and an annual cycle that meshes with tax
reporting and appropriation cycles (the operating budget) and a longer-range (out-
year) budget cycle that gives a better picture of where a department or agency is
going beyond the current snapshot in time. Unlike private-sector organizations,
which have some flexibility to internally establish their own budgeting and fund-
ing processes, all federal departments and agencies must comply with one gov-
ernment-wide set of budgeting procedures.
In the federal budget process, as in many private-sector enterprises, requests
for funding typically exceed expected resources. Only a relatively small propor-
tion of the federal annual operating budget is discretionary, because the bulk of it
is constrained by prior agreements, such as entitlements, and by the need to main-
tain ongoing programs and services seen as critical or valuable. In any environ-
ment where expectations exceed resources, trade-offs must be made. Decision
makers in Congress and federal departments and agencies are asked to balance
the competing demands of very different programs: Funding for facilities invest-
ments must be weighed against funding for medical research, weapons systems,
homeland security, education, or numerous other public programs.11
In many cases, therefore, federal policy and budget decisions are fundamen-
tally matters of achieving political consensus. Where a difficult decision is at
stake, the government often operates on the principle that, absent a clear consen-
sus, it is better not to act but rather to continue to seek a consensus. The govern-
mental process is not one that chooses to settle on one or another proposal based
solely on a financial or technical analysis. Instead it seeks to fashion a compro-
mise proposal that will command the greatest degree of consensus from among
those offered. In this operating environment, programs or investments whose re-
sults are not highly visible or will only be realized in the long term, such as
facilities maintenance, tend to be put off to out-year budgets.

Response to Change
The federal government is less driven to change or to adapt its operating
principles, policies, or practices or its organizational structure than is the private
sector. Change or adaptation in government is not driven by market forces but is
more likely to occur in response to elections, major events, socioeconomic trends
at home and abroad, budget projections, media attention, outside or internal
evaluations of agency performance, or changes in perceived good management
practices.

11Private-sector organizations are rarely involved in making trade-offs among such disparate de-

mands.

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Typically, change occurs slowly, except perhaps in isolated cases during cri-
sis situations. The system of checks and balances guards against constant or rapid
change and upheaval in the delivery of public goods and services. Consensus
building to make a change can take years and span several election cycles be-
cause of the many vested interests involved—elected leaders, Congressional com-
mittees, agency staff, contractors who work for the government, and the public.
The reorganization of departments and agencies or the divesting of government
programs is typically a lengthy and controversial process. However it is possible
and can be done when the need is clear.12 For these reasons and others, the mis-
sions of the federal government, its departments, and agencies often remain rela-
tively unchanged at strategic levels for long periods of time, although many man-
agement practices change over time and the missions of individual agencies do
evolve.13

Flexibility
The scale of government operations is invariably large and typically pre-
cludes flexibility and scalability. The government is frequently a monopoly pro-
vider of goods and services, either because the function is inherently governmen-
tal or because of legislation. In some instances, the government’s role is to develop
products and services initially and then spin them off to the private sector once
the feasibility has been established and risk factors have been understood.14
Because of the federal government’s size and other factors, most of its activi-
ties are governed by numerous procedures that are designed to achieve some
uniformity in the use of and accounting for resources. Such procedures limit the
flexibility that can be applied to operations, including the hiring and firing of the
workforce.
Leadership in the federal government is primarily provided by the President,
the Congress, the Cabinet, and other high-level political appointees. In contrast to
the private sector, the election process may cause constant change in leadership.
Each administration establishes a vision of the future and puts forward strategies
for achieving that vision. However, it does not have the flexibility to unilaterally
implement those strategies but must either work within established procedures

12Examples include the separation of the regulatory and advocacy functions of the Atomic Energy

Commission (now the Department of Energy), the establishment of a Department of Homeland Secu-
rity, and the divestiture of some aspects of the communication satellite business.
13The Department of Energy (DOE), for example, was originally established as the Atomic Energy

Commission in the 1940s to produce nuclear weapons. Today, in addition to the nuclear stockpile,
DOE’s missions focus on energy production and conservation and the cleanup of waste from the
weapons programs.
14Space-based systems for communication and Earth imaging are cases in point.

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and processes or enact legislation to change those procedures, typically a time-

consuming and difficult process.
Civil service employees, whose tenure is not dependent on the political party
in office, carry out federal government programs and initiatives. Federal depart-
ments and agencies must seek to attract workers with the required management
and technical skills by using relatively standardized compensation packages with
clearly established salary ranges and salary caps. Their ability to adjust their
workforces to meet changing requirements is similarly limited in that it is a time-
consuming process to reassign or lay off workers whose skills are no longer es-
sential to the achievement of the mission. Dismissal of civil service employees
for unsatisfactory performance can also be a difficult and lengthy process. As a
catalyst for workforce restructuring, federal agencies have repeatedly been given
“buyout” authority in recent years. Such authority provides financial incentives
for individuals to retire or seek work elsewhere, allowing some adjustments in the
size of the workforce and the allocation of positions.
The lack of flexibility in processes and procedures also applies to most facili-
ties. Historically, federal departments and agencies acquired the majority of their
facilities on a one-off basis—that is, a facility was designed to serve a specific
purpose or function; such facilities include courthouses, embassies, research labo-
ratories, museums, and hospitals. In addition, many federal buildings are historic
in character and require specialized renovation techniques. Because most federal
facilities are used for 50 years or longer, many of them must be adapted to sup-
port new functions when requirements change: A former barracks might be
reconfigured for use as administrative space.
Efforts such as GSA’s integrated workplace are intended to provide more
flexibility in building systems and components so that they can be more easily
adapted to changing requirements and technology (GSA, 1999). However, the
vast majority of federal facilities were clearly not designed for flexibility and are
difficult and expensive to reconfigure or adaptively reuse in response to changing
requirements.

FACILITIES REQUIREMENTS, LONGEVITY, AND

LIFE-CYCLE COSTS
The last two decades have brought great changes in the way Americans live
and the services they demand. External and internal forces such as radical ad-
vances in computers and communication, the regulatory environment, changes in
demographics and socioeconomic conditions, and a renewed emphasis on the
safety of personnel and customers are driving change in the operating environ-
ments of all types of organizations.
Today, organizations can operate around the clock by having business units
located around the world and networked through technology. An increasingly
diverse workforce requires greater accessibility and work arrangements such as

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26 INVESTMENTS IN FEDERAL FACILITIES

telecommuting, flexible or part-time schedules, child care, and the like. Tech-
nologies such as the Internet and wireless connectivity are changing the ways in
which the public accesses services and the ways in which organizations interact
with their employees, customers, and clients. Because electronic communication
allows for the rapid exchange of information and the rapid collection and tabula-
tion of demands and viewpoints, it provides ways to increase the number of par-
ticipants in the marketplace and in public processes. All of these changes have an
effect on facilities requirements, design, and operations.

Facilities Requirements
Changes in society and in organizational environments affect facilities re-
quirements—that is, the properties of a facility that will achieve a balance be-
tween the external environment, the facility’s long- and short-term objectives,
and the functions it is expected to serve (Erdener, 2003). Twenty-four-hour op-
erations, together with computers and other office equipment, make the uninter-
rupted supply of a facility’s power, heating, ventilation, and air-conditioning
systems more critical. Increasing turnover rates for employees and operating
units and new technologies for business and security functions necessitate facili-
ties that can be adapted to new interior layouts quickly, efficiently, and cost-
effectively. An increased emphasis on physical security calls for methods to
reduce the vulnerability of a facility to terrorism and natural hazards so as to
better protect the people and equipment inside. Greater accessibility for the
physically handicapped, employees, and visitors requires new facilities designs.

Facilities’ Longevity
Although facilities requirements are dynamic, facilities themselves are rela-
tively static and can be long-lived. Most facilities are designed to provide at least
30 years of service. With proper maintenance and management, buildings can
perform adequately for 100 years or longer.
The longevity of an individual facility is dependent on such factors as quality
of design; quality of construction; durability of construction materials and com-
ponent systems; incorporated technology; location and local climate; type and
intensity of use; operation and maintenance methods; damage caused by natural
and man-made disasters; and human error (NRC, 1998; FFC, 2001c). Facility
longevity is also influenced by its value to its owner: A facility that is performing
adequately may still be demolished if it no longer fulfills an organization’s oper-
ating requirements, or if other opportunities for the land on which it is situated
provide greater value.
Thus, a central issue in addressing facilities investments is the relative lon-
gevity of facilities and the likelihood that whatever is built and however it is
maintained will eventually become obsolete to the original objectives in the short,

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CONTEXT 27

intermediate, or long term. There will also be changes in ownership, occupancy,

regulations, condition, internal and external technologies, and the opportunities
that inhere in a facility or the real estate it occupies.

Life Cycles of Facilities

Facilities are complex structures with a number of separate but interrelated
systems—exterior walls, roofs, and windows; mechanical and electrical systems;
heating, ventilation, and air conditioning; fire protection; security; and others.
The individual systems require extensive renewal periodically, on cycles that vary
from 10 to 50 years. Because a facility’s systems can be repaired or replaced and
its interior spaces can be reconfigured to support new functions, its service life
can be extended well beyond the life of the individual systems. For this reason,
facilities can be viewed as renewable assets.
Facilities pass through a number of stages during their lifetimes: planning
(programming, conceptual planning, design), acquisition (construction, start-up),
operation (use, renewal, repair or revitalization), and disposal (sale, demolition)
(Figure 1.5). The direct costs of facilities over their life cycle include those for
programming; conceptual planning; financing; design; construction; maintenance;
repairs; replacements; alterations; normal operations such as heating, cooling,
lighting; and disposal.
Design and construction expenditures, the so-called “first costs” of a facility,
typically account for 5 to10 percent of the total life-cycle costs. However, deci-
sions made during design and construction about how much to invest in a
building’s materials and systems can significantly impact its operating and “exit”
or disposal costs. Operation and maintenance costs typically are 60 to 85 percent
of the total life-cycle costs, with land acquisition, programming, conceptual plan-
ning, renewal or revitalization, and disposal accounting for the remaining 5 to 35
percent (NRC, 1998; FFC, 2001c). For facilities to perform adequately and reach
their design service life, annual investments in preventive maintenance and minor
repairs are required.
Facilities, of course, are built to shelter people and equipment and their ac-
tivities. Thus, in addition to the cost of the facility itself, there will be related
costs such as those for staffing, furnishings, equipment, and information tech-
nologies. These costs can be 2 to 10 times greater than the cost of the facility over
its entire life cycle.

Plan Acquire Operate Dispose

FIGURE 1.5 Facility life cycle.

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28 INVESTMENTS IN FEDERAL FACILITIES

As noted previously, private-sector organizations invest in facilities to en-

sure that the production of goods and services and other operations are efficient
and ongoing in order to maximize their returns. When public-sector organizations
face choices on where to invest limited resources, facilities investments, particu-
larly investments in maintenance and repairs, are often the first to be deferred or
cut altogether. For public-sector officials, this decision is relatively easy, because
in the short term operations will continue without an obvious immediate decline
in services to the general public. As maintenance is deferred over the longer term,
however, the capital investment required to renew or replace a facility is twofold:
the replacement cost and the return on the original investment. It has been esti-
mated that the cost relationship is between $4 and $5 in capital liability created
for each $1 of deferred maintenance (Kadamus, 2003). Thus an accumulation of
deferred investments over the long term may be significantly greater than the
short-term savings that public-sector decision makers were initially seeking.

CONCEPTUAL SHIFTS IN FACILITIES

INVESTMENT DECISION MAKING
In the drive to achieve their missions, increase profitability, and become more
competitive, private-sector organizations have sought to significantly improve
critical areas of performance by being results-driven. They focus on improving
operations linked to financial, functional, and corporate objectives such as in-
creased yields, reduced delivery times, increased inventory turns, improved cus-
tomer satisfaction, [and] reduced product development time (Schaffer and
Thomson, 1992).
Research reports published in the 1980s and early 1990s found that finance
directors and corporate planners responsible for the business planning and direc-
tion of private-sector organizations were not closely linked to their facilities man-
agement or real estate departments (Then, 2003). As competition and the pressure
to produce results increased in the 1990s, financial directors and corporate plan-
ners began scrutinizing all of the costs of doing business, including facilities costs,
in order to remain competitive. Some organizations began to take a more inte-
grated, all-encompassing approach to managing their resources—people, facili-
ties, information technology, and dollars—to better meet their missions. When
senior managers recognized that the facilities required to support the delivery of
goods and services were a means to a more basic economic end, their organiza-
tions began to evaluate facilities investment proposals as they would proposals
for other investments—as mission-enablers rather than solely as costs. In this
construct, investments in facilities and decisions on their location are typically
made to ensure that business operations are continuous and efficient, essential
ingredients to an organization’s current and future success.
The emergence of new information technologies in the 1990s also drove and
enabled more integrated approaches to facilities investments and management,

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CONTEXT 29

although such technologies also present organizational challenges. Using infor-

mation technology for facilities management is not new: Computer-aided facili-
ties management systems have been available for almost two decades. What is
new is the capacity to integrate data from facilities management systems with
data from financial and personnel systems in order to track all of the resources
involved and provide the information needed to make decisions about invest-
ments. These technologies also allow for the rapid aggregation of large amounts
of data from geographically dispersed sites. Thus, data can now be gathered for
entire portfolios of facilities and their staffing and operating costs as opposed to
data for individual buildings only. At the same time, determining which data are
actually useful in decision making can be difficult. Doing so is likely to require a
concerted effort to identify, verify, and refine data in order to develop informa-
tion that is helpful in differentiating the consequences of alternative actions.
All of the above factors—the desire for flexibility, responsiveness to change,
changing expectations, integrated management, information technologies—are
driving significant change in the field of facilities management. The evolving
discipline of facilities asset management is the focus of Chapter 2.

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Facilities Asset Management

BACKGROUND
The field of facilities management is evolving. Once focused on tactical con-
cerns, tasks, and functions that were oriented to the operation of individual build-
ings, it now focuses on the entire portfolio of facilities and integrated resource
management (Figure 2.1).

Tasks and Processes and Resource

Functions Competencies Management
Property Information Property/Estate Management Property Portfolio
Repairs and Maintenance Asset Management Management

Site Selection, Acquisition Facilities Management Strategic Facilities Planning

Guidelines
Construction and Handover Corporate Real Estate
Management Workplace Strategies
Inventory Control and
Purchasing Long-term Asset
Management
Lease Management and
Disposal Support Services
Management
Refurbishment and Refit
Optimizing Utilization of
Business Resources

Tactical Concerns Strategic Concerns

FIGURE 2.1 The evolving focus of facilities asset management. SOURCE: Then, 1996;
2003.

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FACILITIES ASSET MANAGEMENT 31

Cost Factors
Management and Customer Perception • Competition
• Need to change physical assets from • Energy
overhead to resources • Space
• Image • Need for operational efficiency
• Downsizing
• Focus on core competencies
Employers’ Needs and Expectations
• Working conditions Facilities Government Policies
• Morale • Public-private
• Sick Building Syndrome
Management partnerships
• Repetitive strain injury • Best value
• Liability claims • Health and safety
• Security • Physical security
• Sustainability Change or Business
Re-engineering Factors IT Development
Need for Flexibility
• Outsourcing • Communications
• Intelligent buildings
• Responsiveness
• Space management
• More intense use of facilities
• CAFM
• Volatile market conditions

• Best Value Service • Corporate governance

• Innovative Services • Stakeholders’ influence
• Flexibility • Integrated resource
• IT-based management
• Added Value • Customer-driven strategies
• Environmental Issues • Relationship management
• Sustainability • Market information
• Physical Security

FIGURE 2.2 Factors driving the evolution of facilities management. SOURCE: Adapted
from Okoroh et al., 2002; 2003.

One driver of this evolution is the emphasis by private-sector organizations

on results-driven management strategies for all aspects of their operations. This
shift is also indicative of the increasing recognition of facilities as “mission
enablers” that support organizational goals, work processes, and productivity.
Increased competition, a renewed emphasis on physical security, the outsourcing
of business functions, changing expectations and requirements of employees and
clients, and emerging information and building technologies are also factors (Fig-
ure 2.2). As noted by corporate real estate expert Martha O’Mara,
the organizational emphasis of corporate real estate is shifting from a functional
project management approach based on how buildings are delivered to one which
aligns with the structure of the company and the way work is conducted. This
shift is necessitated not only by the strategic perspective but also by the in-
creased use of service providers outside of the company that assume many of the
routine functions of real estate and facility management (O’Mara, 1999, p. 307).

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32 INVESTMENTS IN FEDERAL FACILITIES

While many factors are driving the evolution of facilities management, new
technologies are enabling it. The development of open platforms and relational
databases allows for the integration of data from disparate sources, including
financial, facilities, and personnel systems. Large quantities of data from geo-
graphically dispersed locations can be gathered and processed quickly to monitor
day-to-day operations, costs, and trends. Decision support tools allow for the
development and evaluation of large numbers of alternative investment scenarios.
The next sections focus on the emerging practice of facilities asset manage-
ment, its components, and the additional skills required of facilities asset manag-
ers. Chapter 2 concludes with a summary of principles and policies from best-
practice organizations.

FACILITIES ASSET MANAGEMENT

Facilities asset management is an evolving discipline. In this report it is de-
fined as “a systematic process of maintaining, upgrading, and operating physical
assets cost-effectively. It combines engineering principles with sound business
practices and economic theory, and provides tools to facilitate a more organized,
logical approach to decision making” (FHWA, 1999, p. 7). A facilities asset man-
agement approach allows for both program- or network-level management and
project-level management and thereby supports both executive-level and field-
level decision making.
Program- or network-level management is associated with a systemwide ap-
proach that involves structured decision-making practices, including the analysis
of trade-offs to identify and execute the best investments for a portfolio of facili-
ties. Such management involves a macroscopic view of the assets being managed
and makes use of aggregated data. Project-level management decisions, in con-
trast, are associated with identifying the best actions to take for specific facilities,
and they typically occur at the field level, using more disaggregated data (Figure
2.3).
The importance of a facilities asset management approach is that it allows
organizations to integrate facilities considerations into corporate decision making
and strategic planning processes. This is a significant shift from past practice,
whereby facilities-related decisions were often made after the organization’s stra-
tegic direction had been set. Using a facilities asset management approach allows
organizations to forge a direct link between organizational goals, facilities invest-
ment decisions, and day-to-day operations (Figure 2.4).

COMPONENTS OF A FACILITIES ASSET

MANAGEMENT APPROACH
Facilities asset management is different from asset management in the finan-
cial/legal sense for the following reasons (Tracy, 2001):

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FACILITIES ASSET MANAGEMENT 33

PROGRAM/NETWORK/SYSTEMWIDE LEVEL

Financing • Data (location, inventory, properties, performance,

evaluation, etc.)
Budgets • Deficiencies/needs (current and future)
Agency Policies • Alternative strategies and life-cycle analyses
• Priorities, programs, schedules

PROJECT/SECTION LEVEL
Standards and • Data (materials, properties, demand, DATA
unit costs, etc.)
Specifications BASE
• Detailed design
Budget Limit • Construction
Environmental • Maintenance
Constraints

ONGOING, IN-SERVICE
MONITORING AND EVALUATION

FIGURE 2.3 Components of a facilities asset management system. SOURCE: Adapted

from Hudson et al., 1997.

FIGURE 2.4 Linking organizational goals with facilities investment and operations.
SOURCE: Adapted from Then, 1996; 2003.

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34 INVESTMENTS IN FEDERAL FACILITIES

• It focuses on a subset of corporate balance sheets that are physical in

nature.
• It enlarges the scope of assets to extend to noncapitalized assets such as
leased space, office equipment, human resources, and the like.
• It includes operating assets that require regular maintenance and repair to
retain their functionality and avoid catastrophic failure.
• It includes operating assets that depreciate and wear out over time but that
can also be renewed through investment (renewable assets).
• It involves the use and deployment of assets in dispersed locations and
over the various operating units of an organization.
• It accounts for a return on investment that is often in the form of increased
productivity of a facility’s occupants, a difficult value to quantify and measure.
• It recognizes that the facilities program manager may or may not have
authority over the disposition of all or a portion of the assets that he or she man-
ages.

The literature on facilities asset management identifies several components

needed to ensure that investment decisions are aligned with the mission and goals
of an organization:

• Accurate data for the entire facilities portfolio, not just individual build-
ings, to enable life-cycle decision making.
• Models for predicting the future condition and performance obtainable
from these facilities as a portfolio.
• Engineering and economic decision support tools for analyzing trade-offs
among competing investment approaches.
• Performance measures to evaluate the impacts of different types of ac-
tions (e.g., maintenance versus rehabilitation) as well as the timing of invest-
ments on the overall goals for service provision.
• Continuous feedback procedures.

These components are described in greater detail below.

Accurate Data
Facilities asset management data at a minimum include inventory and at-
tribute data. Inventory data describe elements of assets that do not change as a
function of time—for example, the number, location, type, and size of facilities
and the year of acquisition. Inventory data are gathered in a relatively straightfor-
ward manner, even for large portfolios of facilities; once gathered, the time and
cost to update them are minimal.
Attribute data capture characteristics that do change over time, such as the
demand for the facilities, usage, value, age, maintenance history (including treat-

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ment types and timing), operating and repair costs, condition, and so forth. At-
tribute data are more difficult to gather initially than are inventory data. Updating
attribute data may require periodic condition assessment and other programs,
which can be costly. Computer-aided facilities management systems are used to
store, analyze, and update both inventory and attribute data.

Performance-Prediction Models
Performance-prediction models predict the deterioration of building compo-
nents, measured as a composite condition index, as a function of time.1 They are
important because certain components of a facility are particularly prone to dete-
rioration or failure and require relatively frequent maintenance or repairs. Some
mechanical and electrical systems of a facility tend to have numerous moving
parts and are likely to need a great deal of maintenance (they are said to have a
high maintenance need probability). Nonperformance of some of these compo-
nents can have serious consequences for the serviceability of the facility. Simi-
larly, life safety systems generally have interacting parts, such as electrical signal
systems or controls, that have both a high maintenance need probability and very
serious consequences if they do not perform properly.
Building envelopes, for example, may have a relatively high maintenance
need probability, and the effects of nonperformance can range from annoying to
catastrophic. The envelope’s exposure to the weather makes it vulnerable, and
hidden deterioration may result if leaks are unknown or neglected. In contrast, the
covered structural system of a building tends to remain unaffected for the life of
the facility (a low maintenance need probability) unless the loading is signifi-
cantly changed, or the structure is modified, or deterioration occurs.2 The conse-
quence of nonperformance of a structural element is almost always serious. Hav-
ing models that can help to identify the differing maintenance need probabilities
of facilities can help facility managers and others determine where resources can
be spent to achieve the most significant returns in terms of supporting the
organization’s operations.

Engineering and Economic Decision Support Tools

Engineering-economic ranking and optimization methods can help decision
makers to evaluate trade-offs among different investment approaches. Ranking

1The BUILDER system developed by the Construction Engineering Research Laboratories of the

U.S. Army Corps of Engineers is one example of a performance prediction model; other models have
been developed by private-sector software firms.
2One example of an uncovered structural system is a steel bridge, which has a high maintenance

need probability.

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36 INVESTMENTS IN FEDERAL FACILITIES

methods make use of various decision criteria to prioritize competing needs in an

overall facility portfolio or infrastructure system. Decision criteria might include
the current condition, the predicted condition at some future time, life-cycle costs,
cost-effectiveness (i.e., some measure of effectiveness per unit cost of improve-
ment), and benefit-cost ratio. The relative sophistication of the decision criteria
used for project rankings ultimately impacts the relative value gained per unit
investment.
Optimization methods such as mathematical programming methods are used
to identify the combination of competing investment options that would result in
the greatest return on the investment, given budget constraints. Although several
attributes of the facility or system investment may be quantifiable as benefits or
costs, not all such attributes are quantifiable—for example, the environmental
and social impacts of various facility investment decisions. Such attributes may,
however, be considered qualitatively in various multiattribute decision frame-
works.

Performance Measures
Performance-prediction models to project what may happen are an important
element of a facilities asset management approach. Equally important are perfor-
mance measures to gauge what has occurred or is occurring in respect to a facili-
ties-related operation or activity.
Most organizations, whether private or public, measure the performance of
individual projects or buildings. Typical indicators include project completion in
relation to the original schedule and budget; energy, utility, or other operating
costs per square foot; utilization rate (occupied space as a proportion of usable
area); facility condition; and the like.
Indicators to measure the performance of an entire portfolio of facilities in
relation to organizational goals are less well developed but are fundamental to a
program- or network-level management approach. Performance measures in gen-
eral and program-level indicators specifically are discussed in greater detail in
Chapter 4.

Continuous Feedback
One of the objectives of implementing a facilities asset management approach
is to ensure the alignment of an organization’s portfolio of facilities with its mis-
sion and operating objectives. Continuous feedback is required to monitor the
operating condition of facilities that directly support and impact organizational
mission; to identify facilities that are no longer needed due to changing require-
ments; and to identify facilities that are obsolete technologically or otherwise.
This information, in turn, can be used to determine where investments should be

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FACILITIES ASSET MANAGEMENT 37

made to acquire, renew, or dispose of facilities. Continuous feedback and moni-

toring are discussed in greater detail in Chapter 4.

FACILITIES ASSET MANAGERS

The usefulness of a facilities asset management system is closely tied to the
extent to which an asset management culture has permeated the organization, the
quality of data on the asset portfolio, the linkage between the asset management
goals and organizational mission, and the skill level of the people involved in the
management system. Implementing a facilities asset management approach also
requires that facilities staff at headquarters and in the field have the appropriate
background and training to provide strategic information and to make recommen-
dations to senior managers.
The importance of having a competent workforce with the appropriate skills
and training to support an organization’s core competencies, goals, and missions
cannot be overestimated. A recent study of private-sector organizations that were
able to “make the leap from good to great” and to sustain their results for at least
15 years found that:
“Who” questions come before “what” decisions—before vision, before strategy,
before organizational structure, before tactics. First who, then what—as a rigor-
ous discipline, consistently applied . . . . The old adage “People are your most
important asset” is wrong. People are not your most important asset. The right
people are . . . . Whether someone is the “right person” has more to do with
character traits and innate capabilities than with specific knowledge, background
or skills. (Collins, 2001, p. 63)
Thus, people, like facilities, technologies, and dollars, are mission enablers,
assets that must be invested in over time.
In a facilities asset management approach, facilities managers can no longer
be regarded only as caretakers who bring unwelcome news about deteriorating
facilities and the need for investments. As facilities management has evolved
from tactical, building-oriented activities to a strategic, portfolio-based approach,
the skills required by facilities management organizations have similarly evolved.
A facilities asset management approach requires not only the technical skills (e.g.,
engineering, architecture, mechanical, electrical, contracting) found in traditional
facilities engineering organizations but also business acumen and communication
skills.
A report by the Center for Construction Industry Studies (CCIS) involving
31 private and public sector organizations found that it is fairly well recognized
in owner firms that the skill set required to manage and work on projects from the
owner’s side has changed dramatically and the issue of skill development of
owner personnel is perhaps the most difficult one facing owner firms (CCIS,
1999). In business terms, critical owner skills include technical knowledge of the

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process, alignment with the business units’ goals and objectives, facility defini-
tion, stewardship of the overall project process and objectives, and project con-
trols (Sloan Program for the Construction Industry, 1998). Skills required by fa-
cilities asset managers are outlined in Table 2.1.
A newly released study reinforces the CCIS report and lists 27 business skills
a facility manager should have to be effective in today’s operating environment
(Table 2.2). According to the International Facility Management Association
(IFMA), only 34 percent of facility managers have business degrees (IFMA,
1998). Thus,
[it] is not surprising that facility managers are unsophisticated in applying busi-
ness practices to facility management. Most of them have technical education in
engineering, architecture, or administrative management. Their education and
training did not stress business principles or theory. Many of them have little
training in financial management. (Cotts and Rondeau, 2004, p.3)
For these reasons, most organizations adopting a facilities asset management
approach must have staff who are able to use new methods of analysis, who
understand financial concepts and management, and who can communicate ef-

TABLE 2.1 Skills Required by Facilities Asset Managers

Category Skill

Business Writing and managing contracts

Negotiation
Managing budgets and schedules
Communication Coordination/liaison
Conflict management
Cultivate broad network of relationships
Influence Mentoring
Motivating
Change management
Managerial Team building
Delegating
Politically aware/see big picture
Problem solving Continually analyze options/innovation
Planning
Consider all sides of issues, risk management
Technical Understand entire construction process
Multidisciplined (knowledge of several areas of engineering)
Information technology skills

SOURCE: CCIS, 1999.

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FACILITIES ASSET MANAGEMENT 39

TABLE 2.2 Business Skills for the Facility Manager

Know your business Submit an annual report for the department

Know and be able to use the language of Implement strategic facilities business planning
business
Be able to develop, execute, and evaluate
Understand the costs of doing business budgets

Become a skilled business communicator Be a skilled contracting officer and procurer of

goods and services
Identify and use best practices in all functions
of facility management Understand how you should manage, track, and
report the ongoing performance metrics, stated
Focus on cost reduction and on management in financial terms for the success of your
improvements that will lead to cost reduction department and service providers
and cost avoidance
Think of ways to make well-run facilities a
Understand, in detail, how you affect the corporate advantage where appropriate
business. Be able to translate facility
management (FM) needs into FM requirements For major decisions, use life-cycle costing
and to show how FM achievements fit business
needs Implement a regular program to communicate
these metrics and your success to management
Make your annual budget your principal facility and to your customers
management information tool
Understand depreciation and its effects on your
Sign favorable leases and get control of your budgets
leases
Expect to invest in business technologies
In your practice and in your communications,
stress the importance and benefits of good Understand the importance of being able to
facility management project and work to a budget and a schedule

Be able to use capital budget evaluation tools Understand ratio analysis

Actively manage your real estate portfolio Be able to administer chargebacks and
allocations
Be capable of making lease-versus-buy
decisions Reduce churn

SOURCE: D. Cotts and E.P. Rondeau, 2004.

fectively with stakeholders and decision makers with differing technical back-
grounds and at all management levels. Training of existing staff and the recruit-
ment of new staff with such skills is required.
Academic institutions are developing facilities and infrastructure manage-
ment programs and courses to educate both students and practitioners on ap-
proaches and methods for managing facilities and infrastructure as assets. Cornell

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40 INVESTMENTS IN FEDERAL FACILITIES

University, Eastern Michigan University, Ferris State University (Michigan),

the University of Southern Colorado, and Brigham Young University all have
programs in facility management (IFMA, 2003). George Mason University of-
fers a professional certificate in facility management and the Georgia Institute of
Technology offers a master’s program in building construction and integrated
facility management. Thirteen of 51 civil engineering and related programs sur-
veyed had at least one course in or related to civil infrastructure management
(Amekudzi et al., 2001). These developments point to a growing demand for
formally trained facilities and infrastructure managers with both the technical
expertise and business acumen to successfully manage facility portfolios and
civil infrastructure systems as assets and to the many resources available nation-
wide that offer full- or part-time training.

EXAMPLES OF FACILITIES ASSET MANAGEMENT SYSTEMS

Included below are two examples of facilities asset management systems in
use. The study committee did not evaluate their effectiveness, and their inclusion
should not be viewed as an endorsement. However, the examples are indicative
of several directions being taken.
The first example of a facilities asset management system is found at Brigham
Young University (BYU). Implementation of BYU’s asset management system
began in the early 1980s, after the existing system had resulted in a culture of
competition, confusion, and lack of trust among the various stakeholders. The
search for a new system resulted in a paradigm shift from being a money-driven
system to a requirements-driven system (Campbell, 2000).
The database developed to support this new paradigm tracks requirements
(Figure 2.5), ensures that all assets are included in the inventory, and updates the
assets based on life-cycle costing. Beyond standard maintenance and repair, an
annual inspection is made of all assets that have 1 year of remaining life to assess
whether their life can be extended or if replacement is warranted. Customer re-
quests, one-time projects, and areas experiencing continual maintenance prob-
lems are also reviewed.
This system has led to a clearer understanding and definition of operating
and capital budgets. Operating budgets include operations, maintenance, and re-
pairs and must ensure that assets function and are managed properly, users are
satisfied, and the environment is stable. Capital budgets include replacements,
retrofits, improvements, and new space additions that maximize or extend the
useful lives of facilities (Figure 2.6).
A partnership has been forged with all key stakeholders wherein an annual
funding limit, a 40-year cash flow average of all life-cycle database items, and a
5-year average of all facility master plan items are mutually created. The annual
funding limit in each area is reviewed periodically for required changes. Annual
inspections and reviews are done to determine requirements. If the requirements

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FACILITIES ASSET MANAGEMENT 41

Growth

Needs
Asset
Expansion

User Needs

Utilization Space Use

Programming
Planning
Design

Construction Construction

Operations

Existing
Assets
Planned Maintenance
Operations
User-Requested Maintenance

Total Asset
Repairs
Management

Retrofits/Upgrades

Improvements Capital

Replacements

FIGURE 2.5 A facilities asset management structure (BYU).

do not exceed the limit, the difference goes into the “bank” for future use on that
asset. If requirements exceed the annual fund limit, then those funds come out of
the bank.
A second example of a facilities asset management system is being imple-
mented at the University of North Carolina (UNC). UNC has a repairs and reno-

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42 INVESTMENTS IN FEDERAL FACILITIES

Capital Needs Analysis Database

Permanent Facility File

Facility
Master
Building Life Cycle Plan
File File Room File File
(replacements)

Process

Annual Database Needs

Fund
Inspection/Review

• Inspect 1 year remaining life

• Review trouble areas
Permanent Facility
• Review customer requests
File Adjustments
• Propose retrofits
• Propose improvements

Annual
Other Project Approvals
Adjustments Management
• List Needs “0”
• Additions • Set Up Projects • Coordinate Items
• Missed • Manage • Determine Funding
• Delete • Close • Bottom-up Review
• Audits • Open Invitation to Challenge
• Corrections • Secure Funding
• Inspections
• Inflation
• Other Defer/Cancel

FIGURE 2.6 A facilities asset management framework (BYU).

vations reserve fund that provides an annual allocation for repairs and mainte-
nance. To ensure that these funds are effectively spent, the university has devel-
oped a method for measuring the cost of work needed to bring a facility up to
some baseline level of quality. This incorporates data kept by UNC’s Facilities
Condition Assessment Program (FCSP) and also goes beyond it. The FCSP iden-
tifies only the work required to bring a facility back to its original condition, as
well as to correct life safety code deficiencies, while the recently developed Fa-
cility Condition and Quality Index (FCQI) also measures the cost to address func-
tional and qualitative obsolescence relative to a desired baseline. This index di-
vides the amount it would cost to bring a facility up to the desired functional level
over the replacement value of that facility. For example, if a facility has a replace-
ment value of $25 million and a cost of $2.5 million to bring it to the desired

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FACILITIES ASSET MANAGEMENT 43

performance level, the FCQI would be 0.1 (Klein et al., 2002). An FCQI exceed-
ing unity indicates that it would cost more to upgrade and modernize the facility
in question than it would to build a new one. Where this occurs, the university
automatically substitutes a replacement building into the 10-year capital needs
plan. In such a case the existing building is not necessarily torn down but might
be modernized to meet less demanding requirements.
To arrive at the FCQI, UNC has a uniform method of compiling facilities
condition data using an online questionnaire about the characteristics of each
building (e.g., structural condition, accessibility, maintainability). The database
that results is also maintained and manipulated online. Beyond quality data,
project implementation data are also entered and tracked via the Web, with access
available to relevant stakeholders.

PRINCIPLES AND POLICIES FROM

BEST-PRACTICE ORGANIZATIONS
Based on a consolidation of research, interviews, briefings, and the commit-
tee members’ individual and collective experience, the committee found that best-
practice organizations operate under a number of principles and policies (all 10
principles/policies are repeated in Chapter 6). In matters of facilities manage-
ment,
Principle/Policy. Best-practice organizations implement a systematic fa-
cilities asset management approach that allows for a broad-based un-
derstanding of the condition and functionality of their facilities portfo-
lios—as distinct from their individual projects—in relation to their
organizational missions. Best-practice organizations ensure that their
facilities and infrastructure managers possess both the technical exper-
tise and the financial analysis skills to implement a portfolio-based ap-
proach.
Facilities asset management is an evolving approach that helps to ensure that
an organization’s facilities portfolio is aligned with its mission. Required ele-
ments include accurate data about the facilities’ portfolio; models for predicting
the future condition of these facilities and the performance obtainable from them;
engineering and economic decision support tools for trade-off analyses among
competing investment alternatives; performance measures to evaluate the impacts
of different types of actions (e.g., maintenance versus rehabilitation) and the tim-
ing of investments on the overall goals for facility provision; and short- and long-
term feedback procedures.
Implementation of a facilities asset management approach requires facilities
and infrastructure managers with the technical expertise found in traditional fa-
cilities management organizations (e.g., engineering, architecture, mechanical,
electrical, contracting) as well as an understanding of financial concepts and
management.

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Decision Making to Support

Organizational Missions

BACKGROUND
Organizations are established to achieve specific goals and missions. Their
level of success depends, in large part, on the effectiveness of their decision mak-
ing. Every decision made by an organization is intended to make something hap-
pen that otherwise would not or to prevent something from happening that other-
wise would (Ackoff, 1999).
Because of the sums of money involved and the long-term nature of facili-
ties, major facilities investment decisions have direct impacts on many business
units, operating groups, and management levels, as well as on the financial pros-
pects of any large organization. Thus, multiple internal and external stakeholders
are either directly or indirectly involved in and impacted by these decisions. These
stakeholders typically have differing, and possibly conflicting, objectives, respon-
sibilities, and levels of technical knowledge.
The magnitude of the financial resources required for facilities investments
precludes investment in other activities of importance and thus requires explicit
trade-offs—if x million dollars are invested in facility A as requested by stake-
holders 1, 2, and 3, then x million dollars will not be invested in activities B, C,
and D, as requested by stakeholders 4, 5, and 6. The potential for adversarial
relationships, miscommunication, and gamesmanship among the stakeholders is
obvious as each group seeks to achieve its own goals and objectives.
To help align the objectives, goals, and values of the various stakeholders
toward achieving the organization’s goals and missions, best-practice organiza-
tions establish a framework of procedures, required information, and valuation
criteria to support their decision making about facilities requirements. The vari-

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 45

ous components of the framework are understood and used by all relevant leader-
ship, management levels, and operating groups, which helps to permeate a facili-
ties asset management approach into the culture of the organization.
For facilities investment decisions, the components of the framework include:

• Common terminology,
• A basis of shared information,
• Decision processes that are clearly defined and incorporate multiple deci-
sion points,
• Performance measures,
• Feedback processes,
• Methods for establishing accountability, and
• Incentives for groups and individuals.

Together these components support decision making related to facilities re-

quirements and investments, create an effective decision-making environment,
and provide a basis for measuring and improving facilities investment outcomes.
This chapter features those components of a framework related to facilities
requirements and investments. The roles of technical analysis and values in deci-
sion making are first reviewed. The following sections discuss management ap-
proaches to achieving a mission; information for decision making; and decision-
making processes. Chapter 3 concludes with a summary of principles and policies
from best-practice organizations.

THE ROLES OF ANALYSIS AND VALUES IN DECISION MAKING

There is a generally recognized five-step process to help guide decisions on
issues worthy of careful thought (Hammond et al., 1999):

1. Define the decision problem.

2. Specify appropriate objectives.
3. Identify a full range of alternatives for meeting the objectives.
4. Understand the consequences of the competing alternatives.
5. Evaluate the alternatives, incorporating the necessary trade-offs.

Regardless of who owns or manages them, facilities are built or renovated as

a result of a similar decision process:

• The requirement for a facility to serve a specific function or purpose is

identified.
• A set of objectives is developed for the facility.
• Different alternatives for meeting the objectives are identified.
• The consequences of the alternatives are estimated.

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46 INVESTMENTS IN FEDERAL FACILITIES

• Trade-offs are made to evaluate the alternatives.

• A decision is made to proceed.

A number of activities are then required to implement the program and to

operate a facility. Many of these activities also occur as a result of decision pro-
cesses:

• Funding is obtained.
• The facility is acquired through construction, renovation, lease, or pur-
chase.
• The facility is occupied, operated, and maintained over a period of years
and sometimes renewed.
• At the end of its life, the facility is disposed of.

Such processes appear logical and straightforward. However, in the real-life

operating environments of corporations or federal agencies, where multiple stake-
holder groups have a direct interest in the outcome of facilities investment deci-
sions, decision making is rarely perfectly logical or sequential. Instead, decision
making is likely to be interactive and iterative and to involve various stakeholder
groups, who have different interests and information, at different and multiple
points in the process.
Furthermore, decisions of any import are not based solely on technical analy-
sis. The various parties involved also judge the desirability of the outcomes of
various alternatives based on their individual and organizational values—that is,
what an individual, a society, or an organization aspires to achieve: the health of
human beings, the preservation of an ecosystem, an improved quality of life, or
the ability to carry on an economic activity. When making decisions about invest-
ment alternatives, the various stakeholder groups use their values explicitly or
implicitly to answer such questions as, How much of one service type should be
given up to enhance another service type? How much is it worth to enhance the
service quality of each type of service? Ultimately, values are at the core of all
investment decisions and characterize the desirability of their consequences.
For large organizations, data, logical analysis, and judgments about facts
help to determine the likelihood of the consequences of an alternative. Quantita-
tive analysis can help people to systematically assess the implications of infor-
mation and expose biases and flaws in their reasoning (Lempert et al., 2003).
However, the decision-making process can quickly result in gridlock if the vari-
ous stakeholders cannot agree on the assumptions that will form the basis of the
analysis.
A further complication is that the desirability of the consequences will be
judged differently by the different stakeholder groups based on their values. To
understand how and why organizations make decisions, both types of judgments

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 47

are important and must be accounted for. Confusing fact-based judgments with
value-based judgments can lead to miscommunication, mistrust, and a decision-
making environment characterized by adversarial relationships and gamesman-
ship (Kleindorfer et al., 1993).
To help align the values, goals, and objectives of the various stakeholders, an
overarching desired outcome, such as mission achievement, must first be identi-
fied. The components of a framework to support achievement of that outcome
can then be developed. For example, in the justice system, one overarching de-
sired outcome is that anyone accused of a crime receive a fair trial. A jury of
peers is assembled to decide on guilt or innocence. The prosecution and the de-
fense, who have diametrically opposed objectives, work within a framework of
procedures, required information, and valuation criteria to present their cases.
They use a common basis of information or set of facts to build their cases, al-
though they are free to reach differing conclusions. The information is deemed to
be credible because it is provided under oath and penalties exist for perjury. The
performance of the prosecution and the defense is measured by their success in
swaying the jury to their point of view. The various arguments are tempered by a
judge, who is responsible for ensuring that the appropriate procedures are fol-
lowed to achieve a fair trial.
Best-practice organizations similarly establish a framework of procedures,
required information, and valuation criteria to meet an overarching desired goal—
achievement of mission. As noted in Chapter 2, a facilities asset management
approach allows an organization to integrate facilities considerations into its stra-
tegic planning processes and to forge a direct link between organizational goals,
investment decisions, and operations. The next section describes some manage-
ment approaches that can be used to reinforce strategic decision making.

MANAGEMENT APPROACHES FOR ACHIEVING A MISSION

Best-practice organizations use their mission as guidance for instituting man-
agement approaches that integrate all of their resources—personnel (human capi-
tal), physical capital (facilities, inventories, vehicles, and equipment), financial
capital, technologies, and information—in pursuit of a common goal. Ackoff de-
scribes two types of management approaches. The first, preactive planning, is a
top-down, strategically oriented approach based on forecasts of suppliers, con-
sumers, and competitive behavior as well as economic, social, and political con-
ditions for which senior management sets organizational objectives. The tactics
for meeting these objectives are left to the individual operating units. The second
approach, interactive planning, is directed at gaining control of the future and
consists of the “design of a desirable future and the selection or invention of ways
of bringing it about as closely as possible.” Interactive planning focuses on in-
volving personnel from within the organization in the planning process so that

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48 INVESTMENTS IN FEDERAL FACILITIES

they can “come to understand their organization and its environment, and how
their behavior can improve performance of the whole, not just their part of it”
(Ackoff, 1999, p. 106).
Yet another management approach for integrating the use of resources is one
that focuses on an organization’s essential areas of expertise (its core competen-
cies), which are the organizational skills that are difficult to duplicate, that create
a unique value, or that constitute the organization’s competitive advantage—that
is, what it does better than anyone else (NRC, 2000).
In this approach, functions deemed to be core competencies are assigned to
an organization’s in-house staff because they have the skills and institutional
knowledge to most effectively perform them. In-house staff may also perform
functions that support core competencies to keep competitors from learning, tak-
ing over, eroding, or bypassing the organization’s core competencies (Pint and
Baldwin, 1997). Noncore functions that are required but not critical to an
organization’s competitive position—for example, janitorial services—may be
outsourced to providers with expertise in that function.
Using this management approach, facilities investments can be evaluated
based on their support of the organization’s mission and core competencies. For
example, if the core competencies are research and development of new pharma-
ceutical products, then laboratories and other research or manufacturing facilities
can be directly linked to operations essential to the organizational mission and
evaluated as mission enablers. Facilities that support core competencies—for ex-
ample, administrative space required for in-house staff or noncore functions—
can be differentiated from facilities viewed as mission enablers.

Level of Control and Planning Horizons

When considering a facilities investment proposal, best-practice organiza-
tions determine the level of control required and the planning horizon (the length
of time a facility will be needed to support a particular function), which may or
may not be the same as the life of the facility.
Based in part on the level of control an organization wishes to exert over its
facilities, it may choose to own them or lease them. Ownership allows the organi-
zation to exert maximum control over a facility’s condition, functionality, and
operations. In choosing ownership, an organization takes a risk that if require-
ments change, the facility can be disposed of without a substantial loss. It also
takes on a financial commitment to operate and maintain the facility over time.
However, the owner can realize financial benefits if opportunities arise to sell a
property at a profit. If a facility is demolished, the owner may be able to realize
some salvage value.
By leasing space,1 an organization gives up some control: for example, the

1The option of leasing facilities presumes that such facilities are available in the marketplace.

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 49

lessor’s approval might be needed for any modifications, or the term of the lease
might affect the organization’s ability to reduce costs by moving out. The lessor
could also choose not to renew a lease or to offer to renew it only at a higher rate.
The advantages of leasing include lower up-front capital and financing costs
and less restrictive credit standards, which translate into less risk and greater
liquidity (how easily assets can be converted to cash). An organization can choose
to renew the lease periodically, allowing it to adjust its space needs to reflect
evolving operational requirements. If the space becomes obsolete, is no longer
required, or is in the wrong location to best support current operations, the orga-
nization can move elsewhere, leaving the lessor to pay the costs of ownership and
obsolescence.
The type of lease entered into (operating or capital2 ) will depend on the type
of function to be supported, the organization’s financial position, its desire for
flexibility, and its operating environment. Whatever the type of lease, an organi-
zation cannot claim any tax depreciation benefits or realize any residual values
through sale or salvage value through demolition.
The General Motors Corporation illustrates one way among many of how a
facilities asset management approach can be directly linked to organizational
mission and strategic planning. General Motors (GM) has identified its manufac-
turing plants as directly supportive of its core competencies and operating re-
quirements—designing and producing vehicles. GM exerts maximum control
over these specialized facilities by owning them for an indefinite period of time
and staffing them with its own workforce.
GM has also developed a strategy for nonmanufacturing facilities intended
to provide a scalable portfolio that responds to changing business needs (GM,
2003). To leverage facilities investments, nonmanufacturing facilities have been
divided into three investment and use classifications (see Table 3.1). “Commit-
ted” facilities involve a long-term commitment. They are owned by the corpora-
tion to allow for proprietary investments and to be used primarily by the
corporation’s internal staff, although contractors, suppliers, or alliance partners
that support the corporation’s core business may occupy some of this space. A
second category is “flex facilities,” which are mid-term investments that allow
GM to exit from the space relatively rapidly if requirements change. Because flex
facilities are designed to accommodate a range of functions and appeal to a wider
audience, they can be more easily disposed of in the marketplace. These facilities
are owned and used by internal and noncorporation tenants. As demand changes,
the amount of space devoted to flex facilities can be increased or decreased to
balance the portfolio. The third category is “buffer” facilities, which support

2An operating lease is a lease usually lasting for 5 years or less in which the lessor handles main-

tenance and servicing. It may be most appropriate for short-term needs or in unstable markets. Capital
leases, in contrast, are long-term leases, usually 6 years or more (Groppelli and Nikbakht, 2000).

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50 INVESTMENTS IN FEDERAL FACILITIES

TABLE 3.1 An Approach for Nonmanufacturing Facilities (GM)

Facility Category Planning Horizon Level of Control Tenancy

Committed Indefinite Own Internal staff

Flex Mid-range Own Internal staff/contractors

Buffer Short term Lease Tenants

noncore functions. Buffer facilities are used as space for tenants, have short-term
leases, and can be easily disposed of in response to short-term business fluctua-
tions.

INFORMATION FOR DECISION MAKING

To provide a basis for informed decision making about facilities investments,
best-practice organizations foster communication among the various stakeholder
groups through the use of common terminology; rigorously analyze and evaluate
facilities investment proposals; and analyze ways to disengage from the proposed
investment (exit strategies).

Common Terminology
Facilities investments typically are of a magnitude that can affect an
organization’s financial health: Decisions about whether to invest will impact
many operating units. As noted in Chapter 1, private-sector organizations typi-
cally make capital investment decisions separately from decisions regarding op-
erating expenditures. Best-practice organizations use a decision-making process
for capital expenditures that involves many of the operating units at some point.
However, engineers, accountants, facilities managers, senior executives, finance
and tax experts, and market, technology, and personnel specialists lack a com-
mon vocabulary or style of interaction. Lack of a common terminology can easily
lead to miscommunication about potential facilities investments and time delays
that can have financial impacts.
Consider the concept “facility life.” Building service life has been defined as
the period of time over which a building, component, or subsystem provides ad-
equate performance (NRC, 1991). Design service life is the time period building
owners, designers, and managers use to make decisions about maintenance, re-
pairs, operations, and alterations, typically between 10 and 30 years (NRC, 1990).
Life cycle has been defined as the sequence of events in planning, design, con-
struction, use, and disposal (e.g., through sale, demolition, or substantial renova-
tion) during the economic or service life of a facility; it may include changes in

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 51

use and reconstruction (NRC, 1991). Unless such terms are clearly defined and
consistently used by all of the individual stakeholders, the potential for miscom-
munication is evident.
To communicate effectively across the various operating units—facilities,
administration, finance, human resources, and marketing, among others—best-
practice organizations establish and consistently use an agreed-upon set of terms
to promote mutual understanding of the issues, risks, and possible outcomes of an
investment proposal. Terms such as “capital” are clearly defined for use by all
operating units in both proposal documentation and in interactive discussions so
that time is not lost through miscommunication or by continually redefining the
ground rules.

Business Case Analysis

To further enhance communication among the various stakeholders and to
facilitate effective decision making, best-practice organizations use a business
case analysis. A business case analysis is a tool for planning and decision making
that projects the financial implications and other organizational consequences of
a proposed action (Schmidt, 2003a). It links estimates of costs and benefits with
expectations for projected outcomes. Although at its heart the business case is a
financial analysis, it also contains information on organizational impacts that can-
not be quantified in monetary terms, such as mission-readiness or fulfillment,
customer satisfaction, and public image.
The overriding purpose of a business case analysis is to make transparent to
the various decision-making and operating groups all of the objectives to be met
by a facilities investment, the underlying assumptions, and the attendant costs
and potential consequences of alternative actions. All of the participating groups
in a facilities investment decision use the same analysis and its various refine-
ments.
For these reasons, a business case analysis is designed and developed to an-
swer questions such as, What are the likely financial and other business conse-
quences if the organization takes a particular action? Which alternative for action
represents the best business decision? Will the returns justify the investment?
What will this action do for overall organizational performance? (Schmidt, 2003a,
2003b). Thus, a business case analysis is a planning and decision support tool, not
a budget, an accounting document, or a financial reporting statement. Best-prac-
tice organizations treat a business case analysis as a living tool, one that is being
continually revisited, refined, and updated, not as a static, one-time-only case
study.
The format and types of analyses included in a business case analysis are not
standardized: each organization determines and reaches general agreement on the
types of data, analyses, and methodologies to be used and how that information
will be presented. These components are strengthened over time through repeated

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52 INVESTMENTS IN FEDERAL FACILITIES

use. The credibility and value of the analyses and methodologies are improved by
understanding the types of information that are useful in differentiating the con-
sequences of various alternatives.
Financial and other quantifiable objectives, together with objectives that are
difficult to place a dollar value on, such as improved employee morale or im-
proved corporate image, are identified up front. Because some assumptions and
data underlying a proposal will be subjective and time sensitive (e.g., interest
rates), the sources of all information related to business trends, future interest
rates, inflation, salaries, and the like are documented. To provide credibility and
accountability, the persons or business units that developed the proposal are iden-
tified (Schmidt, 2003b).
Best-practice organizations recognize the interrelationships among their
people, places, other physical assets, technologies, information, and funds: A
change in the character, size, or amount of any one of these resources will impact
the other resources and the organization’s ability to meet its goals and mission. In
a business case analysis, such organizations analyze the life-cycle costs of a spe-
cific facility investment proposal and of the attendant staffing and equipment,
and they look at alternative uses of the required funding over the appropriate
planning horizon. They include the costs to finance the investment, the potential
costs and benefits of disposal, including sale and salvage value, the costs of tech-
nology, and operational requirements. These analyses allow decision makers to
better understand the potential consequences of facilities investment decisions
and to make informed choices in regard to owning, leasing, reinvesting in, or
constructing facilities.

Pro Forma Statement

At the heart of the business case is a pro forma statement that is essentially a
financial analysis. A number of standardized, repeatable, analytical measures are
typically used. These include net present value, internal rate of return, discounted
cash flow, return on equity, return on net assets, and earnings per share.3 The
metrics chosen are those that best represent the values of the organization. Once
developed, these metrics can be used to determine the cost of ownership, the
benefit/cost ratio, or the cost-effectiveness index—all important decision-making
criteria.
The financial information and assumptions used to develop the business
case analysis must be carefully explained and documented because, owing to the
compounding (or its reciprocal, discounting) effect of interest rates, all of the

3Return on investment is not a standardized, analytical measure; instead it is a concept whose

definition varies by organization and discipline. Organizations using the term “return on investment”
must clearly define how it is being used and how it is being calculated (Schmidt, 2003a).

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financial metrics mentioned above are highly dependent on time and the cost of
borrowing. For example, if the prevailing interest rate is 3 per cent, then a dollar
either received or expended 5 years in the future is worth only $0.78 today (its
“present value”), and a business case analysis must be careful to express all
monetary costs and benefits in similar terms. As interest rates rise or the period
of analysis lengthens, the present value of future costs or benefits decreases
sharply. For example, if interest rates are 8 per cent, the present value of a dollar
received or expended in 20 years is only $0.21. Even though the objectives of
capital investment in the public sector differ from those of the private sector, the
impact of time and interest rates on public-sector investment decisions is equally
powerful.
Several types of financial analyses can be used to evaluate a particular ac-
tion. Three with applicability to the public sector will be discussed here: cost of
building ownership, benefit/cost, and cost-effectiveness.

Cost of Building Ownership

The cost of ownership of a building has been defined as the total of all expen-
ditures an owner will make over the course of the building’s service lifetime
(NRC, 1990). The cost of ownership typically will include planning, design, and
construction (first costs); maintenance, repairs, replacements, and alterations;
normal operations such as heating, cooling, and lighting; and disposal. These
costs are also referred to as life-cycle costs.

Benefit/Cost Analysis
A common method of selecting among alternative investments is to deter-
mine the ratio of a project’s total benefits to its total costs—that is, the benefit/
cost ratio. A benefit/cost ratio greater than 1.0 indicates that the benefits of the
project outweigh the costs, while a ratio less than 1.0 means the opposite. Obvi-
ously, the higher the ratio for a particular alternative, the more attractive that
project will be relative to other competing projects. Using benefit/cost analysis
requires considerable care because the costs and benefits will be experienced at
different times and their magnitudes may vary considerably. For example, in a
building project, the relatively large first costs will be experienced early in the
project’s life and followed by smaller recurrent costs for maintenance, opera-
tions, repair, and replacement. Benefits generally will be small or nonexistent
initially but may accrue to fairly large values late in the life of the project. Al-
though the costs and benefits can be discounted to a single present value, doing so
will require multiple assumptions about interest rates, timing, and the future val-
ues of these elements. Despite these cautions, benefit/cost analysis can be a pow-
erful tool for evaluating alternatives.

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54 INVESTMENTS IN FEDERAL FACILITIES

Cost-Effectiveness Analysis
Benefit/cost analysis is predicated on the ability to express benefits in mon-
etary terms, either as a cash inflow or a cost avoided. However, when only the
cost side of a project can be quantified (as is often the case in public capital
investment decisions), an alternative means of analysis and comparison is re-
quired. Cost-effectiveness analysis was developed as a means of evaluating envi-
ronmental projects where, for example, the benefits of enhanced air or water
quality or the value of wetlands were difficult or impossible to quantify accu-
rately in monetary terms. In these cases, performance objectives were established
for the action, and the project that met all desired objectives at the lowest cost was
considered the most cost-effective. Despite mixed success with efforts to mon-
etize environmental benefits, cost-effectiveness analysis is a useful business case
tool when only the costs of a project are well defined.

Exit Strategies
To provide important insight about the potential consequences of investing
in a long-term, nonliquid asset like a facility and to select the best alternative to
meet the requirement, best-practice organizations typically develop and evaluate
exit strategies—methods for disengaging from an investment—as part of the busi-
ness case analysis.
A commonly analyzed and implemented exit strategy is to lease the required
space in the first place. If requirements change, an organization can move out of
leased space relatively quickly without the burden of selling or otherwise dispos-
ing of the property. In some cases, leased space may have a higher annual cost per
square foot than owned space. However, it may still make economic sense to
lease to ensure that the organization can divest itself of the space on short notice.
For space that is to be acquired through purchase or construction, one exit
strategy is to build flexible (generic) space that can be relatively easily adapted to
other uses to meet changing requirements. Flexible office or warehouse space
generally has wider appeal to potential buyers or those willing to sublease excess
space; this can mitigate the risk of selling it at a financial loss and increase oppor-
tunities for selling it at a profit. Johnson and Johnson, for example, builds its
biopharmaceutical facilities using flexible floor plans. With rapidly changing
markets and an 8-year-long Food and Drug Administration approval process, the
risk is considerable that when a project is completed, it may be outmoded or its
intended product lines will not gain approval. Johnson and Johnson mitigates the
risk by constructing facilities that can be relatively easily adapted to new uses or
different product lines. The Toyota Corporation takes a different approach, build-
ing in flexibility by constructing large facilities that are similar to one another in
order to accommodate a broad range of uses and to reduce surprises—a portfolio
approach.

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 55

Timely maintenance and repair of an owned facility can also be evaluated as

an exit strategy: Investment in maintenance and repair retains or improves the
functionality and performance of a facility, thereby increasing its marketability
and its residual value at the time of sale.
As the merits of a proposal are evaluated, the costs and benefits of leasing
versus owning, of developing flexible facilities, and of maintenance and repair,
as well as the projected residual value, are analyzed to provide quality informa-
tion for decision making. Tishman Speyer Properties, for example, develops and
evaluates at least two exit strategies for every proposed investment.
For some specialized facilities, such as those for manufacturing, power gen-
eration, defense or military use, and some types of research, the only exit strategy
may be demolition, cleanup, and disposal. A particularly strong rationale is needed
for investing in such facilities, such as a direct link to the core business lines and
missions of an organization, and the cost of the intended exit strategy must be
made explicit in the initial proposal. This exit strategy is evaluated to provide
information about the total costs involved and to provide insight into design and
operation practices that may lead to lower demolition and cleanup costs. For ex-
ample, the use of biodegradable materials for a facility may result in lower dis-
posal costs, or special waste disposal methods may be indicated.

DECISION-MAKING PROCESSES
In private-sector organizations, decisions about facilities investments are
typically made by a senior executive-level group—an investment committee, a
management committee, a group of senior vice presidents representing all of the
operating units, or the board of directors. This decision-making group is respon-
sible for ensuring that facilities investments are integrated into the overall organi-
zational strategy. The decision-making body reviews a proposal at several stages
of development. Each stage represents a decision point at which the reviewing
body will decide if the proposal should be given conditional approval and consid-
ered further or if it should be terminated (go/no-go determination).
Funding thresholds are established to determine the level at which a proposal
will be reviewed—the greater the cost or potential impact, the higher the level of
management review. The board of directors may make the final decision about
investment proposals with potentially significant impacts on the organization’s
cash flow, productivity, or competitiveness; in this case, an executive-level re-
viewing body will forward the proposal to the board as a recommendation rather
than a decision.
Minimal resources are invested at the earliest stages of proposal evaluation,
and the business case analysis is likely to focus on the financial aspects of the
proposal, the pro forma statement. As a proposal receives conditional approvals,
and as additional resources are committed, more detailed analyses are under-
taken, and the business case documentation becomes more complete until the

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56 INVESTMENTS IN FEDERAL FACILITIES

proposal becomes an actual project. Once final approval for a project is received,
it is usually put on a fast track so that the resulting facility can be functional as
soon as possible.
Throughout the process, information is continually gathered, refined, docu-
mented, and updated. Decisions are continually revisited to determine if modifi-
cations are needed in response to changing requirements. All significant deci-
sions are documented to create a decision record that can be archived and
revisited. Such a record creates an institutional memory and allows the organiza-
tion to save time when reevaluating a decision and when orienting people to the
project as leadership and managers change.
Figure 3.1 depicts a typical process for facilities investment decision making
used in best-practice organizations. The following text elaborates on individual
elements of this process.

Identify
requirement

Operating group
develops preliminary
proposal
Present to Decision-making No-Go
• Tied to strategic plan Process Ends
entity
• Screening criteria
• Preliminary analysis
Conditional
• Minimal resources approval
invested

Analyze alternatives
Recommend
• Portfolio impact development
strategy to Decision-making No-Go
• Scenarios: buy/lease/build Process Ends
entity
• Total cost projections
• Exit strategies
Conditional
approval

Present
Final detailed proposal to Decision-making No-Go
Process Ends
analysis entity

Fast-track project

FIGURE 3.1 Typical decision-making process for facilities investments.

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 57

Identifying a Facility Requirement

In a best-practice organization, a proposal involving a facility investment
may come from any of the operating units within the organization. The proposal
must be tied to the organization’s missions, organizational objectives, long-term
or rolling capital plan, and sometimes to an individual business unit’s annual plan
and goals. It also must meet established screening criteria (e.g., opportunities to
make money, avoid costs, improve customer satisfaction, improve product deliv-
ery, or create operating efficiencies).
Typically, a facility investment proposal is presented as an opportunity for
the organization to make or save money, avoid costs, or comply with regulations.
Opportunities for making money might occur where there is a facility require-
ment tied to an increased demand for a good or service attributable to increases in
population, increases in income, or an influx of new businesses. Opportunities for
saving money might be realized by creating operating efficiencies, by making
improvements that minimize the potential for accidents or other liability actions,
by replacing an obsolete facility with one that is state of the art, by consolidating
facilities, or by disposing of facilities that are no longer needed. Costs might be
avoided by incorporating nontoxic or recyclable materials in a building to avoid
the additional expense of disposing of hazardous materials at demolition. Or, an
investment might be proposed to comply with regulatory requirements, local
building codes, environmental standards, or new mandates.
At this initial stage, the level of analysis must be sufficient to determine
whether the proposal has merit, without incurring significant time and resources.
A pro forma statement might include the underlying assumptions, preliminary
estimates of internal rate of return, cash availability (expected costs and cash
flow), ledger impact (depreciable expense), and asset burden (tax flow), as well
as judgments about the potential impact on the organization’s operations, market
risk, and opportunities. In private-sector organizations, an earnings per share
analysis might be included to demonstrate the impact on profits and earnings. At
this stage, the information presented is high level and succinct, and the pro forma
may include some “plug in” numbers. The business case analysis may be limited
to the vision, the opportunity, the long-term benefit, a plan, and a net present
value analysis comparing the life-cycle cost of a lease with the life-cycle cost of
owning a facility.
An investment proposal is presented to the reviewing body by its organiza-
tional “owner,” typically the head of an operating unit that has a stake in its
successful outcome. The reviewing body will decide if the proposal has merit and
should be conditionally approved pending additional analysis or if it should be
terminated (no-go).

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58 INVESTMENTS IN FEDERAL FACILITIES

Recommending a Development Strategy

If conditional approval is given, more detailed analyses are undertaken as the
business case is developed. Typically, however, a wide range of alternatives for
meeting the requirement will be developed, including an alternative for not mak-
ing a facility investment. The organization will also analyze how it can fulfill the
requirement by squeezing production capacity out of the existing portfolio of
facilities or meeting it through other, nonfacility alternatives, such as outsourcing.
It will identify facilities in the portfolio that might become obsolete to the mis-
sion, underutilized, or overutilized if the proposal is implemented. If these analy-
ses indicate that additional facilities are required, alternatives for buying, leasing,
or building them and for disposing of facilities that are no longer required will be
evaluated. The life-cycle costs of all required resources (operating, staffing, in-
formation technologies, financial, facilities) are projected for each alternative.
What-if scenarios or sensitivity analyses that change the assumptions about a
proposal are used to aid in deliberation and decision making. Scenario develop-
ment and evaluation can identify a range of situations that are sufficiently plau-
sible and then evaluate their relative risks, costs, and benefits related to cash flow,
profits, life safety (e.g., accidents, injury, fire, earthquakes) and security, envi-
ronmental impacts, and the like. If the original proposal does not meet the invest-
ment objectives, its scope may be changed to consider the effects of a lower-cost
alternative.
All of this information is returned to the appropriate reviewing body. The
level of information presented must be sufficient for all the decision makers to
understand the trade-offs involved in choosing one alternative over another. At
this decision point, the reviewing body may narrow down the alternatives, re-
quest more analysis, or terminate the proposal.
A final, detailed business case analysis is then completed. The required in-
formation may be prepared by cross-functional teams, individual business units,
contractors, or some combination of these, depending on the culture and resources
of the organization. The numbers are validated by the various operating units,
including the facilities management group. In some cases, an independent third
party may be hired to verify the numbers. Based on this information, a develop-
ment strategy is recommended. The proposal is again taken to the reviewing body
for a go/no-go decision.

Time Frame and Continuous Evaluation

On paper, such a process appears to be lengthy and time consuming. In prac-
tice, executive-level committees of private-sector corporations meet as often as
once a week. Even if a proposal goes to a reviewing body four or more separate
times, it may take less than 6 months to move from initial review to final ap-
proval. It is not uncommon for a proposal to go from the planning process to
occupancy of the resulting facility in less than 3 years. In many cases, projects are

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 59

linked to the production schedule of a new product or service, so the timeline is

set by the schedule for production or service availability.
Project implementation may be delayed if there is a change in the external
operating environment, such as a change in interest rates, if a tenant must be
committed to a project before construction begins, if a rezoning approval is
needed, or if difficulties arise in bringing a contractor on board. If the operating
environment changes substantially or significant time elapses before the project
can be initiated, best-practice organizations reevaluate the decision to approve
the project and determine whether to proceed or cancel it.

PRINCIPLES AND POLICIES FROM

BEST-PRACTICE ORGANIZATIONS
Based on a consolidation of research, interviews, briefings, and the commit-
tee members’ individual and collective experience, the committee found that best-
practice organizations that successfully manage facilities investments operate
under a number of principles and policies in their decision making (all 10 prin-
ciples/policies are repeated in Chapter 6):
Principle/Policy. Best-practice organizations establish a framework of
procedures, required information, and valuation criteria that aligns the
goals, objectives, and values of their individual decision-making and op-
erating groups to achieve the organization’s overall mission. The com-
ponents of the framework are understood and used by all leadership and
management levels.4
In large organizations, significant facilities investment decisions typically
entail millions of dollars and have direct impacts on many divisions, operating
groups, management levels, and budgeting processes. Multiple internal and ex-
ternal stakeholders with differing objectives, responsibilities, and levels of tech-
nical knowledge are impacted by these decisions and the trade-offs required.
To align the values and objectives of all relevant decision-making and oper-
ating groups, best-practice organizations establish a framework of procedures,
required information, and valuation criteria to support effective decision making.
Components include common terminology, a business case analysis, and evalua-
tion processes that are clearly defined and involve multiple decision points.
Principle/Policy. Best-practice organizations integrate facilities invest-
ment decisions into their organizational strategic planning processes.
Best-practice organizations evaluate facilities investment proposals as
mission enablers rather than solely as costs.

4This principle/policy and the principle/policy in the Executive Summary and at the end of

Chapter 4 together form Principle/Policy 1 in Chapter 6.

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60 INVESTMENTS IN FEDERAL FACILITIES

Best-practice organizations institute decision-making and management ap-

proaches that integrate the use of all of their resources—people, financial, facili-
ties and other physical assets, technologies, and information—in pursuit of mis-
sion achievement. They evaluate facilities investment proposals as mission
enablers rather than solely as costs: Investments in facilities are typically made to
ensure that business operations are continuous and efficient, essential ingredients
to an organization’s success. Executive-level managers from all of the operating
units are responsible for reviewing facilities investment proposals, making deci-
sions about their viability, and ensuring that facilities investments are integrated
into the organization’s overall strategic planning processes.
Principle/Policy. Best-practice organizations use business case analyses
to rigorously evaluate major facilities investment proposals and to make
transparent a proposal’s underlying assumptions; the alternatives con-
sidered; a full range of costs and benefits; and the potential consequences
for their organizations.
A business case analysis is a planning and decision-support tool used to en-
sure that the objectives for a proposed facility-related investment are clearly de-
fined; a broad range of alternatives for meeting the objectives is developed; the
alternatives are evaluated to determine how well the objectives will be met; and
trade-offs are explicit. It is a living tool that is continually revisited, refined, and
updated throughout the decision-making process.
Principle/Policy. Best-practice organizations analyze the life-cycle costs
of proposed facilities, the life-cycle costs of staffing and equipment in-
herent to the proposal, and the life-cycle costs of the required funding.
Best-practice organizations recognize the interrelationships among their
people, places, physical assets, technologies, information, and funds: A change in
the character, size, or amount of any one of these resources will have impacts on
the other resources and the organization’s ability to achieve its mission. Within a
business case analysis, best-practice organizations analyze the life-cycle costs of
proposed facility investments in addition to the first costs (design and construc-
tion), the costs of financing the investment, the potential costs and benefits of
disposal (sale and salvage value), and life-cycle costs and benefits related to staff-
ing, technology, and operational requirements.
Principle/Policy. Best-practice organizations evaluate ways to disengage
from or exit facilities investments as part of the business case analysis
and include disposal costs in the facilities life-cycle cost to help select the
best solution to meet the requirement.
Best-practice organizations typically consider how they can disengage from
a proposed investment (exit strategy) at the same time they are determining

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DECISION MAKING TO SUPPORT ORGANIZATIONAL MISSIONS 61

whether or not to proceed with it. Commonly analyzed and implemented exit
strategies include leasing rather than owning the required space; acquiring flex-
ible or generic space that offers more options to the owner and that might appeal
to a wide range of potential buyers; and timely maintenance and repair, which
increase a facility’s marketability and residual value at the time of sale. For those
facilities where the only viable exit strategy is demolition, cleanup, and disposal,
the costs of the activities are estimated for the business case analysis; these pro-
jected costs, in turn, may influence the eventual design of the facility, choice of
materials, and methods of operation.
Principle/Policy. Best-practice organizations base decisions to own or
lease facilities on the level of control required and the planning horizon
for the function, which may or may not be the same as the life of the
facility.
When considering a facilities investment proposal, best-practice organiza-
tions determine the level of control (own or lease) they wish to exert over facility
conditions and operations based on the function’s importance (core competency
or noncore function). They also consider the planning horizon—the length of
time the property will be required to support a particular function, which may or
may not be the same as the life of the facility.

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Environments for Effective

Decision Making

BACKGROUND
Ultimately, of course, good decisions are made by good decision makers
armed with credible information, insights from analysis, and appropriate skills.
Information and processes are some of the ingredients needed. The environment
within which decision makers employ these ingredients is also important because
it will affect the free flow and interchange of information and conclusions.
As stated in Chapter 3, best-practice organizations establish a framework of
processes, required information, and valuation criteria that aligns the individual
goals, objectives, and values of its decision-making and operating groups so as to
achieve the organization’s mission. A framework also helps to create an effective
decision-making environment and to provide a basis for measuring and improv-
ing the outcomes of facilities investments. This chapter first discusses the role of
open communications, trust, and credible information in creating effective deci-
sion-making environments. The focus then shifts to the use of performance mea-
sures, continuous evaluation and feedback processes, accountability, and incen-
tives. The chapter concludes with principles and policies from best-practice
organizations.

OPEN COMMUNICATIONS, TRUST, AND

CREDIBLE INFORMATION
Communication can be defined as “the science and practice of transmitting
information, normally through the use of symbols, in a manner that succeeds in

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 63

evoking understanding.”1 It is, therefore, more than a good presentation or a dy-

namic messenger. Communication is about the quality of the message, the cred-
ibility of the information, and the deliberations that ensue. Effective communica-
tion among individuals, business units, or a range of stakeholders can be difficult
to achieve because there are many opportunities for distorting the message, infor-
mation, and deliberations. Barriers to effective communications include lack of a
common terminology; lack of trust in the source of information; poor interper-
sonal relationships; differing individual and group values; and unexpressed as-
sumptions.
Terminology is a factor because different people often interpret the same
words differently based on their professional training, experience, or values. If
the source of the information is not credible, the believability of the overall mes-
sage may be called into question. How people receive a message will depend, in
part, on their past experiences with the person delivering the message as well as
their relationships within and to the organization. Assumptions come into play
when people take for granted that others see the situation in the same way and
will have the same reaction.
In best-practice organizations, effective decision making for facilities invest-
ments is related to managing a free exchange of information among the various
stakeholders, particularly those who might be skeptical about a proposed invest-
ment. Open communications ensure that those who need to know and who can
best critique a proposal have access at a sufficiently early stage to provide infor-
mation and insights that can be constructively used to produce a better proposal.
The more open the process, the more likely it is that errors in fact or methodology
will be uncovered.2
Trust—unquestioning belief in and reliance on someone or something—is
widely understood to be important to the success of almost all forms of human
interaction. Building trust is a complex prospect. Trust is fragile. It is difficult to
establish and easy to destroy. One incident of poor communication could be inter-
preted as deceptive and trust can be lost. One realization that a game has been
played wherein one player was less than open and honest can destroy trust. Nu-
merous documented, positive transactions are required to build trust (Slovic,
1993).
Effective communication is both a top-down and a bottom-up responsibility.
Senior executives are responsible for ensuring effective communication of policy
decisions and institutional strategies throughout an organization. They must cre-

1Modified from definitions in The New Shorter Oxford English Dictionary, Oxford: Clarendon

Press, 1993.
2Closed processes may be required in situations involving the protection of proprietary informa-

tion, safeguarding national security, and judicial proceedings, among others. There is always a risk in
open proceedings, especially in the public sector, that a multitude of participants with different moti-
vations may delay or sidetrack a process.

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64 INVESTMENTS IN FEDERAL FACILITIES

ate an environment that encourages a flow of communication from all manage-

ment levels without fear of reprisal. Mid-level and line managers lack the posi-
tion in the organization to bring all of the relevant stakeholders together and
move them in a common direction. Nonetheless, the managers of operating units
are also responsible for communicating effectively. It is incumbent on the real
estate manager to understand competitive strategy, not on the line manager to
understand real estate (O’Mara, 1999).
As described in Chapter 3, common terminology and a business case analy-
sis are used to foster effective communication among the various stakeholders in
discussing proposals for facilities investments. The business case analysis is seen
as credible because it is understood and used by all relevant leadership, manage-
ment levels, and operating groups. Common terminology and a business case
analysis also serve to create a basis for open communications and to build trust.
The business case analysis provides a means to review the strategic, qualitative,
and quantitative aspects of a proposal and compare it with other proposals. When
the analysis is used in deliberations, discussion of the underlying assumptions
allows everyone to see where everyone else stands on the proposal, to identify a
full range of alternatives, and to discuss their merits and deficiencies in meeting
organizational objectives, as opposed to operating unit or individual objectives.
Expertise in developing and using analyses and communicating the results per-
meates the organization’s workforce and culture when all participants use the
same information repeatedly. Trust is built among the decision-making and oper-
ating groups by ensuring that everyone has access to the same information.
Persons interviewed for this study noted that facilities management operat-
ing groups had gained or retained credibility and built trust at the institutional
level by providing sound information, by incorporating rigor into their analyses,
by giving high-quality presentations, and by submitting realistic, reasonable re-
quests for investment proposals. Among the specific examples cited were the
following:

• Providing good cost estimates the first time around. The cost estimates
were developed using cross-functional teams and reviewed by an internal
cost estimator before being presented to the executive board (Dallas-Fort
Worth airport).
• Having the division director who would be responsible for building and
operating a proposed facility present the proposal to the board of direc-
tors. Having a presenter with operational responsibility and a successful
track record increased the credibility of the presentation (Public Service
Corporation of New Mexico).
• Including input from facilities operating and maintenance staff in the busi-
ness case analysis (DMJM + Harris).
• Closing out projects and turning back unused contingency funds. As a

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 65

result, members of the facilities management operating group were seen

by others in the organization as timely performers and good financial stew-
ards. Over time, the group’s budget was increased because it was trusted
to use the funds wisely (Dallas-Fort Worth airport).

Decisions about proposals for facilities investments are linked to organiza-

tional mission and take into account the organization’s portfolio of facilities. Such
decisions, however, are made within a dynamic environment where operational
requirements and even the mission of the organization are subject to change.
Best-practice organizations use additional framework components—performance
measures, feedback processes, accountability, and incentives—to measure, ad-
just, and improve decision-making processes, management practices, and the re-
sults or outcomes of decisions.

PERFORMANCE MEASURES
For any organization, it is important to understand why decision-making
processes or management practices that had been used led to success or failure,
and how that understanding can suggest improvements. The notion of continu-
ous process monitoring and feedback is based on the recognition that, however
effectively one plans, unintended consequences, unforeseen events, and change
will occur. Best-practice organizations measure the results or outcomes of facili-
ties investments by establishing baselines3 and performance measures4 to con-
stantly monitor and track all aspects of operations and their results in relation to
organizational objectives. Performance measures help to identify where objec-
tives are not being met, or where they are being exceeded. Managers can then
investigate the factors or reasons underlying the performance and make appro-
priate adjustments.
Best-practice organizations have long used metrics such as internal rate of
return, growth or decline in earnings per share, percentage of market share, and
the like to measure overall performance in relation to mission and the desired
results. However, because such measures may focus on what has happened al-
ready—that is, on investments already made—they may not be particularly use-
ful for planning for the future or responding to changing requirements. For those
purposes, operational measures are required that focus on elements that are im-
portant to future financial performance, such as the level of customer satisfaction
or the introduction of innovative products, techniques, or technologies. A study
conducted in the early 1990s found that
Executives also understand that traditional financial accounting measures like

3Defined as a quantifiable point at which an effort began and from which change can be measured

and documented (NAPA, 1996).

4Defined as the standard by which to gauge an operation or activity (NAPA, 1996).

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66 INVESTMENTS IN FEDERAL FACILITIES

return-on-investment and earnings-per-share can give misleading signals for con-

tinuous improvement and innovation—activities today’s competitive environ-
ment demands. The traditional financial performance measures worked well for
the industrial era, but they are out of step with the skills and competencies com-
panies are trying to master today. . . . Senior executives do not rely on one set of
measures to the exclusion of the other. They realize that no single measure can
provide a clear performance target or focus attention on the critical areas of the
business. Managers want a balanced presentation of both financial and opera-
tional measures (Kaplan and Norton, 1992, p. 71).
This particular study led to the development of the Balanced Scorecard
(BSC), a conceptual framework for evaluating organizational performance. Over
time, the BSC has evolved, but the categories of performance to be measured
have remained constant: financial outcomes, internal business processes, customer
relationships, and innovation and learning.
“Balanced” refers to several qualities of the scorecard. First, there is a bal-
ance across the four categories to avoid overemphasis on financial outcomes.
Second, it requires both quantitative and qualitative measures. Third, there is a
balance in the levels of analysis—from individual and group results to organiza-
tional outcomes (Heerwagen, 2002). The BSC approach can be applied hierarchi-
cally, beginning with organizational objectives and cascading down to operating
units and individuals with successively more detailed objectives and measures at
lower levels.
Since its introduction, the BSC approach has been adopted and developed for
use by many organizations, in the private, public, and not-for-profit sectors. Be-
cause it is a conceptual framework, each organization that implements a BSC
approach must develop its own strategic objectives and the performance mea-
sures needed to evaluate progress toward those objectives.
For example, the Mobil North American Marketing and Refining Company
identified return on capital used, existing asset utilization, profitability, and profit
growth as financial strategic objectives; stakeholder objectives included customer
satisfaction in each of the market segments it serves and good relations with its
dealers; internal processes included objectives for the performance of facilities,
inventory management, and on-time delivery of products of specified quality;
learning and group objectives included improving core competencies and skills
and providing employees access to the strategic information needed to do their
jobs (Kaplan and Norton, 2001).
In the case of Charlotte, North Carolina, a public sector municipality, its
strategic objectives for financial outcomes included increasing the tax base and
maintaining the city’s bond rating. Stakeholder relations comprised such objec-
tives as increasing the perception of safety, enhancing service delivery, maintain-
ing a competitive tax rate, and promoting economic opportunity. Strategic objec-
tives for internal processes included improving productivity and increasing

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 67

TABLE 4.1 Strategic Assessment Model Matrix of the Association of Higher

Education Facilities Officers (APPA)

FINANCIAL PERSPECTIVE INTERNAL PERSPECTIVE

Facility Operating CRV Index Cycle time

Facility Operating GSF Index Average age
Capital Renewal Index Backlog
Facilities Condition Index Energy usage
Needs Index Energy Reinvestment Index

CUSTOMER PERSPECTIVE INNOVATION AND LEARNING PERSPECTIVE

Customer Satisfaction Index Work Environment Index

Distribution Index High Score Index
Weighting Index Distribution Index
Gap analysis Organizational change assessment

SOURCE: APPA, 2000.

infrastructure capacity, and learning and growth objectives were to enhance in-
formation management and close skills gaps (Kaplan and Norton, 2001).
The Association of Higher Education Facilities Officers (APPA) developed
a Strategic Assessment Model for facilities management that incorporates the
four perspectives of the BSC and identifies quantitative performance indicators
and qualitative criteria for evaluating the performance of a facilities management
organization in each of the scorecard perspectives. The purpose of the Strategic
Assessment Model is to help facilities professionals assess their organizations
and carry out a continuous improvement program (APPA, 2000). The signifi-
cance of the model is that many of the measures it incorporates relate to a facili-
ties portfolio, not individual structures. Sample performance indicators used in
the Strategic Assessment Model are shown in Table 4.1; other indicators may be
more useful for other organizations.
The measures developed to evaluate the performance of the organization,
operating units, or individuals in meeting strategic objectives must be developed
internally. Heerwagen (2002) provides a set of criteria that organizations of any
kind can use in selecting appropriate and useful performance measures:

• Value. The measure addresses an important outcome or process and is

related to the mission, goals, and objectives of the organization and oper-
ating unit.
• Reliability. Repeated efforts to measure a phenomenon reach the same
results.
• Validity. The measure is a good indicator of the outcome of interest (it
measures what it purports to measure).

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• Logical connection. The outcome of interest can be connected logically,

or from existing research data, to the program.
• Ease of gathering data. The data should be obtainable with minimal extra
cost or effort.
• Efficiency. The overall measurement plan uses the minimal set of mea-
sures needed to do the job and enables conclusions to be drawn from the
entire data set.
• Discriminating. The measures will allow small changes to be identified.

The inclusion of both qualitative and quantitative measures is an essential

aspect of an effective performance measurement system. Quantitative measures,
such as operating costs per square foot of a facility, are often readily available
and reproducible. Many people regard quantitative data as hard evidence and
qualitative data as soft. This distinction is often interpreted to mean that quantita-
tive data are better, when, in fact, they are just different.
The operating environment within which performance measures are applied
also impacts the types of measures developed and their utility. Private-sector or-
ganizations typically have control over their processes, people, financial re-
sources, and the allocation of resources to meet their internally established objec-
tives. They can design their budgeting and accounting systems to support the
types of data needed to evaluate performance in relation to organizational objec-
tives and achievement of mission. Governmental organizations operate under the
constraints discussed in Chapter 1.

EVALUATIONS AND CONTINUOUS FEEDBACK

Performance measures are of limited value unless they are used in conjunc-
tion with formal and continuous feedback, or evaluation, processes. Evaluations
have been defined as the systematic assessment of the operation and/or the out-
comes of a program or policy, compared with a set of explicit or implicit stan-
dards, as a means of contributing to the improvement of the program or policy
(Weiss, 1998). Evaluations of people and processes can help determine if the
organization’s mission is being achieved and if strategic objectives are being met.
They can also serve other purposes important to decision makers and managers:

• Midcourse corrections. Evaluations can be used to provide feedback early

in program implementation to identify what is happening so that changes
can be made before problems become serious and less amenable to cor-
rection.
• Deciding whether to keep, abandon, or change a program. Evaluations
provide data on what the program has accomplished to date and whether
or not these accomplishments are in line with goals. If not, decisions can

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 69

be made about program improvements to increase effectiveness, or a de-

cision may be made to reduce or abandon the program altogether.
• Testing a new program idea. In many instances, new programs start as
demonstration projects or experiments. Early evaluation can be used to
identify which aspects of the program are succeeding and which aspects
may need further development before the program is implemented at a
larger scale.
• Choosing among alternatives. In cases where several different methods or
programs are being tried out, evaluation can provide substantive feedback
on which alternative is achieving the best combination of results overall
(Weiss, 1998; Heerwagen, 2002).

Continuous evaluation and feedback on processes and investments are essen-

tial to controlling and improving them. Feedback can be positive or negative, take
many forms, and be used over various timescales. It can be used to bridge the
relatively static nature of facilities and the dynamic nature of facilities require-
ments. Short-term feedback is widely used by organizations of all types to answer
questions such as, Was the project completed within budget? Was it operational
on schedule? Does it work? If not, why not? Techniques for receiving short-term
feedback include real-time assessment, systems optimization, value engineering
alternatives, construction realization, and postoccupancy evaluations.
Because of the long-term nature of facilities themselves, longer-term feed-
back also is needed to identify methods to reduce facility transaction and operat-
ing costs and to improve decision criteria and processes. Did the facility invest-
ment meet the organizational objectives? Did it correct an operational problem?
Reduce long-term operating and maintenance costs? Contribute to a more flex-
ible portfolio? Satisfy users?
In best-practice organizations, the performance of projects, processes, people,
business units, physical assets, investments, and the organization as a whole are
continuously monitored and evaluated over both the short and long term using
performance measures and a variety of feedback processes. An internal set of
performance measures designed to capture good performance at levels that di-
rectly or indirectly contribute to the desired objectives is developed. Specific
elements of performance for individuals, operating units, and contractors can
thereafter be tracked and evaluated, providing a strong accountability process in
the short and longer term.

FORMS OF FEEDBACK

Project Management
Weekly, monthly, and quarterly control reports for tracking the progress of a
project during planning, design, and construction are standard operating proce-

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70 INVESTMENTS IN FEDERAL FACILITIES

dure in most organizations. The performances of the project manager, operating

units, and contractors are also monitored throughout the process. In some cases,
the senior person responsible for the project may be required to meet with the
board of directors to demonstrate that the project is proceeding according to plan.
Adjustments in schedule and personnel may be made weekly or even daily as it
becomes apparent that changes are needed. Once a facility project is completed, a
more extensive evaluation is made of what worked well and where improvements
in processes and project teams are needed for future projects.

Internal Audits
At the Public Service Company of New Mexico, feedback on major facility
projects is provided by the project managers and by an internal operating group of
auditors with a direct line to the board of directors. The innovative aspect of this
approach is that the internal auditors function as internal management consultants
rather than as a policing function. The auditing group is tasked with providing
management efficiency studies as well as monitoring active projects. In some
cases, other operating groups voluntarily call in the audit group to review pro-
cesses and activities.
The auditing group is staffed by a core group of individuals with accounting
and auditing backgrounds, as well as operational backgrounds. Rotational assign-
ments are available for people with operational backgrounds, allowing them to
return to their operational function with an audit discipline and some on-the-job
training in financial concepts and business skills.

360-Degree Review and Feedback

The Johnson and Johnson Company reported using a process in which all of
the participants in a specific project—in-house staff, the architectural and engi-
neering firm, and the construction management firm—rate each other’s perfor-
mance. The project sponsor is also involved in rating the performance of the
project. A formalized survey with a 1-5 rating scale for safety, quality, schedule,
and other factors is used. All of the information is compiled in a lessons-learned
database that can be used to improve processes and performance in subsequent
projects.

Peer Review
Independent peer review is often used by owners and project managers of
complex engineering projects as a means of quality assurance. It is a method of
providing an outside, independent perspective—employing qualified profession-
als with related experience—to identify issues that may have been missed and to
reevaluate decisions to assure that the best alternative has been chosen (NRC,

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 71

2003a). Peer review can also be used to introduce more innovation into a project
and to overcome traditional impediments to improvement.
Peer review processes typically result in changes in plans: Participants iden-
tify better ways of operating as a result of listening to their peers. They can also
be useful in bringing together private- and public-sector representatives to inter-
act in a constructive way; in educating junior and mid-level people by exposing
them to knowledgeable, more senior people; and in providing a forum for deriv-
ing and discussing improved performance measures.
Peer review efforts have been directed at the expensive and urgent chal-
lenges of reconstruction at six airports: Buffalo, Boston, New York LaGuardia,
Syracuse, Washington Dulles, and Washington National. The peer reviews fo-
cused on idea generation and information exchange: Agendas were generated by
a discussion among the peers, not presented ahead of time for review, amend-
ment, and ratification. The main results were changes in plans as the airports
found better ways of operating when they exchanged information. Cost savings
also resulted but were not the primary objective in this instance.

Postoccupancy Evaluation
Postoccupancy evaluation (POE) is based on the idea that better living and
work space can be designed by asking users how well the facility they are occu-
pying satisfies their needs. POE is a process for systematically evaluating the
performance of buildings after they have been built and occupied for some time.
It focuses on the requirements of building occupants, including health, safety,
security, functionality, efficiency, comfort, aesthetic quality, and satisfaction
(FFC, 2001b).
POE efforts in the United States and abroad have focused on government and
other public buildings from the 1960s until today. Some private-sector organiza-
tions in the United States began instituting POEs following publication of a 1985
report by Michael Brill et al., Using Office Design to Increase Productivity. A
number of organizations have since used POE as a tool for improving, innovat-
ing, or otherwise initiating strategic workspace changes (FFC, 2001b).

Longer-Term Feedback
The long-term nature of facilities investments, the longevity of facilities
themselves, and the continuously changing operations of organizations require
long-term as well as short-term evaluations and feedback. Does the facility in-
vestment meet organizational objectives? Correct an operational problem? Re-
duce long-term operating and maintenance costs? Contribute to change manage-
ment? These and other questions can only be answered through long-term
feedback, both continuous and periodic.
Long-term feedback requires a cradle-to-grave monitoring and evaluation

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system supported by integrated databases and formal feed-forward mechanisms.

Such systems, sometimes referred to as lessons-learned programs, are designed
to collect, archive, and share information about successes and failures in pro-
cesses, products, and other building-related areas for the purpose of improving
the quality and life-cycle cost of future buildings (FFC, 2001b).
The Disney Corporation provides one model from the private sector: It has
been evaluating everything it does since the 1970s. Disney has at least three evalu-
ation programs and three corresponding databases. One program evaluates the
performance of materials and equipment, and the findings are recorded in a tech-
nical database. A second program focuses on predictors of customers’ intentions
to return, Disney’s key business driver. A third is aimed at refining programming
guidelines and rules of thumb. The databases are not formally linked but are used
extensively during design and renovation projects. By using these databases, the
design and engineering team can improve future facilities based on past experi-
ence and research. For example, streets can be designed to allow the optimal
number of visitors to prevent overcrowding and stimulate gift shopping, key fac-
tors in Disney’s future success (FFC, 2001b).
In best-practice organizations, once a facility is in operation, evaluation and
feedback are employed to track operating costs and other factors over the longer
term to determine if investment and organizational objectives are being met. They
also measure and evaluate the performance of their entire portfolio of facilities in
relation to organizational objectives. Such evaluations and feedback may often
drive changes in the decision-making process itself.

ACCOUNTABILITY
Accountability has been defined as the relationship between those who con-
trol or manage an entity and those who possess formal power over them. It re-
quires the accountable party to provide an explanation or a satisfactory reason for
his or her activities and the results of efforts to achieve the specified tasks or
objectives. The process of accountability includes rendering an account of or
explaining one’s actions to those in authority or formal power so that they may
assess performance, make a judgment, and take action (GASB, 1994).
Private-sector organizations operate on a risk/reward basis, rewarding those
individuals or operating units accountable for successful execution of an idea,
project, or other activity and penalizing those accountable for less than successful
efforts within their control. They link accountability, responsibility, and authority
when making and implementing facility investment decisions. If an individual or
operating group is to be held accountable for a decision to proceed or not to
proceed with a facility investment, or for the execution of a project, that indi-
vidual or operating group is given the appropriate level of authority and resources
to meet their responsibilities. At the same time, they are held accountable for the
results, whether positive or negative, and rewarded or punished accordingly.

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 73

Typically, at higher levels of management the responsibilities and authorities

of individuals increase and they become more accountable for the performance of
their operating unit or the entire organization. In the case of a facility investment
proposal, the reviewing body that decides to proceed or not to proceed may be
held accountable for the results of that decision in relation to the achievement of
operational or organizational objectives.
Establishing accountability in the federal government, where decision-mak-
ing authority and responsibility are spread throughout the executive and legisla-
tive branches, is a complex proposition that is discussed more fully in Chapter 6.

INCENTIVES
In private-sector organizations, incentives are created to motivate in-house
individuals and operating units to meet organizational objectives. The incentives
are often, but not always, financial. For instance, for groups of individuals, bo-
nuses may be linked to how their operating unit contributes to meeting organiza-
tional objectives. Bonuses for senior executives may be tied to overall corporate
performance, while bonuses for operations staff may be tied to project perfor-
mance. Incentives are also created in less significant but important ways: through
recognition and awarding additional vacation days, priority parking spaces,
plaques and trophies, and the like.
In one firm interviewed, every partner owns a percentage of all facility or
real estate projects and thus has an incentive for monitoring the performance of
the entire portfolio of projects. Quarterly reviews are held with investors. At regu-
lar intervals, the oversight committee reviews the performance of individual
projects. The intervals are shorter if performance or market conditions deterio-
rate; if a project is in serious trouble, the monitoring is constant.
In the public sector, creating incentives based on financial reward is a more
difficult prospect and raises concerns about how such incentives can be appropri-
ately designed. A wide range of nonfinancial incentives, including recognition,
can also be used. These issues are more fully addressed in Chapter 6.

PRINCIPLES AND POLICIES FROM

BEST-PRACTICE ORGANIZATIONS
Based on a consolidation of research, interviews, briefings, and the commit-
tee members’ individual and collective experience, the committee found that best-
practice organizations that successfully manage facilities investments operate
under a number of principles and policies when they make decisions (all 10 prin-
ciples/policies are repeated in Chapter 6):
Principle/Policy. Best-practice organizations establish a framework of
procedures, required information, and valuation criteria that creates an

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74 INVESTMENTS IN FEDERAL FACILITIES

effective decision-making environment and that provides a basis for

measuring and improving the outcomes of facilities investments. The
components of the framework are understood and used by all leadership
and management levels.5
In best-practice organizations, effective decision making for facilities invest-
ments is related to managing a free exchange of information among the various
stakeholders, particularly those who might be skeptical about a proposed invest-
ment. Open communications ensure that those who need to know and who can
best critique a proposal have access at a sufficiently early stage to provide infor-
mation and insights that can be constructively used to produce a better proposal.
The more open the process, the more likely it is that errors in fact or methodology
will be uncovered. Such organizations use additional framework components—
performance measures, feedback processes, accountability, and incentives—to
measure, adjust, and improve decision-making processes, management practices,
and the results or outcomes of decisions.
Principle/Policy. Best-practice organizations use performance measures
in conjunction with both periodic and continuous, long-term feedback
to evaluate the results of facilities investments and to improve the deci-
sion-making process itself.
The notion of continuous process monitoring and feedback is built on the
recognition that however effectively one plans, unforeseen events, unintended
consequences, and change will occur. Best-practice organizations establish
baselines and performance measures to monitor processes and the results, or out-
comes, of those processes in relation to organizational objectives. Both quantita-
tive and qualitative measures are used, and the measures are tailored to the
organization’s culture, mission, and objectives.
Continuous feedback on processes and investments can be positive or nega-
tive, can take many forms, and can be used over various timescales. Short-term
feedback is widely used by organizations of all types. Not as widely used is
longer-term feedback, which is useful in identifying methods to reduce facility
transaction and operating costs and for improving decision criteria and processes.
Principle/Policy. Best-practice organizations link accountability, re-
sponsibility, and authority when making and implementing facilities in-
vestment decisions.
Private-sector organizations operate on a risk/reward basis, rewarding those
individuals or operating units accountable for successful execution of an idea,
project, or other activity, and penalizing those accountable for less than success-

5This principle/policy and that in the Executive Summary and at the end of Chapter 3 together form

Principle/Policy 1 in Chapter 6.

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 75

ful efforts within their control. If an individual or operating group is to be held

accountable for a specific result, it is given the appropriate level of authority and
resources to meet its responsibilities.
Principle/Policy. Best-practice organizations motivate employees as in-
dividuals and as groups to meet or exceed accepted levels of performance
by establishing incentives that encourage effective decision making and
reward extraordinary performance.
In best-practice organizations, incentives are created to motivate individuals
and operating units to meet organizational objectives. The incentives are prima-
rily financial but also include recognition and other less significant but meaning-
ful rewards for superior performance.

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Alternative Approaches for

Acquiring Federal Facilities

BACKGROUND
Facilities investments typically require substantial up-front funding for de-
sign, construction, or outright purchase. The benefits from such investments may
not begin to accrue for 2 or more years as facilities are constructed or renovated.
Private-sector organizations typically finance facilities investments by bor-
rowing all or a portion of the required funds from a bank or other lending institu-
tion, by using their own financial resources, or by using some form of third-party
financing or equity arrangement. Additional arrangements are routinely used, such
as alliances with other firms, joint ventures, sale-and-leaseback, and public-pri-
vate partnerships. All involve varying levels of risk, and some incur debt. A loan
or other commitment is typically repaid over time, allowing the organization to
receive value from the investment before the debt is fully repaid.
In the federal government, significant facilities investments are primarily
funded from the annual budget. Individual departments and agencies may not
borrow funds or otherwise incur debt to finance facilities.1 They must receive
authorization from Congress for funding to cover the full, up-front (design and
construction or purchase) costs in a specific fiscal year budget.
Although the annual budget is the primary source of funding, a number of
alternative approaches for acquiring facilities are being used by federal depart-
ments and agencies, on a case-by-case basis under special agency-specific legis-

1The Tennessee Valley Authority, an independent, wholly owned corporation (not a department or

agency) of the federal government, has the authority to issue bonds and notes and thus to incur debt
and other financial obligations (GAO, 2003h).

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 77

lation. This chapter first discusses issues related to full, up-front funding of fa-
cilities, including procedures for budget scorekeeping, and issues related to al-
ternative acquisition approaches. A number of alternative approaches, including
public-private partnerships, capital acquisition funds, trust funds, sale-and-lease-
back arrangements, outleasing, real property exchanges, and shared facilities,
are then described and analyzed in greater detail. The chapter concludes with a
summary and a recommendation for the federal government.

ISSUES RELATED TO FULL UP-FRONT FUNDING OF FACILITIES

The requirement for full, up-front funding of federal facilities is intended to
(1) give adequate scrutiny to the initial costs and proposed benefits of an invest-
ment; (2) avoid the risk of allowing projects to be started through incremental
funding before they are adequately scrutinized; (3) give Congress the flexibility
to respond to changing circumstances and priorities; (4) provide for transpar-
ency in the budget by making sure the investment proposal is understandable to
a range of constituencies, and (5) allow for the informed participation of those
constituencies.
Under current procedures, the budget authority associated with requests to
design and construct a new facility, to fund the major renovation of an existing
facility, or to purchase a facility outright are scored up front in the year requested
even though the actual costs may be incurred over several years. Thus, the pro-
jected costs, which may easily run more than $50 million per facility, are counted
against the agency’s overall budget request for a given fiscal year.
The requirement for full, up-front funding, however, typically results in a
spike in a department’s or agency’s budget request. If it is to stay within its spend-
ing cap, a request for a significant facility investment will force cuts in other
programs or activities within the department or agency, causing tension among
the various in-house decision-making and operating groups.
The focus on first costs of facilities investments is reinforced by the budget
scorekeeping rules mandated as part of the Budget Enforcement Act of 1990.
“Scorekeeping” is a process for estimating the budgetary effects of pending and
enacted legislation and comparing those effects with limits set in the budget reso-
lution or legislation. It has no analogue in the private sector.
Scoring facilities costs up front is intended to provide the transparency needed
for effective congressional and public oversight. The objectives are to (1) high-
light the full costs of decisions when they are being made; (2) discourage the
undertaking of investments that are not cost-effective; (3) protect congressional
control over federal spending; (4) see how legislation fits into the overall plan for
federal spending; and (5) determine if any ceilings in those plans have been
breached (CBO, 2003).
In actuality, up-front scoring of major facility proposals does not disclose the
full costs of facility investment decisions; only the projected design and construc-

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78 INVESTMENTS IN FEDERAL FACILITIES

tion costs of facilities are transparent. Facilities operation, maintenance, repair,

and disposal costs are accounted for in different functional areas of the budget
and are not identifiable for specific facilities.
Scorekeeping procedures also create incentives for agencies to drive down
the first costs of facilities investments—even if it may increase the life-cycle
costs—in order to lessen their apparent impact on the current year budget. In
rewarding such behavior, the scorekeeping procedures can indirectly increase the
long-term operation and maintenance costs of facilities—that is, 90 to 95 percent
of their life-cycle costs—and decrease the staffing efficiencies that might result
from additional initial investment.
Another consequence of the scorekeeping procedures for major proposals is
that
[a]gencies faced with the upfront costs of acquiring new capital assets—facili-
ties and equipment—often have the option of continuing to produce goods and
services using what they have even if it is old and obsolete. Although the ap-
proach can increase the costs of producing output in the long run, it holds down
budgetary costs in the short term. (CBO, 2003, p. 21)

ISSUES RELATED TO THE USE OF ALTERNATIVE APPROACHES

FOR ACQUIRING FACILITIES
Recognizing some of the difficulties of providing adequate funding for re-
quired facilities investments through the annual budget process, legislation has
been enacted over the years on a case-by-case basis for individual departments
and agencies to allow the use of alternative approaches for acquiring facilities.
Legislation allowing the use of these approaches on a government-wide basis has
not occurred for a variety of reasons. First, the use of alternative approaches for
acquiring federal facilities creates a tension between government-wide oversight
groups—Congress, the OMB, the CBO—and the line agencies. As noted by the
GAO,
From an agency’s perspective, meeting capital needs through alternative fund-
ing approaches (i.e., not full funding) can be very attractive because the agency
can obtain the capital asset without first having to secure sufficient appropria-
tions to cover the full cost of the asset. Depending on the financing approach, an
agency may spread the asset cost over a number of years or may never even
incur a monetary cost that is recognized in the budget. From a government wide
perspective however . . . the costs associated with these financing approaches
may be greater than with full up-front budget authority (GAO, 2003a, p. 1).
The use of alternative approaches for facilities investments raises a second
issue: Who retains the proceeds from the sale or leasing of properties, called
“offsetting collections,” for federal budget purposes? Under federal procedures,
any proceeds realized by the sale of federal buildings or properties are returned to
the general treasury unless special legislation has been enacted.

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For individual federal agencies, authorization to retain and use the proceeds
for the sale or leasing of property could provide incentives to find more cost-
effective ways to manage their facilities portfolios. On the other hand, from a
government-wide perspective, retention of proceeds could spur some agencies to
sell properties that are required for long-term mission support to generate funding
for more short-term needs.
A third issue relates to the public nature of facilities investments. Because
federal facilities are located in all states and most communities, the perspectives
of state and local governments and constituencies must be accounted for when
alternative funding approaches are considered. Federal departments and agencies
are not typically subject to local zoning and land use controls when siting facili-
ties. What may appear to be cost-effective from a departmental or agency per-
spective may significantly affect the surrounding community and may not appear
to be cost-effective or desirable from the perspective of the locality and citizenry.
In some cases, the short-term benefits of some alternative approaches may
not outweigh the long-term, quantifiable costs. Still, in certain circumstances,
such approaches can provide other, less tangible benefits to the public. These
include the preservation and upkeep of historic properties, investment and occu-
pancy of buildings in downtown and inner city neighborhoods, and more conve-
nient access to services.
A number of alternative approaches currently in use by federal agencies are
described below. Each approach has advantages and disadvantages for particular
types of organizations and types of facilities. None can guarantee effective man-
agement absent agreed-upon performance measures, feedback procedures, and
well-trained staff. It should be noted that state and local governments have also
developed innovative funding approaches that could be adapted to the federal
government. Identification and evaluation of such approaches were beyond the
scope of this particular report, but such an analysis by the appropriate federal
entities is warranted.

Public-Private Partnerships
In general, the concept underlying public-private partnerships is to utilize the
untapped value of real property. One type of public-private partnership is a project
for which the private sector provides cash and financing ability to renovate or
redevelop real property contributed by the federal government. Once such a
project is completed, both partners share in the net cash flow that is generated
(PriceWaterhouse, 1993). A more general conception of a public-private partner-
ship includes sharing of other responsibilities such as project planning and initia-
tion, design, construction, and operations management. The extent of the alloca-
tion between the public and private sectors in any of these areas depends on the
specific agreement between the two sectors. Two examples of current programs
follow.

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80 INVESTMENTS IN FEDERAL FACILITIES

Department of Veterans Affairs Enhanced-Use Leasing Authority

In 1991, Congress gave the Department of Veterans Affairs (VA) authority
to lease underused property and facilities to private or other public entities for up
to 35 years in return for cash or in-kind consideration, such as services, goods,
equipment, or facilities. The basic intent of this authority was to increase the
agency’s flexibility to utilize underused assets that could not or would not other-
wise be disposed of. In 1999 this authority was extended for 10 years, and the
applicable lease term was extended to 75 years. As part of this extension, the VA
was also allowed to lease properties for the sole purpose of generating revenues
to provide better services for veterans, and the agency was also allowed to make
capital contributions to joint ventures on agency properties (FFC, 2001a).
The basic process for using the enhanced authority requires local VA offices
to develop a business plan. The organization that initiates a successful proposal
can retain the net proceeds from an enhanced-use lease agreement. Public hear-
ings are held on any proposal, after which the proposal moves to the VA head-
quarters for review. Projects valued at more than $4 million must be approved by
the OMB and go through the Federal Register process before a Request for Pro-
posal is issued. Once a proposal is negotiated, Congress is notified and the VA
must wait 30 days before entering into a lease.
As of 2003, the authority has been used in more than 27 agreements (GAO,
2003a). As an example, in Texas a private developer constructed a regional VA
office on the VA’s medical campus, and the agency in turn leased land on the
campus to the private developer so that it could construct commercial buildings
with space rented out to private businesses (FFC, 2001a). Enhanced-use leasing
authority recently has been granted to the National Aeronautics and Space Ad-
ministration and the Department of Defense, although the specific procedures
and requirements of their authorities vary from those of the VA.

National Park Service Concessions Program

For many years the Department of the Interior’s National Park Service has
entered into long-term agreements with private entities to manage certain facili-
ties on government-owned properties. In 1998, 630 concessionaires provided ser-
vices grossing $765 million in revenues. Almost two-thirds of this total came
from the 73 concessionaires that provided lodging. A change in the law that same
year increased competition for those concessions and created an advisory board
to the Secretary of the Interior to suggest ways for improving the process.
Potential benefits of public-private partnerships include the conversion of
properties that might currently drain public resources into useful and productive
facilities that provide net cash inflow to federal agencies. Partnerships also can
attract private funding sources for renovations and repairs. In addition, the intro-
duction of private-sector, profit-motivated entities may increase the efficiency
with which existing properties are managed (GAO, 2001d).

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The up-front and long-term costs of public-private partnerships vary. Con-

siderations for the government include the contract agreements for occupancy by
federal entities, restrictions on the use of the property, liability for the actions of
any particular lessee, and the leasehold interests of the government in relation to
any lender of the nongovernmental partner. Any federal public-private partner-
ship is subject to budget scorekeeping rules. There could be cases where a finan-
cial analysis of a transaction by an agency is at variance with the scorekeeping
analysis as determined by the OMB or the CBO—that is, the agency analysis
might show a net benefit, while the scorekeeping analysis might show a net cost.2
Although the study committee supports more widespread use of public-pri-
vate partnerships, it offers some caveats. The public interest must be considered
before entering any partnership. Even if a transaction is viable from the private
perspective, there should be sufficient financial returns to the government to war-
rant it. Public objectives related to accessibility, the environment, and historic
preservation should not be compromised. Strict controls to avoid conflict of inter-
est and other forms of potential or actual corruption are required. All of these
factors should be weighed in a partnership feasibility analysis because they may
argue against a partnership that looks attractive on more narrow financial grounds.
Program design must also take these factors into account. The VA program,
for example, has many checkpoints, including public hearings at the local level,
that must be passed through before an enhanced-use lease agreement becomes
final. No matter how well designed an agreement may be, poor implementation
and execution can undo the benefits or, worse, lead to losses. The Park Service’s
concessions program, for example, has in the past suffered from the fact that
agency staff overseeing the contracts are often inadequately trained and have
lacked basic business analysis and management skills (GAO, 2000a). Lack of
performance-based contracts in that agency is another problem, as is a muddling
of lines of authority and accountability from project-level staff to higher-level
agency executives. For example, the chief of concessions has no direct authority
over staff in the individual park units who manage individual concessions. Al-
though these are particular examples relating to the Park Service, they illustrate
the kinds of issues that must generally be resolved satisfactorily in any broaden-
ing of the use of public-private partnerships in the federal government.

Capital Acquisition Funds

Proposed in the Report of the President’s Commission to Study Capital Bud-
geting (1999) and in the President’s Budget for FY 2004, capital acquisition funds
(CAFs) are accounts that would receive appropriations for large capital projects,

2See the CBO report Budgetary Treatment of Leases and Public/Private Ventures (2003) for a full

discussion of these points.

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82 INVESTMENTS IN FEDERAL FACILITIES

appropriations that are now made to individual operating units within federal
agencies. The CAFs would use the authority represented by those appropriations
to borrow against the general fund and would acquire the assets on behalf of the
operating units within the agencies, charging those units rent on the facilities
equal to the cost of debt service on the relevant project. Thus, if an agency wanted
a new capital project, Congress could allow the agency to borrow money through
its CAF to purchase it. Agency programs would then repay the fund, based on
their use each year.
Although proposed as agency-wide, a CAF could be applied at a higher level
across agencies; for example, appropriations committees could appropriate to a
CAF established for all agencies under the purview of their particular committee.
A CAF would not replace the General Services Administration (GSA) revolving
fund (the Federal Building Fund3 ). Instead, agencies would use their CAF only if
their office space acquisition could be done more effectively and efficiently than
through GSA.
CAFs have not yet been used in the federal government, and how they would
operate is still unclear. It would seem that oversight and management of such
funds should reside in a central budget organization such as OMB. Under the
proposal in the President’s Budget for FY 2004, departments would no longer
receive separate appropriations for support services and capital assets but would
create a fund at each department that program managers would use to buy facili-
ties-related requirements. Managers could then buy support services from the
government or the private sector with the funds. Although the proposal is broader
than a CAF alone because it covers noncapital services in addition to capital
programs, CAFs are explicitly a part of the proposal.
A CAF has several perceived advantages over current agency methods of
capital funding. First, it would require capital asset coordination and planning
across agency operating units. Second, a CAF could smooth out funding and
expenditure spikes that occur when individual units have especially large peri-
odic capital requests. Finally, because operating units would be charged annual
“rent” (representing debt service and other asset overhead), a CAF could lead to
more accurate allocation of asset costs to affected parties within agencies, giving
asset managers incentives to make more efficient decisions.
The existence of a CAF by itself would not ensure good implementation and
management. As proposed, a CAF is an additional layer of administration that
could complicate program management rather than streamline it. Issues to be
worked out include the relationship between a CAF and the GSA Federal Build-
ing Fund, the managerial relationship between a CAF and individual operating
units within agencies, and the status and treatment of CAF activities within the
current overall operating budget.

3The Federal Building Fund was established under the Federal Property and Administrative Ser-

vices Act of 1949.

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The measure could also present challenges for agencies that own extensive
property. Whereas currently a congressional appropriation for a capital project is
simply added to the budget of the fiscal year in which it is appropriated, under a
CAF, as outlined in the new proposal, an agency’s capital acquisition fund would
borrow the needed money, and that money would be gradually paid off by the
agency programs that used it. Assigning costs in this way would make projects
appear more expensive. That is an intended consequence meant to ensure the
overhead costs of a capital project are more explicit and borne by the managers
and users of that project. Indeed, according to the CBO, such an approach works
on the premise that the federal budget should recognize capital costs up front
when the decision to invest is made while spreading those costs out over time in
program managers’ budgets (CBO, 2003).
Despite these caveats and issues, the committee believes that CAFs offer an
opportunity to fulfill facilities-related requirements more cost effectively and ef-
ficiently. The committee supports implementation of pilot programs using CAFs
to determine if their promise can be realized in the federal operating environment.

Dedicated Funding, Trust Funds, and Earmarked Receipts

Dedicated funding refers to any mechanism whereby resources are commit-
ted to a specific purpose in advance of any actual spending or activity and which
in some way guarantees that those resources will actually be spent according to
that initial commitment. A variety of mechanisms are used to ensure dedicated
funding. A simple one is a direct mandate, perhaps contained in the charter of an
organization that contractually or legally forces an entity to spend certain monies
in a specified way.
More widely used are the devices of trust funds and earmarked receipts. In
the private sector a person creates a trust fund using his or her assets to benefit
specific individuals. The creator of the trust names a trustee who has fiduciary
responsibility for managing the designated assets in accord with the stipulations
of the trust (GAO, 2001a). In the federal government, Congress creates a federal
trust fund in law and designates a funding source to benefit specified groups or
individuals or, in some cases, itself. The Treasury Department and the OMB de-
termine the budgetary designation as a trust fund when a law both earmarks re-
ceipts and identifies the account as a trust fund account (GAO, 2001a).
Earmarked receipts are collections that are stipulated by law as being dedi-
cated to a specific fund or purpose. Earmarked funds do not always go to trust
funds. They also are deposited into entities such as public enterprise funds, which
often have the same purposes as trust funds but are not designated as such. Two
examples of earmarked funds are the Nuclear Waste Fund and the Postal Service
Fund. Examples of federal trust funds include Social Security, Medicare, and the
Highway Trust Fund.
There are two types of federal trust funds: (1) revolving funds, which support

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a cycle of businesslike operations in which earmarked receipts are derived mainly

from revenues generated by those businesslike activities, making the relationship
between the sources and uses of funds relatively clear, and (2) nonrevolving funds,
in which the earmarked receipts are not generated by businesslike activities but
come from periodic revenues such as annual appropriations and a variety of other
sources, from cigarette and payroll taxes to customs duties (GAO, 2001a).
Designation as a trust fund does not impose a greater commitment on the part
of the government to carry out that activity than it has to carry out other activities.
Although special constituencies may create pressure to spend earmarked revenues,
the federal government does not have fiduciary responsibility to the trust benefi-
ciaries in establishing and operating a trust fund, revolving or otherwise. While
the law establishing a given trust fund does govern the collection and disburse-
ment of revenues going into that fund, Congress can change the law to change the
terms of how much money is collected, how much is disbursed, to whom it is
disbursed, or the purposes for which the funds are used. In addition, in most cases
the federal government has custody and control of the funds and the earnings on
those funds.
One example of a trust fund used for facilities acquisition and investment is
the U.S. Mint Public Enterprise Fund. Established in 1996, this fund allows all
receipts from the Mint’s operations to be deposited into an account from which
all operations are then funded. Such operations include “the acquisition or re-
placement of equipment, the renovation or modernization of facilities, and the
construction or acquisition of new buildings” (P.L. 104-52). The fund is unique in
that the Mint’s operations are exempted from the Federal Acquisition Regula-
tions, which cover government procurements and public contracts. The exemp-
tion allows the Mint to operate more like a private-sector entity, thus gaining the
flexibility and efficiency that purportedly accrue to such entities. Under this ex-
emption, the Mint itself determined that it also had statutory lease authority and
thus did not fall under the leasing rules set forth by the General Services Admin-
istration (OIG, 2002).
Trust funds, earmarked funds, and charter mandates have the advantage of
being relatively simple in concept and focused on a single aim: provision of dedi-
cated and sufficient funds for an intended purpose. In that sense they have per-
formed well. The public readily understands the concept, and when one of these
mechanisms exists, it tends to create momentum toward keeping funding at least
at a certain minimum level. Similar results can accrue to public enterprise funds
and other special funds in the federal budget receiving earmarked funds.
However, the existence of a trust fund or other mandate does not guarantee
that funds or facilities will be well managed. An investigation of the U.S. Mint
found that the agency was leasing too much space for its needs, was not following
prudent business practices in its leasing arrangements, and in general had weak
management controls. Thus, having a dedicated trust fund, which in this case

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gave extra operational flexibility, is not a replacement for good management

(OIG, 2002).
There are also issues surrounding the interpretation of trust fund balance
information. A fund may be running a surplus, something that may be interpreted
as indicating a healthy program. Yet the program may not be financially or mana-
gerially sustainable in actual fact if the trust fund flows are not designed with
long-range needs in mind and if program funds are not soundly administered.
Similarly, a deficit does not necessarily indicate a troubled program. Even if it
does, the response may be to simply add more funds without addressing funda-
mental problems.
Trust funds, earmarked funds, and special funds are widely used in the fed-
eral government. In FY 1999 half of federal receipts went into trust funds, and
130 of them existed at that time—120 nonrevolving and 10 revolving. Issues
related to their continued use include whether they should be renamed to avoid
confusion on the part of the public with private sector trust funds, whether there
should or could be some tightening of terms to make them more like private trust
funds, whether information provided on them should be revamped to reveal more
about program operations than a mere fund balance, the strength of the link be-
tween the source of the funds and their use, and how the use of funds is linked to
underlying program management regimes—that is, the transparency of the fund-
ing (GAO, 2001a).

Sale-and-Leaseback Arrangements
Sale-and-leaseback arrangements are routinely used in the private sector. The
owner of a building sells it to another company or entity and then leases it back
for a specified time period. At the end of that time, the original owner buys the
building back. This type of arrangement allows the original owner to raise capital
and still retain use of the building, in essence temporarily borrowing funds that
can then be used for other purposes (Groppelli and Nikbakht, 2000).
A sale-and-leaseback arrangement offers few, if any, incentives for a federal
agency unless it can retain the sale proceeds and use them to achieve some benefit
or purpose that is not being funded through its annual budget. In at least one
instance, the GSA was granted authority to retain the proceeds if it entered into a
sale-and-leaseback arrangement. In this case, the GSA had planned to excess a
Class C office building in West Virginia after the federal tenants in the building
moved to a new courthouse. In the interim, the Social Security Administration
contacted the GSA about moving into the Class C space in order to better serve
the public by consolidating its functions with those of the West Virginia Disabil-
ity Determination Agency. Legislation was enacted allowing GSA to sell the
building and retain the proceeds for the Federal Buildings Fund. The new owner
committed $11 million to upgrade the building to Class A office space; in turn,

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GSA committed to leasing a portion of the building back for 20 years, thus assur-
ing the owner of a stream of revenue to pay back its investment. Both the GSA
and the Social Security Administration claimed immediate benefits from this ar-
rangement. However, the GAO expressed concern whether this arrangement
would be cost-effective in the long term (GAO, 2003a).

Outleasing
Under an outleasing arrangement, a federal agency leases all or a portion of a
facility to a private-sector or not-for-profit organization. The lessee assumes the
maintenance and repair costs of that space and in some cases invests in renova-
tions. In essence, the federal agency becomes a landlord to nonfederal entities.
Outleasing arrangements have been used by the GSA, the Coast Guard, and
possibly other agencies, for some underutilized and historic properties (GAO,
2003a). The Coast Guard, for instance, has outleased and divested 28 historic
lighthouses in the State of Maine to organizations that will ensure the lighthouses
are repaired and maintained. Under this arrangement, the Coast Guard receives
some income from the lighthouses that can be used to offset expenses at other
historic properties and avoids annual maintenance and repair costs of $3 to $5
million. It thus receives a benefit from properties that are no longer integral to its
mission. The public benefits in that the properties are preserved for posterity and
in a better state of repair. The GSA has used outleasing to gain similar types of
benefits from other historic properties, such as customhouses (GAO, 2003a).
Clearly such arrangements raise questions about the relative costs and ben-
efits of selling excess historic and underutilized facilities outright and maintain-
ing some control and stewardship over heritage properties. They also raise issues
related to local land use control and interests. The costs and benefits, financial
and intangible, will vary case by case but offer the potential for improved stew-
ardship of federal properties.

Real Property Exchanges

Sometimes land and buildings owned by a federal agency have a greater
value to another entity than to the agency itself. On occasion, the GSA, the Air
Force, other military services, and possibly other agencies, have been able to
exchange real property with a private developer or a state or local government in
return for a different piece of property or facilities. Such exchanges are different
from public-private partnerships in that they typically do not involve an exchange
of funds or competitive bidding; there are a limited number of potential special-
purpose exchanges; congressional oversight is more limited; and such exchanges
are not reflected in the federal budget (GAO, 2003a).
In one instance, the Army Reserves conveyed approximately 11 acres of land
used for training activities to a private-sector developer that required the land to

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build a road for access to a new development. In exchange, the developer con-
structed a new fire station for the Army Reserves, to replace an older, less modern
one (GAO, 2003a).
In another example, the GSA conveyed two small parking areas and a par-
tially vacant, deteriorating historic property to the city of Albuquerque, New
Mexico, in exchange for a large parking garage proximate to other federal build-
ings (GAO, 2003a).
In a third instance, legislation was enacted that authorized the Air Force to
convey land it owned on the Los Angeles Air Force Base to a private developer in
exchange for the design and construction of a new 560,000-square-foot space and
missile systems center on the base. The new center replaced two outdated build-
ings that were vulnerable to earthquakes.
In these cases and others, the federal agencies involved were able to ex-
change real property for other land or buildings that provided greater benefit to
the agency without having to use funds from their annual budget appropriation.
From a government-wide perspective, real property exchanges raise issues about
the property valuation procedures used, the fair market value of the property if a
competitive bidding process is not used, the sufficiency of congressional over-
sight, and how to reflect such exchanges in the federal budget.

Shared Facilities
“Shared facilities” refers to the practice of having independent operating en-
tities with large portfolios of facilities share the use and/or management of those
facilities in some way. The sharing could apply to information about the facili-
ties, coordination of planning and management, joint oversight, or actual shared
use of facilities. As an example, the GSA oversees and coordinates the Govern-
ment-wide Real Property Information Sharing (GRPIS) program, which allows
different federal agencies to share information about facilities under their indi-
vidual control. Purely voluntary in its participation, GRPIS has so far resulted in
the formation of interagency real property councils in several regions of the coun-
try; development of an automated inventory of real property; a Web site for shar-
ing information about best practices, ongoing issues, and follow-on initiatives;
and joint analyses of common issues in the regions and possible coordinated solu-
tions to those problems (GSA, 1998).
Sharing facilities is a way to extract more utility from a portfolio of facilities.
By treating a facility as commonly held rather than individually held, managers
can avoid duplication of effort in both current operations and future investments;
fully utilize assets that, if used only by the owner of the facility, might be
underused; and share costs, making the facility more affordable and manageable.
Disadvantages of facility sharing vary according to what is being shared. The
GRPIS program is a voluntary information-sharing program. As the GSA itself
notes, while a voluntary program increases the level of trust and perhaps enthusi-

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asm for participation, it also potentially makes for less effective joint action. If
more than information is shared and if participation is mandatory, other problems
might be introduced. Joint use and management of facilities, for example, can be
a costly activity, in terms of both staff time and direct outlays. And depending on
how disparate the operating entities are and how diverse the facilities portfolio
being managed is, sharing of facilities can make management slower, less re-
sponsive, and less effective.

SUMMARY AND A RECOMMENDATION

Based on a consolidation of research, interviews, briefings, and the commit-
tee members’ collective and individual experience, the committee found that a
range of alternative approaches to acquiring federal facilities are used by indi-
vidual agencies under special legislation specific to the agency. Capital acquisi-
tion funds, not yet implemented in any federal agency, offer the potential for
improved capital asset coordination and planning across operating units, more
accurate cost allocation of assets, and incentives for asset managers to make more
cost-effective decisions.
However, each of these approaches has advantages and disadvantages. Suc-
cessful implementation of alternative approaches requires effective oversight and
management by federal employees with the appropriate skills and training.
When implementing an alternative approach, the committee believes that all
the potential costs and benefits to federal departments and agencies and the pub-
lic should be taken into account. The impacts on state and local communities
should be accounted for and attempts should be made to balance national, depart-
mental, and agency objectives with those of other public stakeholders.
Taking these caveats into consideration, the committee believes that if alter-
native approaches for acquiring facilities were carefully applied, their use on a
government-wide basis could provide federal departments and agencies with more
cost-effective ways to acquire facilities, reinvest in the existing stock, and pro-
vide a range of benefits to the public. Pilot programs to test the effectiveness of
various approaches and to evaluate their outcomes from national, state, and local
perspectives should be implemented as a first step. If changes to the budget
scorekeeping rules are required to expand the range of alternative approaches,
such changes should be tested through the pilot programs.
Recommendation: In order to leverage available funding, Congress and
the administration should encourage and allow more widespread use of
alternative approaches for acquiring facilities, such as public-private
partnerships and capital acquisition funds.

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6
Adapting Principles and Policies from
Best-Practice Organizations to the
Federal Operating Environment

BACKGROUND
In Chapters 2 through 5, the committee identified principles and policies
used by best-practice organizations for facilities investment and management.
The committee found these principles and policies to be largely independent of
the size and complexity of the organizations, their form (e.g., corporation, part-
nership), their orientation toward goods or services, and their centralization or
decentralization. The practices used to implement the principles and policies,
however, vary widely and are tailored to an organization’s structure, goals, re-
sources, and culture. In this chapter, the committee addresses how the identified
principles and policies from best-practice organizations could be tailored to the
structure of the federal government and to the goals, resources, and cultures of its
individual departments and agencies.
The chapter first reviews special aspects of the federal operating environ-
ment that must be considered in any adaptation of the identified principles and
policies. The following section consolidates and reiterates the principles and poli-
cies used by best-practice organizations as defined and identified by the commit-
tee. Issues and barriers related to adapting these individual precepts for use in the
federal operating environment are discussed and one or more recommendations
for their adaptation are made. The chapter concludes with the committee’s rec-
ommended overall strategy for implementation.

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SPECIAL ASPECTS OF THE

FEDERAL OPERATING ENVIRONMENT
Although many have suggested that the federal government adopt principles,
policies, and practices used by private-sector organizations to make the govern-
ment more “businesslike” in its operations, significant differences in the two en-
vironments complicate their direct transfer.

Mission
As long as profits result, a private-sector organization’s mission, values, and
leadership can remain relatively unchanged for years. In the federal government,
the accepted overall goal is to promote the general welfare of the public; federal
departments, independent agencies, corporations, and commissions each have
multiple missions and programs intended to help achieve the overall goal. How-
ever, the electoral process ensures change in executive and legislative leadership
on a regular, relatively short-term basis. As the leadership changes, the emphasis
placed on meeting particular missions also changes.
The electoral process in the legislative branch and at the top of the executive
branch also means that the major participants are acting within a framework of
public positions on many of the values and priorities implicit in facilities projects.
The time between initial project analysis and decision making and the start of
execution can be quite long and span several administrations. Consequently, in
the government, accountability for decision making is dispersed among a myriad
of stakeholders, some of whom may no longer be with the government by the
time decisions for investments are implemented and the facilities are subsequently
operated.

The Organizational Structure

In large private-sector organizations, the chain of command between deci-
sion makers and operating groups is relatively short, the size of the decision-
making group is relatively small, and there are strong commonalities of goals and
values among all those involved.
In the federal government the decision-making environment is rather more
complex, deriving in part from the separation of powers between the executive
and legislative branches and, within the legislative branch, between the Senate
and the House of Representatives; the organizing principle of checks and bal-
ances at all levels; and the consequently much longer command chains. This sys-
tem ensures that the many viewpoints, possible outcomes, and consequences of
public policy decisions are identified, considered, and accommodated, which can
span several administrations.
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network of distinct but interdependent organizations. Federal facilities invest-

ment decisions involve multiple stakeholders, decision makers, and operating
groups with differing missions, values, goals, and responsibilities, which may
sometimes be overlapping and sometimes conflicting. In this network-like struc-
ture, responsibility and authority for decision making are spread throughout the
executive and legislative branches and frequently are not directly linked.
Within the federal structure, departments and agencies are somewhat analo-
gous to private-sector organizations. Departments and agencies have specific and
varied missions; significant resources at their disposal to achieve those missions;
and a variety of decision-making and operating groups—human resources, facili-
ties, research, financial, policy-level and program-level units, public relations,
etc.—with differing objectives, responsibilities, and technical knowledge. They
have some flexibility in establishing processes for the evaluation of facilities in-
vestment proposals, although they must all follow the same procedures for fund-
ing requests through the annual budget process.
The answer to the question, What facilities are required? typically begins to
be formulated at the department and agency level. It is here that facilities require-
ments to support organizational operations or meet congressional and presiden-
tial directives are identified, alternatives are developed, and analyses of facilities
investment proposals are conducted. Trade-offs begin to be made among alterna-
tives for a specific investment proposal, among a range of proposals, and among
investments in facilities and other important organizational activities.
Unlike private-sector organizations, federal departments and agencies can-
not independently make a final decision to proceed with a significant facility
investment or to independently allocate funding for that investment. Instead, they
can only recommend that an investment be made and then forward that recom-
mendation to the Office of Management and Budget for its review and to Con-
gress for a final decision. These reviews and approvals involve a set of stakehold-
ers who take a government-wide perspective and whose responsibilities,
objectives, and values differ.

The Nature of Federal Facilities Investments

Another distinction between private-sector organizations and the federal gov-
ernment relates to who pays for and who benefits from the facilities and infra-
structure in which they invest. Federal facilities investments are funded by the
American public and therefore incur costs and confer benefits on a wide spectrum
of people and organizations. Such investment decisions must take into account
the costs and benefits to the public at large, not just those to a specific agency,
department, or organization. The benefits are often qualitative rather than quanti-
tative and can be difficult to measure. The costs and benefits may also differ
depending on the level—national, state, regional, local, departmental, or agency.
The wide range of government roles and missions means that each funding

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proposal for facilities must compete with many more alternatives for public in-
vestment, each with quite different measures of social utility. Federal facilities
that support public services do not generally operate under easily quantifiable
dollar measures of costs, operating margins, and market performance, further
complicating simple metrics for making decisions. The commitment of public
funds also requires far more transparency in the process than does that of private-
sector funds.

Decision-Making Environment
In the federal government, as in many private-sector organizations, requests
for funding of particular programs, projects, and initiatives typically exceed avail-
able resources. Decision makers in Congress and federal departments and agen-
cies are asked to balance the competing demands of very different programs:
Funding for facilities investments must be weighed against funding for medical
research, weapons systems, homeland security, education, and numerous other
public programs. The knowledge that resources are limited and trade-offs will be
made contributes to a competitive rather than a collaborative environment for
facilities investment decision making at all steps in the process. The current fed-
eral operating environment may be characterized by guarded communication
about facilities investments, adversarial relationships, and gamesmanship.

The Annual Budget Process and Procedures

It is standard practice for private-sector organizations to make decisions about
operating and capital expenditures (e.g., facilities) and to budget for them sepa-
rately; the two are linked through an overall management plan. In the federal
government, expenditures for operating and capital expenditures are considered
concurrently, and decision making for facilities investments is driven in large
part by the annual budget process. The budget scorekeeping rules mandated as
part of the Budget Enforcement Act of 1990 (for which there is no private-sector
analogue) also influence decisions related to the acquisition or leasing of facili-
ties and the use of alternative financing approaches. The budget process and
scorekeeping procedures reinforce a focus on the short term and on the first costs
of facilities investments, typically only 5-10 percent of the total life-cycle costs.
An additional complication is that
[n]early every federal agency oversees some capital spending. . . . As a result,
decisions on infrastructure are largely ad hoc in that they are aligned with agen-
cies’ programs, which have differing goals. Even within agencies with signifi-
cant infrastructure budgets like the Department of Transportation, infrastructure
investment strategies for different programs like transit and aviation may be
developed separately. Because the federal government does not have an overall
plan for its capital investments, the challenge of selecting the most important or

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cost-effective projects is even more difficult across federal agencies (GAO,

2000b, p. 44).

Procedures
In the federal government, activities typically related to facilities investment
and management, such as budgeting, acquisition, and modifying a project’s scope
or direction to account for changes in requirements, are procedurally encumbered.
The Federal Property and Administrative Services Act of 1949 governs the ad-
ministration of facilities in all federal civilian and military departments and agen-
cies. More recent legislation, including the Government Performance and Results
Act of 1993, the Federal Acquisition Streamlining Act of 1995, and the Clinger-
Cohen Act of 1996, applies to facilities management but also to a wide range of
other federal activities.1
The inherent differences between nongovernmental and governmental orga-
nizations, then, are significant. Nonetheless these differences do not fundamen-
tally change the need to apply best practice principles and policies to foster suc-
cessful investment in and management of federal facilities portfolios. They do,
however, impact the particular lessons that might be transferred from one domain
to the other. The next section focuses on answering the question, How can the
principles and policies used by best-practice organizations be applied to the fed-
eral operating environment?

ADAPTING BEST-PRACTICE PRINCIPLES AND POLICIES TO

THE FEDERAL ENVIRONMENT

Principle/Policy 1. Best-practice organizations establish a framework of

procedures, required information, and valuation criteria that aligns the

1These include the Government Performance and Results Act (GPRA) of 1993 (P.L. 103-62),

which requires federal agencies to develop mission statements, long-range strategic goals and ob-
jectives, and annual performance plans and to identify and measure the “outcomes” or results of
federal programs. Related legislation includes the Chief Financial Officers Act of 1990; the Federal
Acquisition Streamlining Act of 1994, Title V; the Government Management Reform Act of 1994;
and the Federal Financial Improvement Act of 1996. Executive initiatives and directives that spe-
cifically pertain to federal facilities and infrastructure include Executive Order No. 12893, “Prin-
ciples for Federal Infrastructure Investments” (January 26, 1994); Office of Management and Bud-
get (OMB) Bulletin No. 94–16, Guidance on Executive Order No. 12893, “Principles for Federal
Infrastructure Investments”; OMB Circular A–11: Part 3: “Planning, Budgeting, and Acquisition of
Capital Assets”; OMB’s Capital Programming Guide, a Supplement to Part 3; and Executive Order
No. 13327, “Federal Real Property Asset Management,” signed February 4, 2004. The President’s
Management Agenda, issued in the summer of 2001, focuses on improving the management and
performance of the federal government.

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goals, objectives, and values of their individual decision-making and

operating groups to achieve the organization’s overall mission; create
an effective decision-making environment; and provide a basis for mea-
suring and improving the outcomes of facilities investments. The com-
ponents of the framework are understood and used by all leadership and
management levels.
Discussion 1. The components of this framework include terminology
that is agreed upon by the relevant decision-making and operating groups; a
business case analysis; evaluation processes that are clearly defined and incor-
porate multiple decision points; performance measures; continuous feedback
processes; methods for establishing accountability; and incentives for groups
and individuals.
In the federal government, decisions about federal facilities investments in-
volve multiple stakeholders: Congress and its various committees, the adminis-
tration, federal departments and agencies that own facilities, operating groups
that manage facilities portfolios, the OMB, agencies that use facilities provided
by others, special interest constituencies, the GAO, and others. These stakeholder
groups have differing terminologies, responsibilities, objectives, and values.
For example, groups that manage facilities portfolios are responsible for en-
suring that facilities perform well enough to support their department’s or
agency’s missions and programs without undue disruption. They have limited
authority to determine what investments are made within the funding allotted to
them. Their objectives and values may be to build the highest-quality facilities
within the available budget in order to minimize long-term building operating
costs.
Senior-level executives, in contrast, are responsible for the overall perfor-
mance of the organization in meeting its mission and for using resources effec-
tively and efficiently. They must balance the competing demands of a variety of
programs and initiatives: Funding for facilities investments must be weighed
against funding for personnel, information technologies, research, other physical
assets such as vehicles, ships, planes, and so forth. Their objectives and values
may support building a less costly facility of sufficient quality to meet only the
immediate need so that investments in other programs can also be made.
Personnel at OMB are responsible for reviewing the budgets submitted by
agencies and recommending resource allocations, although they do not make fi-
nal decisions. Their objectives may include helping to reduce the budget by limit-
ing funding levels for various programs or services. They may not support allo-
cating any funding for building a specific facility.
Decision makers in Congress and the President are asked to balance the com-
peting demands of very different programs across a wide spectrum of agencies
and other federal entities: Funding for facilities investments must be weighed
against funding for medical research, weapons systems, homeland security, edu-

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cation, or any of a myriad of other public services. At this level, specific facilities
investment decisions may be subsumed entirely by policy decisions.
The lack of alignment in goals and objectives among these stakeholders is
exacerbated by the federal budget process. The knowledge that resources are lim-
ited and trade-offs will be made contributes to a competitive rather than a coop-
erative decision-making environment. Agencies may overstate a need in their
budget requests based on an expectation that the budget will be cut; then, when
cuts are made, there may still be enough funding to proceed. Reviewing authori-
ties, in turn, may suspect that budget requests are always inflated and that cuts
can safely be made.
A history of such gamesmanship sows elements of doubt and mistrust be-
tween the managers providing information and the decision makers using it: Can
decision makers believe what is being communicated? Will people do what they
promise? Agency managers may believe that decision makers are unable to ac-
knowledge the legitimacy of the needs being set forth in the face of pressure
(such as to maintain a certain level of budget request). Or, based on their objec-
tives and values, decision makers may recognize the needs but believe that other
investments have a higher priority.
For these reasons and others, the environment for decision making about
federal facilities investments can presently be characterized as one of adversarial
relationships, gamesmanship, miscommunication, and mistrust.
The committee believes that a framework of procedures, required informa-
tion, and valuation criteria based on the principles and policies used by best-
practice organizations for facilities investment and management should be
adopted. The individual missions, goals, cultures, and organizational structures
of federal departments and agencies can be expected to result in varying practices
within this to-be-adapted government-wide framework of principles and policies.
Because such a framework represents a significant departure from current
operating procedures, it might be advisable to establish one or more pilot projects.
A small government agency with a diverse portfolio of facilities might provide a
good environment in which to test the framework.
RECOMMENDATION 1. The federal government should adopt
a framework of procedures, required information, and valuation crite-
ria for federal facilities investment decision making and management
that incorporates all of the principles and policies enumerated by this
committee.
******
Principle/Policy 2. Best-practice organizations implement a systematic
facilities asset management approach that allows for a broad-based un-
derstanding of the condition and functionality of their facilities portfo-
lios—as distinct from their individual projects—in relation to their or-

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96 INVESTMENTS IN FEDERAL FACILITIES

ganizational missions. Best-practice organizations ensure that their fa-

cilities and infrastructure managers possess both the technical expertise
and the financial analysis skills to implement a portfolio-based approach.
Discussion 2(a). Facilities portfolio managers within federal agencies face
many challenges, including the following:

1. Finding ways to manage portfolios comprising a few hundred to several

hundred thousand individual structures of various types, ages, and conditions
without having the authority or budget necessary for proper management. Such
portfolios typically are dispersed throughout the United States and sometimes
across the world.
2. Coordinating and monitoring several hundred to several thousand ongo-
ing projects for new construction, renovation, repair, and renewal. These projects
are in various phases of development and their total costs range from several
million to several billion dollars.
3. Adapting 20- to 100-year-old facilities to accommodate new information
technologies and new physical security measures.
4. The continued deterioration of facilities as indicated by the growing back-
log of maintenance and repair.
5. The acquisition of new facilities without adequate annual resources com-
mitted to properly maintain them.
6. Excess and obsolete facilities that consume resources needed for mission-
critical facilities or other programs.

In recent years, federal departments and agencies, including but not limited
to the Department of Transportation, the Coast Guard, and the GSA, have begun
to implement facilities asset management programs that consider both the port-
folio and individual investments. Portfolio-based approaches should be imple-
mented in every department and agency with responsibility for facilities man-
agement.
RECOMMENDATION 2(a). Each federal department and agency
should update its facilities asset management program to enable it to
make investment and management decisions about individual projects
relative to its entire portfolio of facilities.
Discussion 2(b). A concern in implementing new approaches to facilities
asset management is the availability of federal staff with the full range of skills
now required. Most federal facilities management organizations currently have
facility professionals and staff with expertise in managing contracts, budgets, and
schedules related to their specialty. The best of these have also taught themselves
communication skills and techniques of financial analysis and information tech-

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nologies. They have largely done a remarkable job with the resources available to
them.
Departments and agencies will need to give their facilities asset managers
training in the business tools and financial theories and concepts required to imple-
ment a portfolio-based approach. Mirroring this, departments and agencies, in-
cluding the OMB and the GAO, should ensure that financial, budget, and pro-
gram analysts receive some basic training on the physical aspects, not merely the
financial aspects, of facilities investment and management.
Training can occur through coursework, seminars in conjunction with the
various operating units at the headquarters of an organization, and with operating
units in the field. Rotational assignments should be encouraged to provide more
in-depth training and understanding. As job vacancies occur in facilities manage-
ment operating groups, departments and agencies should seek to recruit and hire
staff not only with the traditional technical competencies but also with the requi-
site business-related training.2
RECOMMENDATION 2(b). Each federal department and agency
should ensure it has the requisite technical and business skills to imple-
ment a facilities asset management approach by providing specialized
training for its incumbent facilities asset management staff and by re-
cruiting individuals with these skills.
Discussion 2(c). One of the objectives to be met by implementing a facili-
ties asset management approach is to ensure the alignment of an organization’s
portfolio of facilities with its missions and operating objectives. Continual moni-
toring is required to identify facilities that are no longer needed due to changing
requirements and those that are obsolete technologically or otherwise. Private-
sector organizations have a direct incentive to dispose of unneeded facilities as
soon as possible because they are a drain on organizational resources and are
readily identifiable on their balance sheets. They dispose of excess facilities
through sales, nonrenewal or breaking of leases, or demolition to free up resources
that can be used for other requirements.
The federal government, in contrast, has continuously acquired facilities over
several centuries but placed relatively little emphasis on disposing of facilities
that have become obsolete, too costly to maintain, or that do not support current
missions and requirements.3 In some cases, considerable pressure has been placed

2In Chapter 2 the committee identified numerous institutions that offer the recommended

coursework.
3 There are, of course, federal facilities that are excess but present significant challenges for dispo-

sition, such as former nuclear sites and their associated facilities. Clearly such properties must remain
under government ownership. Decommissioning such sites will cost billions of dollars; the decom-
missioning of former uranium enrichment facilities, for example, will cost between $9 billion and $20
billion (NRC, 1996b).

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98 INVESTMENTS IN FEDERAL FACILITIES

on elected officials by local constituencies to obstruct the closing of local federal

facilities, even when it is not economically efficient to continue their use.
Federal policies, practices, and procedures present other obstacles for facili-
ties disposition. Eighty-one separate policies applicable to the disposal of federal
facilities have been identified (GSA, 1997). These policies include legislative
mandates or directives that are agency-specific as well as government-wide so-
cioeconomic and environmental policies such as the Land and Water Conserva-
tion Fund Act of 1965, the Stewart B. McKinney Homeless Assistance Act of
1987, and various historic preservation statutes.
The budget structure also weighs against disposal of unneeded facilities. The
budget appropriation line item Operations is used to fund the maintenance, repair,
and disposal of facilities for most departments and agencies. Disposal of some
excess facilities can occur through transfer of ownership or demolition; in both
cases, an up-front investment is required before disposition can occur. Transfer-
ring the ownership of a federal facility to a nonfederal entity brings with it the
responsibility to meet environmental and other regulations. Depending on the
age, materials, and former use of a facility, it may or may not be cost-effective to
make the repairs necessary to comply with regulations in order to dispose of it.
Similarly, it can be expensive to demolish facilities in the short term even if the
long-term benefits may be significant. The military services estimate that demoli-
tion costs for facilities range from $8 to $12 per square foot. For the Army alone,
demolition of excess facilities could cost more than $1.3 billion (GAO, 1997).
Faced with the trade-off of using the available funds to invest in facilities that
support current missions or to dispose of excess ones, managers typically choose
the first alternative (NRC, 1998).
Finally, there are few incentives for departments and agencies to invest the
time and effort to sell excess properties. Proceeds realized through such sales will
go to the general treasury, not back to the organization unless it has been given
authority under special legislation to retain some portion of them.4
RECOMMENDATION 2(c). To facilitate the alignment of each
department’s and agency’s existing facilities portfolios with its missions,
Congress and the administration should jointly lead an effort to consoli-
date and streamline government-wide policies, regulations, and pro-
cesses related to facilities disposal, which would encourage routine dis-
posal of excess facilities in a timely manner.
Discussion 2(d). Some federal departments and agencies are incurring sig-
nificant costs for operating and maintaining facilities that they no longer need to
support today’s missions. The Department of Defense (DoD) estimates it spends

4Legislation has, in fact, been enacted to allow the U.S. State Department to sell some of its excess

properties at fair market value and to retain the proceeds for investment in mission-critical facilities.

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$3 billion to $4 billion each year maintaining excess facilities (GAO, 2003f). The
Departments of Energy, State, and Veterans Affairs, the GSA, and the U.S. Postal
Service own considerable numbers of properties that are no longer needed but
continue to require investment of resources (GAO, 2003f). These agencies and
possibly others are
incurring significant costs for staff time spent managing the properties and on
maintenance, utilities, security, and other building needs . . . [and] the govern-
ment is needlessly incurring unknown opportunity costs, because these build-
ings and land could be put to more cost-beneficial uses, exchanged for other
needed property, or sold to generate revenue for the government . . . . [Holding
excess properties] presents an image of waste and inefficiency that erodes tax-
payers’ confidence (GAO, 2003f, p. 11).
The lack of alignment between a department’s or agency’s missions and its
facilities portfolio, coupled with the cost of operating and maintaining excess
facilities, can require extraordinary measures to effect some improvement, par-
ticularly when the goals, objectives, and values of the President, Congress, de-
partments, and agencies may be so different that a compromise cannot be reached
in the traditional operating environment. One such extraordinary measure was the
base realignment and closure (BRAC) process used to divest facilities owned by
DoD.
As early as 1964, the Secretary of Defense announced the need for a major
military base closing. Legislative and executive decision-making groups were
unable to reach a compromise on such closures for the next 25 years. Following
the end of the Cold War, it became clear again that certain facilities and infra-
structure designed to support a specific type of military force were no longer
needed or financially supportable. In the 1980s, the report of the Grace Commis-
sion concluded that closing unnecessary military bases could produce savings of
$2 billion annually. Decision makers in the legislative and executive branches
agreed that some infrastructure could be closed down without affecting the ca-
pacity of the government to provide for national defense. However, neither branch
could close down military bases without the approval of the other. Both branches
were reluctant to support the closing of specific bases because of the impacts on
local economies, employment, the objections of the local electorate, and the im-
plications for individual members of Congress (Goldfein, 1994).
To resolve this impasse, the Base Realignment and Closure Act was enacted
in 1988, establishing a decision-making process outside the traditional operating
environment. The Act established an independent commission to make the final
recommendations for closures and set ground rules for both executive and legis-
lative agencies in terms of their input and its timing. The Act required elected
officials to approve or reject a recommended package of base closings as a
whole—elected officials were not allowed to remove individual bases from the
list or to otherwise amend it. Time for debate was limited and filibusters in Con-

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100 INVESTMENTS IN FEDERAL FACILITIES

gress were disallowed. This process was used for three rounds of base closures in
the 1980s and 1990s and may be used again in 2005. The government as a whole
and DoD in particular have 15 years of experience and lessons learned. Such
lessons can be used by DoD and other agencies to make adjustments to the pro-
cess to improve it and adapt it to other departments and agencies as appropriate.
RECOMMENDATION 2(d). For departments and agencies with many
more facilities than are needed for their missions—the Departments of
Defense, Energy, State, and Veterans Affairs, the General Services Ad-
ministration, and possibly others—Congress and the administration
should jointly consider implementing extraordinary measures like the
process used for military base realignment and closure (BRAC), modi-
fied as required to reflect actual experience with BRAC.
******
Principle/Policy 3. Best-practice organizations integrate facilities invest-
ment decisions into their organizational strategic planning processes.
Best-practice organizations evaluate facilities investment proposals as
mission enablers rather than solely as costs.
Discussion 3. Federal departments and agencies typically are established to
serve specifically defined missions and objectives and to execute programs to
achieve them. Throughout their histories, departments and agencies have con-
ducted strategic planning processes aimed at identifying and achieving short-,
intermediate-, and long-term objectives. Strategic planning processes have been
formalized and their reporting requirements expanded through the Government
Performance and Results Act of 1993.
In regard to facilities investments, most federal departments and agencies
have not yet linked their strategic planners and finance directors with their facili-
ties management operating groups, nor have they demonstrably integrated facili-
ties investment decision making into their organizational strategic planning pro-
cesses. Instead, decision making for facilities investments is typically a reactive
planning process that has been described as follows:
It begins with the lowest or low-level units of an organization identifying the
deficiencies and threats they face. Then they attempt to return to a preferred
earlier state by designing projects intended to reveal the causes of these deficien-
cies and threats and to remove or suppress them. Next, using cost-benefit analy-
sis, priorities are assigned to projects. Finally, using an estimate of the amount of
resources that will be available for work on projects, a set of them is selected
starting at the top of the priority list, working down until all the expected re-
sources have been allocated. The set of projects thus selected constitutes the
unit’s plan.
Unit plans are passed up to the next higher-level unit, where they are edited and
coordinated and integrated with a plan similarly prepared at that unit. This pro-

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cess is continued until the accumulated plans reach the top of the organization,
where again they are edited, coordinated, and integrated with projects designed
at that level. (Ackoff, 1999, p. 104)
Most initiatives or activities contemplated in any department’s or agency’s
organizational strategic planning entail a facilities requirement: Space is required
to house people and equipment and to ensure that operations are ongoing and
efficient. The location of that space can help or hinder operations. When depart-
ments and agencies plan for their facilities investments using a reactive rather
than a more integrated management approach, they fail to account for a poten-
tially substantial portion of the total cost of a program or initiative.
Integrating facilities considerations into organizational strategic planning
processes up front will provide decision makers with better information about the
total long-term costs, considerations, and consequences of a particular course of
action. One method for doing so is to have the senior facilities program manager
participate in the organization’s strategic planning sessions and processes. His or
her role is to translate between the organization’s mission and programs and its
physical assets and to clearly communicate the potential support that enabling
real estate and facilities can give to the organization’s mission.
Some departments and agencies have already instituted more integrated man-
agement approaches to planning. In the State Department, for example, the direc-
tor/chief operating officer of the Bureau of Overseas Buildings Operations par-
ticipates in strategic planning sessions with the other senior-level department
executives (undersecretaries and assistant secretaries for the various operating
units). His role is to link investments in embassies, consulates, and other facilities
and the abandonment of still others to the conduct of foreign policy and to help
identify the impacts, costs, potential consequences, and opportunities of such in-
vestments.
In response to criticism from the OMB and others about its facilities plan-
ning and management processes, the VA has developed a planning process that
considers trade-offs among all types of physical assets, including infrastructure
projects, nonmedical equipment, leases (new and existing of more than 300,000
square feet), medical equipment, information technology, and enhanced-use
leases (public-private partnerships) (VA, 2003). The process requires that capital
investment proposals be clearly tied to the department’s goals and objectives
before they are considered for funding. A strategic review is conducted by a capi-
tal investment board (CIB) made up of senior executives from the major operat-
ing units. The CIB is responsible for evaluating, prioritizing, and measuring pro-
posals against the VA’s strategic plan and OMB’s requirements. The committee
believes that all federal departments and agencies should integrate facilities in-
vestment decisions into their organizational strategic planning processes.

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RECOMMENDATION 3. Each federal department and agency should

use its organizational mission as guidance for facilities investment deci-
sions and should then integrate facilities investments into its organiza-
tional strategic planning processes. Facilities investments should be
evaluated as mission enablers, not solely as costs.
******
Principle/Policy 4. Best-practice organizations use business case analy-
ses to rigorously evaluate major facilities investment proposals and to
make transparent a proposal’s underlying assumptions; the alternatives
considered; a full range of costs and benefits; and the potential conse-
quences for their organizations.
Discussion 4(a). A business case analysis, as used in the private sector, is
not a budget or accounting document, nor is it a static, one-time-only analysis
that looks solely at physical assets. It is, instead, a planning and decision-support
tool that is constantly revised to reflect changing requirements and to incorporate
better or updated information. It accounts for the life-cycle costs of all of the
resources inherent in an investment decision—that is, facilities, staff, equipment,
technologies, and financial resources.
Federal efforts to provide more complete analyses of facilities investment
alternatives have been initiated. The OMB has issued the Capital Programming
Guide, which incorporates policies and procedures for developing and evaluating
alternatives to be used by all executive branch agencies when preparing budget
requests. It is intended to provide guidance for a disciplined capital programming
process to ensure that capital assets contribute to the achievement of agency stra-
tegic goals and objectives (OMB, 1997).5
Federal departments and agencies have also issued internal guidance for de-
veloping their own business case analyses for facilities investments. As one ex-
ample only, the VA developed the Capital Investment Methodology Guide as a
basic reference to help standardize the methods for gathering, analyzing, and pre-
senting data to decision makers.6 The guide incorporates tools to analyze a
proposal’s cost-effectiveness, alternatives, risk, and earned value.
The continual updating of a business case analysis is an important consider-
ation for federal departments and agencies, where facilities investment proposals
may take years to move through the budgeting process. Private-sector organiza-
tions invest minimal resources at the earliest stages of proposal evaluation and

5Because OMB defines capital assets as “land, structures, equipment and intellectual property (in-

cluding software) that have an estimated useful life of two years or more,” the guide applies to capital
assets that are substantially different in character, purpose, and longevity.
6Available at www.va.gov/budget/capital.

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analysis, focusing primarily on the financial aspects. If the expected return is not
sufficient to justify additional study, the proposal is terminated. If additional study
is justified, it is undertaken in an iterative manner such that significant resources
are only expended once a proposal becomes a project.
In contrast, federal departments and agencies may invest significant resources
in conducting an alternatives analysis and conceptual planning, in some cases
taking a project to a 35 per cent design phase before a proposal is presented to
OMB or Congress. At this point, several hundred thousand dollars or more, and
many hours of staff time, will have been expended. As a project receives condi-
tional approvals within the agency itself, from OMB, and from Congress, which
may take years, more people and operating groups become vested in the proposal.
Most department or agency managers are reluctant to reevaluate the need for a
specific project even if it is clear that requirements have changed, because of the
buy-in by other groups. Federal managers also take political and financial risks if
they request that Congress reallocate an appropriation to another use. Once a
project is approved, it is not usually put on a fast track. More commonly, several
years will pass before it is actually constructed and occupied.
Continual updating of information may help to preclude the building of fa-
cilities designed for a requirement that has been overtaken by events. For ex-
ample, to mitigate problems caused by an extended time frame, the VA has insti-
tuted a policy that after proposals have been approved and funded but before
initiation, proposal teams must submit progress reports to determine if schedules
and costs would still be on target and must take corrective actions as appropriate.
Once funding is secured, planning assumptions approved 18 to 24 months earlier
must be reviewed and validated before the obligation of funds.
Because a business case analysis is tailored to the vocabulary, culture, re-
sources, and mission of an organization, it is developed and revised over time and
through repeated use by all of the decision-making and operating groups. Thus,
there is no standard format for a business case analysis that can be readily adapted
to all federal departments and agencies. However, the committee believes that
such an analysis can and should be developed by each federal department and
agency and refined over time through repeated, consistent use by all of their deci-
sion-making and operating groups.
Whatever its format, a federally adapted business case analysis should ex-
plicitly include and clearly state the following: (1) the organization’s mission, (2)
the basis for the requirement for the facility investment, (3) the objectives to be
met by the facility investment and its potential effect on the entire facilities port-
folio; (4) performance measures for each objective to indicate how well objec-
tives will have been met, (5) identification and analysis of a full range of facilities
investment and other alternatives to meet the objectives, including the alternative
of no action, (6) descriptions of the data, information, and judgments necessary to
describe anticipated performance of the alternatives in terms of performance mea-
sures, (7) a list of the value judgments (i.e., value trade-offs) made to balance

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104 INVESTMENTS IN FEDERAL FACILITIES

achievement on competing objectives, (8) a logic for the overall evaluation of the
alternatives, (9) strategies for exiting the investment, and (10) the names of the
individuals and operating groups responsible for the analysis and accountable for
subsequent performance. The form of the business case analysis for each depart-
ment and agency should be agreed to by the appropriate oversight authorities.
RECOMMENDATION 4(a). Each federal department and agency
should develop and use a business case analysis for all significant facili-
ties investment proposals to make clear the underlying assumptions, the
alternatives considered, the full range of costs and benefits, and the po-
tential consequences for the organization and its missions.
Discussion 4(b). One element of the recommended framework is common
terminology to promote effective communication among the various stakeholders
when discussing the business case analysis or other facilities-related issues. Engi-
neers, lawyers, accountants, economists, technologists, military personnel, and
elected officials lack a common vocabulary or style of interaction. Nor do facility
planners, facility operators, agency heads, facility users, legislative personnel,
budget analysts, and elected officials necessarily share a common set of interests
or time frames they consider important. Common terminology promotes improved
communications among stakeholders with widely differing educational and tech-
nical backgrounds, values, and objectives.
For effective communication to occur, facilities asset management staff
should have the capacity and skills to understand the relationship of facilities to
the big picture—that is, the organizational mission—and to communicate that
understanding. They should also be able to solve problems by considering all
sides of issues and negotiate a solution that will best meet the organizational
requirement. Similarly, the staff of reviewing authorities should have the capac-
ity and skills to understand the physical aspects of facilities management as prac-
ticed in the field. Training, rotational assignments, and cultivating a wide variety
of contacts and relationships through networking are effective methods for in-
stilling such skills.
RECOMMENDATION 4(b). To promote more effective communica-
tion and understanding, each federal department and agency should
develop a common terminology agreed upon with its oversight constitu-
encies for use in facilities investment deliberations. In addition, each
should train its asset management staff to effectively communicate with
groups such as congressional committees having widely different sets of
objectives and values. Mirroring this, oversight constituencies should
have the capacity and skills to understand the physical aspects of facili-
ties management as practiced in the field.
******

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Principle/Policy 5. Best practice organizations analyze the life-cycle

costs of the proposed facilities, the life-cycle costs of staffing and equip-
ment inherent to the proposal, and the life-cycle costs of the required
funding.
Discussion 5(a). In the federal government, policies and directives for using
life-cycle costing of facilities investments have been issued. However, because
capital and operating expenditures are considered concurrently, the annual bud-
get process does not encourage a total life-cycle perspective at the highest levels
of decision making.
Under the current budget structure, only the projected design and construc-
tion (first costs)—which account for only 5 to 10 percent of the total costs of
facilities—are easily identifiable and open to scrutiny by the OMB, Congress,
and others. Funding requests for design and construction are considered on a
case-by-case basis under separate line items. In contrast, funding requests for the
operation, maintenance, and disposal of facilities are lumped together in a differ-
ent line item and may be considered in different budget years. Thus, the budget
process is so structured that up to 95 percent of the total life-cycle costs of oper-
ating and maintaining facilities are not routinely considered.
For some high-dollar project proposals, federal departments and agencies
conduct life-cycle analyses internally to understand the total facilities costs and
benefits over the long term and to prioritize their requests for funding. However,
once their budget requests are submitted, the requests are disaggregated into fund-
ing for design, construction, operations, and maintenance of the facility to con-
form to the budget structure; the full costs of staffing, equipment, and technolo-
gies for the particular facility are not included. In its research and interviews, the
committee was not made aware of any instance in which a department or agency
conducted a life-cycle analysis for a facility investment proposal and a life-cycle
analysis of its attendant staffing, equipment and technologies and a life-cycle
analysis of the cost of funding. If agencies were to adopt more integrated man-
agement and planning approaches, such analyses would probably become more
commonplace.
RECOMMENDATION 5(a). Each federal department and agency
should use life-cycle costing for all significant facilities investment deci-
sions to better inform decision makers about the full costs of a proposed
investment. A life-cycle cost analysis should be completed for (1) a full
range of facilities investment alternatives, (2) the staff, equipment, and
technologies inherent to the alternatives, and (3) the costs of the required
funding.
Discussion 5(b). The focus on the first costs of facilities investments is rein-
forced by the budget scorekeeping rules mandated as part of the Budget Enforce-

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106 INVESTMENTS IN FEDERAL FACILITIES

ment Act of 1990, discussed in Chapter 5. Revising the budget scorekeeping rules
such that they meet congressional oversight objectives for transparency and at the
same time facilitate decision making that takes into account the long-term inter-
ests of departments and agencies as well as the public will not be an easy task.
Amending the scorekeeping rules specifically to account only for life-cycle costs
would probably create an even greater disincentive for facilities investments. The
committee believes that a collaborative effort that encompasses a wide range of
objectives, goals, and values is required. Some possible revisions to the rules
could be tested in pilot projects.
RECOMMENDATION 5(b). Congress and the administration should
jointly lead an effort to revise the budget scorekeeping rules to support
facilities investments that are cost-effective in the long term and recog-
nize a full range of costs and benefits, both quantitative and qualitative.
******
Principle/Policy 6. Best-practice organizations evaluate ways to disen-
gage from, or exit, facilities investments as part of the business case
analysis and include disposal costs in the facilities life-cycle cost to help
select the best solution to meet the requirement.
Discussion 6. When planning for new facilities or major renovations, fed-
eral departments and agencies typically do not develop exit strategies.7 When
considering the acquisition of new facilities, it is not yet commonplace to analyze
the entire portfolio of facilities to determine whether other existing facilities will
become obsolete to the mission or to analyze the resulting cost implications.
The development of exit strategies as part of a business case analysis will
help federal decision makers to better understand the potential consequences of
the alternative approaches. An evaluation of exit strategies can, for example, pro-
vide a basis for determining whether it is best to own or lease the required space
in a particular situation, or whether specialized or more generic flexible space is
the best solution. For those investment proposals in which the only exit strategy is
demolition and cleanup, evaluating the costs of disposal may lead to better deci-
sions about the design of the facility and the choice of materials, thereby reducing
life-cycle costs.
RECOMMENDATION 6. Every major facility proposal should include
the strategy and costs for exiting the investment as part of its business
case analysis. The development and evaluation of exit strategies during

7An example of an exit strategy is housing vouchers that allow enlisted men and women to seek

housing in the private market. Using vouchers provides the DoD and its military services with more
flexibility to adjust to fluctuations in staff needs and allows them to avoid the long-term costs and
commitments of operating military housing.

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the programming process will provide insight into the potential long-
term consequences for the organization, help to identify ways to mitigate
the consequences, and help to reduce life-cycle costs.
******
Principle/Policy 7. Best-practice organizations base decisions to own or
lease facilities on the level of control required and on the planning hori-
zon for the function, which may or may not be the same as the life of the
facility.

Discussion 7. As do private-sector organizations, federal departments and

agencies acquire the use of space and equipment through ownership and through
operating and capital leases. Based on the committee’s interviews and research
activities, the criteria departments and agencies use to determine if it is more
cost-effective to own or lease facilities to support a given function are not clear or
uniform. What is clear is that the decision is complicated by the budget
scorekeeping rules.
As with budget requests to design and construct facilities, requests to fund
operating and capital leases are scored up front.8 Leases typically will have lower
costs over the given lease period than the design and construction of a facility,
even if the long-term costs might be higher. Consequently, leasing the required
space may appear to have less impact on an organization’s overall budget. In this
case, the scorekeeping rules may provide an incentive for a department or agency
to game the system and request approval to lease space even if it is not cost-
effective in the long term.
The committee believes that a more effective approach for deciding whether
it is best to own or lease the required space is to base the decision on the level of
control desired and the planning horizon for the function. Departments and agen-
cies should determine whether the required space will support functions that are
critical to the organizational mission (core functions), functions that support the
mission, or functions that are mission neutral (noncore) and then determine the
level of control desired. An additional decision factor should be the length of time
the function must be supported. For long-term, mission-critical functions, a de-
partment or agency may wish to exert maximum control through ownership. For
short-term, noncore functions, leasing may be the most cost-effective option.
Whatever the decision, the committee believes it should be based on a clearly
stated rationale linked to support of the organizational mission and the life of the
function.

8The criteria used to distinguish among the different categories of leases are to some extent arbi-

trary (CBO, 2003), leading to some variation in the ways leases are scored by the OMB and the CBO.

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RECOMMENDATION 7. Each federal department and agency should

base its decisions to own or lease facilities on the level of control desired
and on the planning horizon for the function, which may not be the same
as the life of the facility.
******
Principle/Policy 8. Best-practice organizations use performance mea-
sures in conjunction with both periodic and continuous long-term feed-
back to evaluate the results of facilities investments and to improve the
decision-making process itself.

Discussion 8. The Government Performance and Results Act of 1993 re-

quires all federal departments and agencies to develop performance measures in
order to evaluate the effectiveness of their programs and investments in providing
goods and services to the American public and to report the results annually.
Some federal organizations have used the Balanced Scorecard concept to develop
measures for determining how well strategic objectives are being met. However,
because the results of many federal programs or services are qualitative in nature
and occur over long periods of time—for example, the regulation of air quality—
measuring them can be challenging.
Federal organizations are faced with several issues when they develop per-
formance measures to capture the outcomes of facilities investments and manage-
ment as they apply to portfolios of facilities. One is the lack of adequate baseline
data about facilities portfolios: their condition, value, functionality, and operating
costs. When Congress appropriates the annual operations and maintenance bud-
get back to the agencies, the agencies themselves then allocate this funding to
investments in facilities maintenance, repair, alteration, and renewal. (Planning,
design, and construction of projects are typically funded through separate line
items.) Departments and agencies do not systematically separate and track actual
expenditures for maintenance, repair, and operations of buildings, making it diffi-
cult to develop accurate baseline data. A second issue is the structure of current
accounting systems, which are driven by the federal budget process and do not
typically disaggregate facilities operations and maintenance costs. An example of
one further complicating factor is that many federal buildings are not metered,
making it difficult to track utility costs or usage.
Despite these and other difficulties, efforts are under way to develop mea-
sures that apply to facilities portfolios. Many agencies use a facilities condition
index (FCI) to monitor the overall condition of their facilities inventories. The
Navy has developed the Mission Dependency Index (MDI), which uses opera-
tional risk management techniques of probability and severity and applies them
to facilities in terms of interruptability, relocatability, and replaceability. The MDI
also takes mission intradependencies (those that reside within a command) and

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ADAPTING PRINCIPLES AND POLICIES FROM BEST-PRACTICE ORGANIZATIONS 109

mission interdependencies (those that reside between commands) into account

through a structured interview process with command representatives of indi-
vidual units that cover a finite geographical area. The DoD has developed a facili-
ties sustainment model and recapitalization metric to determine the rate of resto-
ration and modernization relative to the average expected service life of the
inventory. The Coast Guard is developing (1) a space utilization index (SUI) to
measure compliance with organizational space standards to ensure equitable dis-
tribution of space and funding across the organizations and (2) a systems critical-
ity index based on functional importance, health and safety, repair cost factors,
interdependencies with other systems, and other factors (Dempsey et al., 2003).
NASA has developed a parametric model for tracking deferred maintenance
across its inventory. Some or all of these indices could be adapted for use by other
federal departments and agencies and used in combination with other metrics to
measure the performance of federal facilities portfolios. An approach like that of
the Balanced Scorecard could be applied hierarchically, with successively more
detailed objectives and metrics at lower levels. The department or agency level
would be the starting point since it is the focus of resource allocation and estab-
lishment of management objectives. Department objectives would flow down to
agencies and thence to regions and facilities.
The effective use of performance measures for facilities investment and man-
agement requires the continuous monitoring of projects, processes, and facilities
portfolios through short- and long-term feedback. Monitoring the progress of fa-
cility projects to measure whether they are on time and within budget is a com-
mon practice in federal organizations. The GSA, the U.S. Postal Service, the
State Department, and other agencies receive feedback on customer satisfaction
with newly occupied buildings through postoccupancy evaluations. Such evalua-
tions provide a basis for lessons-learned programs, which in turn are used to
improve processes and design standards. However, most of the feedback proce-
dures are short term. To the committee’s knowledge, no federal department or
agency gathers consistent, organized, long-term feedback to determine if facili-
ties investments met organizational objectives, solved operational problems, or
reduced long-term operating costs. This type of feedback is essential if the out-
comes of facilities investments and management processes are to be measured
and improved.
RECOMMENDATION 8. Each federal department and agency should
use performance measures in conjunction with both periodic and con-
tinuous long-term feedback and evaluation of investment decisions to
monitor and control investments, measure the outcomes of facilities in-
vestment decisions, improve decision-making processes, and enhance
organizational accountability.
******

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110 INVESTMENTS IN FEDERAL FACILITIES

Principle/Policy 9. Best-practice organizations link accountability, re-

sponsibility, and authority when making and implementing facilities in-
vestment decisions.
Discussion 9. As noted in Stewardship of Federal Facilities: A Proactive
Strategy for Managing the Nation’s Public Assets, the responsible ownership of
facilities by the federal government is
an obligation that requires not only money, but also the vision, resolve, experi-
ence, and expertise to ensure that resources are allocated effectively to sustain
the public’s investment. The recognition and acceptance of this obligation is the
essence of stewardship. Public officials and employees at all levels are respon-
sible for decisions that affect the stewardship of facilities. (NRC, 1998, p. 62)
In the federal government, responsibility and authority for making decisions
and executing programs often are not directly linked. Instead, decision-making
authority and decision-making responsibility are spread throughout the executive
and legislative branches, leading to a lack of clear-cut accountability for facilities
investment outcomes.
In the instance of facilities management and maintenance, the linkages be-
tween responsibility, authority, and accountability are lacking at several levels.
First, for most facilities projects, one operating unit may be responsible for the
planning of a facility, another for designing and constructing it, and a third for
maintaining, preserving, and operating it. When these functions are separate, there
is no strong incentive for those designing a facility to consider its life-cycle costs
or to evaluate alternative materials, systems, or other components in terms of
their impact on long-term operations and management, repair, and disposal costs.
The groups responsible for design are rarely held accountable for the subsequent
total operating costs of the facility. The group overseeing construction is respon-
sible for and held accountable for completing the facility on time and on budget
but not necessarily for ensuring that the facility will operate economically and
satisfy user requirements.
Second, those who use a facility often are not responsible for its maintenance
and care. Their budget allocation is usually separate from that for facilities main-
tenance, so to them, the facility does not have a direct cost. They operate within
the facility but are not accountable for how their operations affect the facility or
the cost of maintaining it.
Third, those responsible for managing facilities portfolios may be held ac-
countable for the quantity and quality of services being provided to the organiza-
tion. However, they are not always given the resources and authority necessary to
maintain the facility’s functionality or condition at the level needed to effectively
support the required services.
Fourth, to help balance the budget, budget and program analysts may be
responsible for limiting the resources to be invested. However, they are not held
accountable for the consequences of their recommendations, which may include
the worsening condition of facilities over time through lack of investment.

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Fifth, senior managers and elected officials are responsible for broad levels
of services and for balancing needs with available resources. At this level, trade-
offs are made among a wide range of programs and services, and decisions are
made by consensus. Faced with these trade-offs, senior managers and public offi-
cials may decide that there will be no serious consequences if facility mainte-
nance and repair is deferred another year in favor of more urgent operations or
programs with greater visibility. Only if there is a catastrophic failure, such as a
roof falling in or a bridge collapsing, are senior managers likely to be held ac-
countable for the condition of facilities in any given year (NRC, 1998).
Within the federal government, private-sector methods for linking responsi-
bility, authority, and accountability for facilities investment-related activities are
most easily applied at the project level. Given adequate resources and the author-
ity to allocate those resources, a facility project manager can be held accountable
for delivering a project on time and within budget. As one moves up within a
department or agency to the facility program level, accountability for the out-
comes of investments is more difficult to establish owing to the typical separation
of planning, design, construction, and operations functions and, more importantly,
to an inability to control adequate resources to manage existing facilities portfo-
lios over the long term.
Several elements of the framework of principles and policies recommended
in this report will enhance accountability for the outcomes of federal facilities
investments. Implementation of facilities asset management approaches, coupled
with adequate resources and authority for allocating those resources, will en-
hance accountability for outcomes within facilities management organizations. A
facilities asset management approach allows linking the performance of the fa-
cilities portfolio to the organization’s mission and measuring how well opera-
tional and strategic objectives are being met over both the short and long terms.
The development and consistent use of a business case analysis that docu-
ments decisions, value trade-offs, the quality and depth of the alternatives ana-
lyzed, and those responsible for the analysis will enhance accountability for in-
vestment proposals and their outcomes. More integrated approaches to the design,
construction, and operation of individual buildings could result in lower life-cycle
costs and could also serve to make planners, designers, constructors, and opera-
tors of facilities more accountable for the performance and functionality of the
facility. Some design-build-operate-maintain project delivery strategies have been
developed on these premises. The Departments of Defense and State are now
conducting pilot studies to determine if this type of project delivery strategy could
be widely used to achieve better facilities and greater accountability.
As a first step toward making the decision-making process itself more trans-
parent, and to enhance accountability at all levels, each federal department and
agency should develop a decision tree or diagram that illustrates the many inter-
faces among the decision-making and operating groups involved in the process,
identifies the points at which decisions are made, and identifies the groups mak-
ing the decisions at each point.

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RECOMMENDATION 9. To increase the transparency of its decision-

making process and to enhance accountability, each federal department
and agency should develop a decision process diagram that illustrates
the many interfaces and points at which decisions about facilities invest-
ments are made and the parties responsible for those decisions. Imple-
mentation of facilities asset management approaches and consistent use
of business case analyses will further enhance organizational account-
ability.
******
Principle/Policy 10. Best-practice organizations motivate employees as
individuals and as groups to meet or exceed accepted levels of perfor-
mance by establishing incentives that encourage effective decision mak-
ing and reward extraordinary performance.

Discussion 10. The federal government, unlike private-sector organizations,

does not operate on a risk-reward basis, nor does it seek to make a profit. Using
public dollars to create financial incentives to motivate individuals to meet orga-
nizational objectives sometimes raises concerns; however, such incentives are
already used on a limited basis by federal departments and agencies. Incentives
come in many forms. Identifying and implementing incentives to support good
decision making on the part of individuals and operating groups is as important
for federal organizations as it is for the private sector.
In the federal system, the multiple-objective nature of laws and policies and
the sheer volume of procedures sometimes result in unintended consequences,
including disincentives for good decision making and cost-effective behavior.
The budget scorekeeping rules are one example; they are intended to provide
transparency in the budget and to help control spending, but they also engender
gamesmanship that discourages long-term, cost-effective behavior in favor of
behavior that satisfies short-term needs. The separation of planning, design, con-
struction, and operations functions within departments and agencies creates dis-
incentives for life-cycle costing in favor of driving down the first costs of facili-
ties. The federal budget process creates additional disincentives for cost-effective
actions. For example, in most circumstances, the carryover of unobligated funds
from one fiscal year to the next is not allowed even if a facilities program man-
ager can demonstrate that carryover of funding for a capital investment is the
most cost-effective approach. Funds that are not expended in the current fiscal
year are routinely taken back from departments and agencies, and the next fiscal
year’s funding may be reduced on the premise that money not spent is money not
needed. Thus, admitting to savings is not in a federal manager’s interest or that of
his organization (NRC, 1998).
Examples of incentives that would support more cost-effective decision mak-

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ADAPTING PRINCIPLES AND POLICIES FROM BEST-PRACTICE ORGANIZATIONS 113

ing and management by facilities asset management groups include these: (1)
allow savings from one area of operations to be applied to needs in another area if
the savings are carefully documented; (2) allow the carryover of unobligated funds
from one fiscal year to the next for capital improvements, if doing so can be
shown to be cost-effective; or (3) establish awards for operating units with high
levels of performance. A major issue in the implementation of such programs is
to find ways to militate against the common practice of reducing a department’s
or agency’s budget in future fiscal years if the agency appears to have funds
available at the end of the current year.
GSA’s Public Buildings Service (PBS) has instituted a program for linking
budget to performance that provides one example of how financial incentives can
be applied in the federal government to motivate operating groups to better meet
organizational goals on a national and regional level. In 1998, PBS began using a
limited number of performance metrics and targets, coupled with funds from its
annual budget, to precipitate changes in employee performance. The funds for the
program are set aside at the beginning of each fiscal year. For each of the nine
performance measures, which are organized around business performance and
customer satisfaction, PBS leadership sets a national goal. It then negotiates tar-
gets for each of its 11 regions, taking into account the characteristics of the real
estate markets in each region. At the end of the fiscal year, the funds are distrib-
uted to those regions that meet or exceed the national goal; the regions that do not
meet goals do not share in the bonus pool. Regions have discretion in how the
money is used. Of $75 million distributed as of 2001, approximately two-thirds
was used for repairs and alterations of PBS space to improve long-term perfor-
mance of regional facilities inventories and about one-third for salary, training,
workspace, and team awards (Dunham and Beard, 2001). The PBS also reports
improved collaboration among the regions and significant improvements in their
performance as additional outcomes of the program.
RECOMMENDATION 10. Congress and the administration and fed-
eral departments and agencies should institute appropriate incentives to
reward operating units and individuals who develop and use innovative
and cost-effective strategies, procedures, or programs for facilities asset
management.

AN OVERALL STRATEGY FOR IMPLEMENTATION

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114 INVESTMENTS IN FEDERAL FACILITIES

cilities. However, implementing an overall framework of principles and policies

will require collaborative, continuing, and concerted efforts among the various
legislative and executive branch decision makers and operating groups. These
include the President and Congress, senior departmental and agency executives,
facilities program managers, operations staff, and budget and management ana-
lysts within departments and agencies and from the CBO, the OMB, and the
GAO.
Having noted this, the committee is well aware that similar recommenda-
tions made by other learned panels advocating long-term, life-cycle stewardship
of facilities and infrastructure have achieved only limited success (see, for ex-
ample, NCPWI, 1988; NRC, 1990, 1991, 1998) and have failed to motivate those
outside the professional facilities community to action. The committee believes
that a new dynamic can and must be instituted.
An illustrative model of sociotechnical systems (Figure 6.1) is useful for
visualizing the interactions that occur during a complex decision-making process
(Linstone, 1984). If the committee’s recommendations for improved decision
making for federal facilities investments are to be implemented successfully, these
interactions must be understood and enabled by all the participants in federal
facilities investments and management. Facility managers will not be successful
if they limit themselves to narrow technical analyses or if interactions with senior

ORGANIZATIONAL ASPECTS

PRIMARY
ORGANIZATIONAL
ACTORS

SECONDARY
SOCIO-TECHNICAL ORGANIZATIONS
SETTING

PHYSICAL
(Environmental) POLITICAL
SETTING DECISION
ACTIVITY

TECHNOLOGY
TECHNO-PERSONAL INDIVIDUAL
SETTING ACTORS

TECHNICAL ASPECTS PERSONAL ASPECTS

FIGURE 6.1 A sociotechnical system view for decision making. SOURCE: Linstone,
1984

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ADAPTING PRINCIPLES AND POLICIES FROM BEST-PRACTICE ORGANIZATIONS 115

SCIENTIFIC SCIENTIFIC VALUE SOCIAL

DATA JUDGMENTS JUDGMENTS JUDGMENTS

x1 w1
y1

x2
w2
Overall
y2 Worth

x3 w3

¥
¥
¥ y3

FIGURE 6.2 A model for integrating scientific and social values in decision making.
SOURCE: Hammond, 1996.

agency management, program and financial staff, and OMB occur just once a
year as part of the budget cycle. Building a case for proactive facility investments
requires that dialogue be initiated and sustained between and among the various
stakeholders using terms of reference that all can relate to and act upon.
Kenneth Hammond has researched the issue of integrating scientific and so-
cial values into the decision-making process and applied the results in practical
ways (Hammond, 1996). He found that in public decision-making settings, an
impasse may occur despite numerous meetings and discussions between govern-
ment officials and community leaders. Often, the root cause of the impasse is the
fact some stakeholders are concentrating solely on technical factors, while com-
munity leaders are primarily concerned with the potential effects on the citizenry.
Figure 6.2 is a diagram Dr. Hammond developed to demonstrate that the
various stakeholders often address related but distinct problems: the technical
requirements involved in solving a specific issue and the social values of the
community. Once such differences are recognized, discussions can be shaped to
address a full range of issues and to develop trust and understanding among the
stakeholders.
The committee believes that all too often, the facilities management commu-
nity, whether in the public or private sector, presents an analysis designed to
convince those who already believe in good facility practices. Factors from the
left side of Figure 6.2 are developed and honed to a keen edge. However, this
information often fails to sway the decision makers, who count facilities as only

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116 INVESTMENTS IN FEDERAL FACILITIES

one area among many competing for resources and attention. Demonstrating that
proactive facility investment supports the broader values of the organization or
government entity will allow for integrated decision making that is more compel-
ling to all stakeholders.
Implementing a framework of expectations, processes, information, and cri-
teria based on the principles and policies identified by the committee will require
broad sponsorship, focused leadership, and deep commitment on the part of all
stakeholders.
To this end, the committee recommends that legislation be enacted and
executive orders be issued that would do two things:

(1) Establish an executive-level commission with representatives from

the private sector, academia, and the ranks of the federal government to
determine how the identified principles and policies can be applied in the
federal government to improve the outcomes of decision-making and man-
agement processes for federal facilities investments within a time certain.
The executive-level commission should include representatives from nonfederal
organizations acknowledged as leaders in managing large organizations, finance,
engineering, facilities asset management, and other appropriate areas. The com-
mission should also include representatives of Congress, federal agencies with
large portfolios of facilities, oversight agencies, and others as appropriate. It
should be tasked to gather relevant information from inside and outside the fed-
eral government; hold public hearings; submit a report to the President and Con-
gress outlining its recommendations for change; an implementation plan; and a
feedback process for measuring, monitoring, and reporting on the results—all
within a time certain.

(2) Concurrently establish department and agency working groups to

provide recommendations to the executive-level commission for use in its
deliberations. The working groups within each department and agency should
work collaboratively with the executive-level commission. Staff in the depart-
ments and agencies are in the best position to communicate their organizational
culture and identify practices for implementing the principles and policies that
will work for their organization. In addition, they can provide the commission
with information on the characteristics of their facilities portfolios; issues related
to aligning their portfolios with their missions; facilities investment trends; good
or best practices for facilities investment and management; performance mea-
sures for monitoring and measuring the results of investments; and other relevant
information.

The committee believes that such sponsorship, leadership, and commitment

to this effort will result in

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ADAPTING PRINCIPLES AND POLICIES FROM BEST-PRACTICE ORGANIZATIONS 117

• Improved alignment between federal facilities portfolios and missions to

better support our nation’s goals,
• Responsible stewardship of federal facilities and federal funds,
• Substantial savings in facilities investments and life-cycle costs,
• Better use of available resources—people, facilities, and funding,
• Creation of a collaborative environment for federal facilities investment
decision making.

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Highway Administration.
USDOT. 1999. Asset Management Primer. Washington, D.C.: USDOT.
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U.S. Department of Veterans Affairs (VA). 2003. Capital Investment Methodology Guide. Available
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D.C.: U.S. Government Printing Office.
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www.firstgov.gov/Agencies/Federal/Independent.shtml. Accessed June 12, 2003.
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12, 2002.
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and Gary Spring, eds. Reston, Va.: American Society of Civil Engineers.
Varnier, D.J. 1999. Why Industry Needs Asset Management Tools. American Public Works Associa-
tion (APWA), International Public Works Congress, NRCC Seminar Series “Innovations in
Urban Infrastructure,” pp 11-25. Kansas City, Mo.: APWA.
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Whole Building Design Guide (WBDG). 2003. Available at www.wbdg.org. Accessed June 12, 2003.

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Appendixes

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Biographical Sketches of
Committee Members

Albert A. Dorman, NAE, Chair, was the first president, chairman, and CEO
(now retired) of AECOM Technology Corporation, one of the 200 largest private
U.S. corporations. AECOM is a leading provider of program management and
construction-related, diversified technical, professional services. The company
maintains more than 100 offices worldwide and employs 17,000 people. Mr.
Dorman has been involved in projects on all seven continents and has extensive
experience in infrastructure programs, architecture, engineering, finance, and
management in both the public and private sectors. In addition, he has served as
chairman of a savings and loan association, has served on the boards of three
publicly traded corporations, and has been a partner in more than two dozen real
estate ventures. In the public arena, he has served as chairman of the Economic
and Job Development Committee of the California Chamber of Commerce, served
on the boards of five universities, and has delivered or published more than 30
papers. Mr. Dorman was elected to the National Academy of Engineering in 1998
for his contributions to the integration of civil engineering and architecture for
large-scale public works projects. He is an honorary member of the American
Society of Civil Engineers, also received its first award for Outstanding Lifetime
Achievement in Leadership, and is a fellow of the American Institute of Archi-
tects. He holds a bachelor’s degree in mechanical engineering and an honorary
doctoral degree from the New Jersey Institute of Technology and a master’s de-
gree in civil engineering from the University of Southern California. He is also
trained as an architect.

Adjo Amekudzi is an assistant professor in the School of Civil and Environmen-

tal Engineering at the Georgia Institute of Technology. Dr. Amekudzi’s research

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128 INVESTMENTS IN FEDERAL FACILITIES

focuses on managing infrastructure systems as assets. She specializes in applica-

tions of management methods, decision and risk analysis, and system perfor-
mance evaluation. Her current research activities focus on asset valuation; envi-
ronmental management systems; and applications of portfolio theory and
sustainability metrics for infrastructure management. She has coauthored several
papers. Dr. Amekudzi holds a B.S. in civil engineering from Stanford University,
master’s degrees in civil engineering and civil infrastructure systems from Florida
International University and Carnegie Mellon University, respectively, and a
Ph.D. in civil and environmental engineering from Carnegie Mellon University.
She is a member of the American Society of Civil Engineers, the American Soci-
ety for Engineering Education, the Transportation Research Board, the American
Public Works Association, and the Georgia Transportation Institute.

Kimball J. Beasley is principal and manager of the New York office of Wiss,
Janney, Elstner Associates, Inc. Mr. Beasley is a structural engineer with exten-
sive experience in investigation and design of repairs for both historic and con-
temporary structures. During the past 30 years he has investigated more than
1,200 failures and performance problems involving a wide variety of building
components and materials. His experience includes serviceability problems rang-
ing from deterioration or water leakage and failure of traditional or composite
wall systems to complete building collapse. He has served as a consultant on such
notable buildings as the Metropolitan Museum of Art, Lincoln Center, the
Whitney Museum of American Art, the World Wide Plaza, and the Empire State
Building, in New York City; the City Hall in Richmond, Virginia; and the Na-
tional Theater and Union Station in Washington, D.C. Mr. Beasley has authored
over 30 articles and coauthored book chapters. He received a B.S. in structural
and materials engineering from the University of Illinois and an M.B.A. from
Pace University in New York.

Jeffery Campbell is a professor with the Facilities Management School of Tech-

nology, College of Engineering, at Brigham Young University (BYU). He has
direct experience in and has published numerous articles on contract services,
real estate, strategic market planning, project management, and life-cycle man-
agement. He has worked on research projects with the Association of Higher
Education Facilities Officers, Dow Chemical, and the McKay School of Educa-
tion at BYU. Prior to his position at BYU, Dr. Campbell held positions as an
assistant professor in construction management and engineering at Boise State
University; as director of construction and corporate facilities for Flying J, Inc.;
as general/operations manager, FHP Medical Centers; as director of business de-
velopment, Arnell-West General Contractors; and as a vice-president and com-
mercial real estate broker with Smoot Commercial Brokers. Dr. Campbell has
been honored by the International Facility Management Association with its Dis-
tinguished Educator Award. He received his Ph.D. from the University of Idaho.

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Eric T. Dillinger is a principal and the vice president of facilities management

for Carter & Burgess, Inc., consultants in planning, engineering, architecture,
construction management, and related services. Mr. Dillinger has more than 14
years of experience in the area of facility management, including facility audits
and condition assessment surveys, resource allocation, and capital asset manage-
ment. He has participated in and directed facility audits and capital asset manage-
ment programs for numerous federal government installations and agencies as
well as private-sector organizations. Mr. Dillinger also has extensive experience
in architectural and engineering endeavors, maintenance and repair prioritization,
preventive and predictive maintenance, space utilization, inventory control, and
scheduling and resource programming. He was a member of the National Re-
search Council committee that authored the report Stewardship of Federal Facili-
ties: A Proactive Strategy for Managing the Nation’s Public Assets (1998). Mr.
Dillinger has a B.S. in industrial engineering from Kansas State University and is
a member of the International Facility Management Association, the Association
of Higher Education Facility Officers, the Society of American Military Engi-
neers, and the Society of American Military Comptrollers, among other organiza-
tions.

James R. Fountain, Jr., now retired, was assistant director of research at the
Governmental Accounting Standards Board (GASB). The mission of GASB is to
establish and improve standards of state and local governmental accounting and
financial reporting that will result in useful information for users of financial
reports and guide and educate the public, including issuers, auditors, and users of
those financial reports. Mr. Fountain’s current projects include financial condi-
tion reporting, capital asset use and infrastructure reporting, and concepts related
to service efforts and accomplishments reporting. Prior to joining GASB, Mr.
Fountain was director of finance for Fulton County, Georgia, and city auditor and
later assistant city manager for Dallas, Texas. He is the coauthor of Performance
Auditing in Local Government (GFOA, 1984), Service Efforts and Accomplish-
ments: Its Time Has Come (GASB, 1990), Elementary and Secondary Education
(GASB, 1989), Report on the GASB Citizen Discussion Groups on Performance
Reporting (GASB, 2002), and Reporting Performance Information: Suggested
Criteria for Effective Communication (GASB, 2003) and is the author of numer-
ous articles. Mr. Fountain has a master’s degree in public administration from
Georgia State University and an M.B.A. in finance and a bachelor’s degree in
accounting from the University of Florida.

Thomas K. Fridstein is a managing principal with Hillier, a full-service archi-

tecture firm. Previously he was senior director of design at Tishman Speyer Prop-
erties, where he had worldwide responsibility for directing the design of major
real estate development projects. Prior to joining Tishman Speyer Properties, Mr.
Fridstein was a partner with the architectural firm Skidmore, Owings & Merrill.

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130 INVESTMENTS IN FEDERAL FACILITIES

He has more than 26 years of experience in the development, design, and con-
struction of buildings, urban spaces, and interior environments in Europe, Asia,
South America, and the United States. Mr. Fridstein was elected a fellow of the
American Institute of Architects in 1996. He is a member of the Advisory Coun-
cil of the College of Architecture, Art and Planning at Cornell University and the
Board of Overseers of the College of Architecture at Illinois Institute of Technol-
ogy and is active in the Council for Tall Buildings and Urban Habitat, the Urban
Land Institute, and the American Institute of Architects. Mr. Fridstein holds a
bachelor of architecture from Cornell University and an M.B.A. from Columbia
University.

Lucia E. Garsys is the quality services executive officer for Hillsborough County,
Florida, where she directs an organizational improvement initiative and perfor-
mance audit function. Her experience in Fairfax County, Virginia, and
Hillsborough County and her consulting experience in the Chicago metropolitan
area include planning, development, redevelopment, capital investment using tax
increment financing, public-private partnerships, and impact fees. In Hillsborough
County, she directed initiatives to integrate operation and maintenance cost pro-
jections into capital budgeting, earmark revenues for building maintenance based
on routine inventories, design an enterprise-wide system to manage a $600 mil-
lion capital investment program, and develop project and contract management
skills. She has consulted with the National Democratic Institute on planning and
public participation in Lithuania and Belarus. Ms. Garsys is a member of the
American Institute of Certified Planners. She holds a B.S. in city and regional
planning from the Illinois Institute of Technology and a master’s degree in urban
planning from the University of Illinois at Urbana-Champaign.

David L. Hawk is a professor in the Schools of Management and Architecture at

the New Jersey Institute of Technology (NJIT) and a visiting professor at the
Helsinki University of Technology, Department of Industrial Engineering and
Management. He has served as visiting professor/researcher at the Institute of
International Business at the Stockholm School of Economics, Chalmers Techni-
cal University, and Tokyo Metropolitan University. He has also held a teaching
position at Iowa State University. Dr. Hawk has published numerous articles and
papers, lectured, and conducted extensive research on construction, building eco-
nomics, and management issues. He is the author of Foundation of a New Indus-
try: Global Construction. Dr. Hawk is a member of the International Trade and
Finance Association, the International Society for Systems Sciences, and the
American Association for the Advancement of Science and is a founding member
of the European Academy of Management. He is the recipient of a number of
honors, including the Year 2000 Robert W. Van Houten Award for Teaching
Excellence at NJIT and the Progressive Architecture American Institute of Archi-
tects/Association of Collegiate Schools of Architecture Annual Research Award.

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Dr. Hawk holds a bachelor of architectural engineering from Iowa State Univer-
sity, a master of architecture and master of city planning from the University of
Pennsylvania, and a Ph.D. from the University of Pennsylvania, Wharton School
of Business. He does extensive consulting in the fields of relationship alignment
and governance systems.

Ralph L. Keeney, NAE, is a research professor in decision sciences at the Fuqua

School of Business of Duke University. He previously taught at the Marshall
School of Business and the Department of Industrial and Engineering Systems at
the University of Southern California. Dr. Keeney has been a consultant for nu-
merous public and private organizations, working in the areas of large-scale sit-
ing studies, energy policy, environmental and risk studies, and corporate manage-
ment problems. He has been a professor of engineering and management at the
Massachusetts Institute of Technology, a research scholar at the International
Institute for Applied Systems Analysis in Austria, and founder of the decision
and risk analysis group of a geotechnical and environmental consulting firm. Dr.
Keeney was elected to the National Academy of Engineering in 1995 for contri-
butions to the theory and engineering practice of decision analysis as applied to
complex public problems with conflicting objectives. Dr. Keeney has a Ph.D.
from MIT and did his undergraduate work in engineering at the University of
California at Los Angeles.

Stephen J. Lukasik is a consultant to SAIC and a former visiting professor at the

Georgia Institute of Technology. Dr. Lukasik has also been a visiting scholar at
the Stanford University Center for International Security and Cooperation, where
his research focused on technical and policy issues related to critical infrastruc-
ture protection. Dr. Lukasik is a former director of the Defense Advanced Re-
search Projects Agency and a former chief scientist of the Federal Communica-
tions Commission. In addition, he has held various senior positions in industry,
including vice president of TRW, Inc., the Xerox Corporation, the Northrop Cor-
poration, and RAND Corporation. Dr. Lukasik has served on a number of Na-
tional Research Council committees, including the Committee on Scientists and
Engineers in the Federal Government. He is a member of the American Associa-
tion for the Advancement of Science, the American Physical Society, Sigma Xi,
and Tau Beta Pi. Dr. Lukasik received his B.S. in physics from Rensselaer Poly-
technic Institute and an M.S. and a Ph.D. in physics from the Massachusetts Insti-
tute of Technology.

RADM David Nash, U.S. Navy Civil Engineers Corps (ret.), Vice Chair, is cur-
rently serving as Director of the Iraq Infrastructure Reconstruction Office. He is
also the vice president of government operations at BE&K, Incorporated, a pri-
vately held international design-build firm that provides engineering, construc-
tion, and maintenance for process-oriented industries and commercial real estate

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132 INVESTMENTS IN FEDERAL FACILITIES

projects. Prior to joining BE&K, Admiral Nash was president of PB Buildings,

Inc., and was formerly manager of the Automotive Division of Parsons
Brinckerhoff Construction Services (PBCS), Inc. Admiral Nash served for 33
years in the U.S. Navy, completing his career as commander of the Naval Facili-
ties Engineering Command and chief of civil engineers of the U.S. Navy. He is a
member of the Society of American Military Engineers, the American Society of
Civil Engineers, the American Public Works Association, the National Society of
Professional Engineers, the Institute of Electrical and Electronics Engineers, and
the American Society of Quality Control. He holds a B.S. degree in electrical
engineering from the Indiana Institute of Technology and an M.S. in financial
management from the Naval Post Graduate School in Monterey, California. Ad-
miral Nash is a registered professional engineer in Pennsylvania and Michigan.

Carol Ó’Cléireacáin is a nonresident senior fellow at the Brookings Institution’s

Center for Urban and Metropolitan Policy and an independent economic and
management consultant in New York City. Dr. Ó’Cléireacáin was a member of
the President’s Commission to Study Capital Budgeting and also served on the
National Civil Aviation Commission chaired by Norman Mineta. She was a non-
resident senior fellow and visiting fellow at the Brookings Institution; budget
director and finance commissioner of the City of New York under Mayor David
Dinkins; senior research associate at the Bildner Center, CUNY Graduate Cen-
ter; chief economist at District Council 37 AFSCME in New York City; and held
a number of adjunct teaching positions, including at Barnard College, Columbia
University, the Wagner Graduate School at NYU, and the Milano Graduate
School at the New School University. She currently serves on two corporate
boards—as director and chair of the audit committee of Spectrum Pharmaceuti-
cals and as director and member of the Executive Committee of Trillium Asset
Management. She is the author/editor of several books and numerous articles
and papers on budgeting and management. Dr. Ó’Cléireacáin holds a Ph.D. in
economics from the London School of Economics and an M.A. and a B.A. in
economics from the University of Michigan.

Charles Spruill is the manager for space, project, and facilities services at Fannie
Mae. Prior to joining Fannie Mae, he was a facility management professional
with Marriott International. He has 18 years of progressive experience encom-
passing space management, project management, asset and inventory manage-
ment, operations management, and lease and property management. As the facil-
ity manager of Marriott International Headquarters in Bethesda, Maryland, Mr.
Spruill administered 1 million square feet of office, amenity, and support space
for 3,500 associates. He was responsible for policies and procedures related to
office space and project delivery and for initiating and implementing recommen-
dations for cost savings and improvements in operational effectiveness. He main-
tained the corporate strategic facility forecast, consisting of immediate, interim,

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APPENDIX A 133

and long-term space needs, and cash flow and budget impact analysis. In addi-
tion, Mr. Spruill was instrumental in establishing internal cost control and recov-
ery mechanisms, office space standards, project documentation standards, and
contract administration procedures. Mr. Spruill received a B.F.A. in interior de-
sign from Virginia Commonwealth University.

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Committee Interviews and Briefings

2002
January 29 First Committee Meeting; briefings by William Brubaker,
Director, Facilities and Engineering Operations, Smithsonian
Institution, and Captain Patrick Layne, Chief, Office of Civil
Engineering, U.S. Coast Guard

April 9 Second Committee Meeting; briefing by Craig Crutchfield,

Program Examiner, Office of Management and Budget

June 6 Interview with Wendy Comes, Executive Director, Federal

Accounting Standards Advisory Board

June 13 Interview with Jeanne Wilson, Republican Staff Assistant,

House Appropriations Committee, Subcommittee on Energy
and Water Development

June 20 Interview with William Fife, Corporate Vice President,

DMJM + Harris

June 21 Interview with Rusty Hodapp, Director, Airport Engineering

and Maintenance, Dallas/Fort Worth International Airport,
and Jack Allison, Manager of Infrastructure Maintenance

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APPENDIX B 135

June 27 Interview with James O’Keeffe, Senior Transportation

Analyst, Senate Budget Committee

June 28 Interview with David Skiven, Executive Director, Worldwide

Facilities Group, General Motors Corporation

June 28 Interview with Gen. Charles Williams, Director/Chief

Operating Officer, Bureau of Overseas Buildings Operations,
U.S. Department of State

August 14 Interview with Harry Olsen, Project Director, LCOR, Inc.

August 15 Interview with Rudy Umscheid, Vice President of Facilities,

USPS; Diane Van Loozen, Director, Facilities Programs;
Michael Goodwin, Director, Design and Construction; Mike
Mattera, Manager, Facilities Planning and Approval

August 22 Interview with Benjamin Montoya, former head of Public

Utilities Service Company of New Mexico

September 9 Follow-up interview with William Fife, Corporate Vice

President, DMJM + Harris

September 17 Interview with Thomas Kowalyk, Johnson and Johnson

Corporation

October 7 Interview with Thomas D. Farrell, Managing Director, and

Katherine Farley, Senior Managing Director, Tishman Speyer
Properties

November 15 Interview with representatives of Intel Corporation

November 15 Interview with Dennis Cuneo, Senior Vice President, Toyota

Motors North America, Inc.

November 21 Interview with Douglas Hansen, Director, Installations

Requirements and Management, Installations and
Environment, Undersecretary for Acquisition, Technology,
and Logistics, Department of Defense

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136 INVESTMENTS IN FEDERAL FACILITIES

2003
January 7 Informational meeting with staff of the General Accounting
Office, chaired by Bernard Ungar

January 7 Informational meeting with staff of the Department of the

Navy, chaired by RADM Michael Johnson, Naval Facilities
Engineering Command

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Interview Discussion Outline

For purposes of this interview, facilities investment includes new construc-

tion, renewal, maintenance, retrofitting, replacing and decommissioning of
facilities.

1. How would you characterize your organization’s role in making decisions

about facilities investment?
❏ Own facilities
❏ Lease facilities
❏ Provide facilities to others
❏ Use facilities
❏ Manage facilities
❏ Approve facility projects
❏ Approve funding for facility projects
❏ Track/audit expenditures for facilities projects
❏ Measure performance of facility projects
❏ Other

2. Does your organization have an inventory of facilities and their condition?

3. What is the mission of your facilities investment/management organiza-
tion?
4. How are your organization’s goals and objectives integrated into the deci-
sion-making process for facility investment?
5. How does your organization document objectives to be satisfied by facility
investment?

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138 INVESTMENTS IN FEDERAL FACILITIES

6. What performance measures/metrics are used to evaluate the results of fa-

cility investments? (For example, rate of return, discounted cash flow, non-
financial indicators). At what point in the process are they used? At what
level of functionality are they applied (project level, portfolio level, both)?
7. How does your organization define success for facility investments? De-
fine failure/inadequate performance for facility investments?
8. How does your organization identify facilities projects/opportunities for
facilities investment (market analysis, specific search based on strategic
goals, conduct a comprehensive needs assessment, gap analysis between
current and needed capabilities, other)?
9. How does your organization document the need for facilities?
10. How does your organization identify and evaluate alternative approaches
for facility investment (build new, lease, purchase, renew/retrofit existing)?
Who is involved and what criteria are used for establishing alternatives?
11. How does your organization quantify the costs, benefits, risks, and trade-
offs of alternatives?
12. How does your organization rank and select projects?
13. How does your organization make trade-offs among facility projects and
other organizational objectives/programs?
14. How does your organization obtain funding for facilities?
15. Does your organization use a top-down or bottom-up approach to fund fa-
cility investments?
16. Who must approve your facilities investment budget/revenue and operating
plan internally? Externally? (name of groups, positions, not persons)
17. What type of innovative approaches to full up-front funding are consid-
ered? How do you weigh alternatives to full up-front funding?
18. How is your organization’s long-term capital plan prioritized for the cur-
rent operating year?
19. How do you estimate the availability of funding? How do you know how
much money you have available to spend?
20. When acquiring or retrofitting a facility, does your organization have a
long-term expectation for the use of the space? Design flexibility into the
facility to accommodate unexpected or multiple uses? Conduct a life-cycle
cost analysis?
21. Does your organization develop an up-front exit strategy for a facility in-
vestments—that is, a plan for getting out of a facility investment at any
time at a reasonable cost?
22. How does your organization approach decisions related to operating and
maintaining facilities?
23. How does your organization decide that money should be invested to renew
or retrofit a facility?
24. How does your organization decide to decommission a facility? Who is
involved in the decision process? What criteria are used?

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APPENDIX C 139

25. Who is responsible for reviewing projects after a fixed period of usage to
determine whether the alternative assumptions were correct?
26. How does your organization incorporate lessons learned into the decision-
making process?
27. Please share any other comments/information that you believe may be of
value to the committee for its study.

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National Park Service
U.S. Department of the Interior
Facility Manager Leaders Program

The National Park Service Organic Act

An act to establish a National Park Service, and for other purposes.

*This title is not an official short title but merely a popular name used for the convenience of the reader. The Act has no
official short title. The National Park Service Organic Act (16 U.S.C. l 2 3, and 4), as set forth herein, consists of the Act of
Aug. 25 1916 (39 Stat. 535) and amendments thereto.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress
assembled, That there is hereby created in the Department of the Interior a service to be called the
National Park Service, which shall be under the charge of a director, who shall be appointed by the
Secretary and who shall receive a salary of $4,500 per annum. There shall also be appointed by the
Secretary the following assistants and other employees at the salaries designated: One assistant director,
at $2,500 per annum, one chief clerk, at $2,000 per annum; one draftsman, at $1,800 per annum; one
messenger, at $600 per annum; and, in addition thereto, such other employees as the Secretary of the
Interior shall deem necessary: Provided, That not more than $8,100 annually shall be expended for
salaries of experts, assistants, and employees within the District of Columbia not herein specifically
enumerated unless previously authorized by law. The service thus established shall promote and regulate
the use of the Federal areas known as national parks, monuments, and reservations hereinafter specified
by such means and measures as conform to the fundamental purposes of the said parks, monuments, and
reservations, which purpose is to conserve the scenery and the natural and historic objects and the
wildlife therein and to provide for the enjoyment of the same in such manner and by such means as will
leave them unimpaired for the enjoyment of future generations.
SEC. 2. That the director shall, under the direction of the Secretary of the Interior, have the supervision,
management, and control of the several national parks and national monuments which are now under the
jurisdiction of the Department of the Interior, and of the Hot Springs Reservation in the State of
Arkansas, and of such other national parks and reservations of like character as may be hereafter created
by Congress: Provided, That in the supervision, management, and control of national monuments
contiguous to national forests the Secretary of Agriculture may cooperate with said National Park
Service to such extent as may be requested by the Secretary of the Interior.
SEC. 3. That the Secretary of the Interior shall make and publish such rules and regulations as he may
deem necessary or proper for the use and management of the parks, monuments, and reservations under
the jurisdiction of the National Park Service, and any violations of any of the rules and regulations
authorized by this Act shall be punished as provided for in section fifty of the Act entitled "An Act to
codify and amend the penal laws of the United States," approved March fourth, nineteen hundred and
nine, as amended by section six of the Act of June twenty-fifth, nineteen hundred and ten (Thirty-sixth
United States Statutes at Large, page eight hundred and fifty-seven). He may also, upon terms and
conditions to be fixed by him, sell or dispose of timber in those cases where in his judgment the cutting
of such timber is required in order to control the attacks of insects or diseases or otherwise conserve the
scenery or the natural or historic objects in any such park, monument, or reservation. He may also
provide in his discretion for the destruction of such animals and of such plant life as may be detrimental
to the use of any of said parks, monuments, or reservations. He may also grant privileges, leases, and
permits for the use of land for the accommodation of visitors in the various parks, monuments, or other
reservations herein provided for, but for periods not exceeding thirty years; and no natural curiosities,
wonders, or objects of interest shall be leased, rented, or granted to anyone on such terms as to interfere
with free access to them by the public: Provided, however, That the Secretary of the Interior may, under
such rules and regulations and on such terms as he may prescribe, grant the privilege to graze live stock
within any national park, monument, or reservation herein referred to when in his judgment such use is
not detrimental to the primary purpose for which such park, monument, or reservation was created,
except that this provision shall not apply to the Yellowstone National Park: And provided further, That
the Secretary of the Interior may grant said privileges, leases, and permits and enter into contracts
relating to the same with responsible persons, firms, or corporations without advertising and without
securing competitive bids: And provided further, That no contract, lease, permit, or privilege granted
shall be assigned or transferred by such grantees, permittees, or licensees, without the approval of the
Secretary of the Interior first obtained in writing: And provided further, That the Secretary may, in his
discretion, authorize such grantees, permittees, or licensees to execute mortgages and issue bonds,
shares of stock, and other evidences of interest in or indebtedness upon their rights, properties, and
franchises, for the purposes of installing, enlarging or improving plant and equipment and extending
facilities for the accommodation of the public within such national parks and monuments.
Sac. 4. That nothing in this Act contained shall affect or modify the provisions of the Act approved
February fifteenth, nineteen hundred and one, entitled "An Act relating to rights of way through certain
parks, reservations, and other public lands."

Source: National Park Service

The National Park Service Organic Act
http://www.nps.gov/legacy/organic-act.htm
National Park Service
U.S. Department of the Interior
Facility Manager Leaders Program

The President’s Commission on Americans Outdoors

A summary
In the 1980's, major changes both in the demand for and the supply of outdoor recreation
opportunities became apparent. Participation in many activities had surpassed the projections of the
Outdoor Recreation Resources Review Commission (ORRRC). A growing population was putting
increased pressure on recreation lands while development was subtracting from available open space
in and near growing cities and towns. Technology had spawned a host of new activities, from hang-
gliding to driving rugged vehicles off-road, to snowmobiling. The population was changing toward an
older citizenry, more women working, and more single parents. The private sector had become a
significant supplier of outdoor recreation areas and equipment. Meanwhile, the federal government and
many states were in difficult financial straits; they were finding it hard to pay for outdoor recreation.
A consortium of interest groups went to Laurance Rockefeller, the chairman of the 1960 ORRRC,
and urged that he take the lead in stimulating a new ORRRC-like assessment of outdoor recreation
trends and needs. In 1982, Rockefeller convened a small group of conservation and recreation leaders
under the chairmanship of Henry L. Diamond, former commissioner of New York State's Department of
Environmental Conservation. Revisiting many of the issues the ORRRC had explored 20 years earlier,
Rockefeller's Outdoor Recreation Policy Review Group concluded that with governments retrenching,
"Even with the tremendous growth in the involvement of the private sector, there is evidence that
outdoor recreation opportunities are contracting overall, rather than expanding to meet increasing
need." These findings led the Rockefeller group to recommend a comprehensive federal reappraisal of
the nation's recreation policy and resources by a new commission patterned after the ORRRC. When
efforts to have Congress enact legislation creating the commission stalled, President Reagan
established, by executive order, the President's Commission on Americans Outdoors in 1985.
President Reagan directed the Commission to look ahead for a generation and determine what
Americans wanted to do outdoors and what was needed to ensure that they have the necessary
opportunities.
The Commission's report, Americans Outdoors: The Legacy, the Challenge (1987), contained more
than 60 specific recommendations addressing outdoor education, public services, volunteers, resource
protection, information needs, and funding. The Commission said the provision of outdoor recreation
opportunities were most needed close to home, and it urged a "prairie fire of local action" to protect,
restore, and provide local recreational lands. It recommended the establishment of "greenways"
described as "corridors of private and public lands and waters to provide people with access to open
spaces close to where they live . . . . " It urged communities to shape growth to keep them attractive
places in which to live and work, and it recommended intensified efforts to maintain the quality of
natural resources and to increase recreation opportunities on federal lands. Partnerships between
government agencies and the private sector were seen as a key to expanding outdoor opportunities.
Finally, the Commission recommended that Congress establish a dedicated trust fund to provide a
minimum of $1 billion a year for outdoor recreation.

Adapted from:
University of Wyoming
Website, “Outdoor Recreation and Wilderness are Part of our American Heritage”
http://uwadmnweb.uwyo.edu/RanchRecr/handbook/outdoor.htm
National Park Service
U.S. Department of the Interior

Procedures for the Accountability

of Capital Assets
July 2002
Cover: Authorized in 1848, the Golden Gate National Recreation
Washington Monument obelisk Area encompasses shoreline areas,
dominates the skyline of the ocean beaches, redwoods, military
Nation’s Capital. properties, and Alcatraz Island.
COREL CORP. PHOTO COREL CORP. PHOTO

2 Procedures for the Accountability of Capital Assets

Procedures for the Accountability
of Capital Assets
July 2002

Produced by the
National Park Service
Accounting Operations Center
Herndon, Virginia

U.S. Department of the Interior

Washington, DC

National Park Service 3

A symbol of freedom for all, the
Statue of Liberty was a commemo-
rative gift to the United States
from France in 1886.
COREL CORP. PHOTO

4 Procedures for the Accountability of Capital Assets

Contents

Purpose 7

Guidelines 7

Capital Assets 7
Heritage Assets 7
Non-Heritage Assets 7
National Park Service New Capital Asset Construction Projects (CACP) 8

Project Formulation Requirements 9

Accounting and Coding Requirements for Capital Assets Projects 9
Key Accounting Terminology 9
Federal Financial System (FFS) Project Table 10
Coding Requirements for Capital Assets Project Accounts 11
Federal Financial System (FFS) Coding Requirements 11

Payment Record Documentation 11

Distributing Payment Across Asset Accounts 11

Correcting Accounting Information 12

Managing Budget Authority for Major Capital Asset Activities 12

Annual Reporting and Financial Closing Requirements 13

Appendix A: Annual/Final Major Capital Fixed Asset Accounting Status Report 15

Appendix B: Annual Report Non-Heritage Capital Assets Brought In-Service 17
Appendix C: Annual Report of Capitalized Personal Property Purchased in Association With Major Capital Asset Projects 19

National Park Service 5

The White House has been the
residence and office of the
Presidents of the United States
since November 1800.
COREL CORP. PHOTO

6 Procedures for the Accountability of Capital Assets

Procedures for the Accountability of Capital Assets

PURPOSE ■ In general, the designation of heritage assets is established

The purpose of this document is to establish National Park formally by authoring legislation, National Register designa-
Service (NPS) procedures for the accountability of government- tion, List of Classified Structures, etc.
owned or government-controlled capital assets, and to improve ■ The predominant use of any additional asset that supports a
management of capital assets in all parks, regional offices, service heritage asset will determine its classification. For example, a
centers, and the headquarters office. Adherence to the proce- septic system that services several historical buildings would
dures outlined in this document is critical to proper accounting be considered a heritage asset. Conversely, a utility system that
treatment and assurance of adequate internal controls. Budget, supports complex mixed heritage and non-heritage assets
program, property management, and accounting controls are generally would not be considered a heritage asset and would
emphasized throughout. be capitalized.

The responsibility of the managing park or regional office is the

GUIDELINES final determination of the heritage assets versus non-heritage
The Federal Accounting Standards Advisory Board (FASAB) assets category. This distinction is critical to the proper account-
guidelines on which these procedures are based, but not limited ing and reporting of NPS capital assets.
to, are:
■ Statement of Federal Financial Accounting Standards, During Fiscal Year (FY) 1995, the NPS implemented the FASAB
Number 6, Accounting for Property, Plant, and Equipment. draft standards concerning property, plant, and equipment
■ Statement of Federal Financial Accounting Standards, (PP&E) that include stewardship land. The FASAB definition for
Number 8, Supplementary Stewardship Reporting. stewardship land is “ . . . land that is not acquired for, or in
connection with, items of general PP&E is considered to be
stewardship land.” All NPS land is considered stewardship land
CAPITAL ASSETS and does not meet the criteria for general-purpose PP&E.
These procedures establish the standards to be met by NPS units Heritage assets, like stewardship land and structures, have no
for the proper accountability of NPS capital assets. The distinc- asset value for balance sheet reporting, but these assets are
tion of and accounting treatment for heritage assets and non- disclosed in the “Required Supplemental Stewardship Informa-
heritage assets (including rehabilitation, purchases, pass- tion” section of the NPS Annual Accountability Report.
through, donations and transfers, and other non-asset expenses)
specifically are discussed in this document. The accounting The exception to this rule is any new lands at the time of
procedures for personal property are not covered in this acquisition—with an assessed value of $500,000 or more—which
document but are outlined in Director’s Order Number 44, contain buildings, structures, and/or other facilities that will be
Personal Property Management. The capitalization criteria, used by a NPS unit for operational purposes (e.g., maintenance
dollar threshold, and depreciation schedule for each respective facility, utility system, etc.). Non-heritage assets acquired as part
type of capital asset are defined in this document. Also included of a land acquisition will be capitalized based on the assigned fair
in these procedures are the required system of appropriate and/ market value and expected useful life. Heritage asset structures
or required supporting documentation, project cost account acquired as part of a land acquisition will not be capitalized.
coding schemes, project cost account relationships, project
closing requirements, and the tracking mechanisms necessary to Non-Heritage Assets
maintain proper accountability and ensure adequate internal The NPS has divided non-heritage capital assets into three
controls. subcategories for capitalization and two subcategories for direct
expense purposes.
Heritage Assets
Heritage assets are owned by the NPS and are unique for one or ■ Non-Residential Buildings (OB) – assigned a useful life of 40
more reasons defined by FASAB standards. Heritage assets years.
generally possess: ■ Residential Buildings (RB) – assigned a useful life of 27 years.
■ Other Fixed Asset Structures (OS) – assigned a useful life of
■ Historical or natural significance. 20 years.
■ Cultural, educational, or aesthetic value. ■ Pass-Throughs (PT) – directly charged to operating expenses.
■ Significant architectural characteristics. ■ Other Expenses (OE) – directly charged to operating ex-
penses.
Heritage assets also may include other characteristics: ■ Donations and Transfers – recorded in FFS general ledger
through a “Receipt For Property” (DI-105).
■ It is expected that such assets will be preserved indefinitely.
Consequently, they are not subject to depreciation.

National Park Service 7

National Park Service New Capital Asset Construction Projects (CACP)

NPS Capital Asset

Construction Project
Accounting

Non-Heritage or Pass- Heritage CACP

Through CACP Regardless of the project’s
Is this project routine main- cost or work to be performed,
tenance? Yes or No? all costs will be charged to op-
erating expenses GL 610A.

Yes No All Heritage CACP

No special project account- Are the total projected costs account numbers need “HA”
ing is required. All costs of of this project (include all in the PROJECT GROUP field
maintenance will be a direct sub-projects) greater than in the FFS PROJECT Table.
operating expense GL 610A $400K?

All Non-Heritage Pass- No Yes Year-end reports

Through CACP account PROJECT GROUP field must Establish PROJECT account(s) for the Required Supplemen-
numbers need “PT” in the be coded with OE in the FFS with applicable codes in the tary Stewardship Reporting
PROJECT GROUP field in the PROJECT table and GL POST FFS PROJECT table. will be produced by the AOC.
FFS PROJECT TABLE TYPE is left blank.

Year-end reports for the Residential Buildings (RB)

Pass-Through costs will be PROJECT GROUP field must
produced by the AOC for HA be coded with “RB” and GL
costs. POST TYPE coded with “WP”
in the FFS PROJECT table.

Non-Residential Buildings (OB)

PROJECT GROUP field must be
coded with “OB” and GL
POST TYPE coded with “WP”
in the FFS PROJECT table.

Other Structures (OS)

PROJECT GROUP field must
be coded with “OS” and GL
POST TYPE coded with “WP”
in the FFS PROJECT table.

8 Procedures for the Accountability of Capital Assets

PROJECT FORMULATION REQUIREMENTS Obligations – Reservation of funds for goods or services
New procedures have been implemented at the project formula- ordered and yet to be received. Undelivered order is another
tion stage. As part of an update to the multi-year capabilities of term for an obligation. Obligations are not considered an
the Project Management Information System (PMIS), a capital expense until the goods or services have been received.
assets plan module will be activated for any project with total
costs exceeding $400,000. Through a series of questions and Project Account Number – Cost account number assigned to a
data identification, the module will determine if, and make a specific project. Cost account number, account number, and
Servicewide record of, projects that are major capital asset project account number are frequently used interchangeably.
activities. As funding is obtained, the PMIS information will aid
in appropriate establishment and coding of accounts. Such Project Table (PROJ) – The FFS table that contains a summary
information also will provide a mechanism for Servicewide of all valid project accounts used by the NPS.
project monitoring and ensuring that financial activity is in
accordance with these guidelines. At the close of a capital asset General Ledger Post Type – The two-character code (e.g., “WP”
project, the same information will aid in preparation of a project or work-in-progress) on the FFS PROJ table that directs the
completion report and serve as an audit trail to justify the general ledger account posting of the costs. This field is left
accounting structure used. blank for heritage asset projects, pass-through projects, other
expenses, projects, and non-heritage capital assets with costs less
The National Park Service will apply these guidelines below the than $400,000.
minimum threshold of $500,000 to ensure that any underesti-
mated projects whose actual costs ultimately exceed the mini- Installation-Wide Project Number (IWPN) – Code on the
mum threshold have had their accounting correctly established project table that links project account numbers together
from the beginning. Therefore, for budgeting purposes, the NPS regardless of fund source, fiscal year, or project number. Also
will use a $400,000 project threshold as the level at which a links related accounting information with the Project Manage-
major capital asset plan is required. ment Information System (PMIS).

Accounting and Coding Requirements for Capital Assets Line Item Construction (LIC) – A specific capital asset con-
Projects struction project identified for funding through budget activity
Once the appropriate distinction of a capital asset (CA) project 10 of the NPS construction appropriation.
(i.e., heritage asset versus non-heritage asset) has been made,
and the total CA project costs are projected to be more than Installation-Wide Project Table (IWPT) – The FFS table that
$400,000, the NPS accounting system, Federal Financial System contains the list of established valid IWPNs.
(FFS), will be used to monitor, track, and account for NPS capital
asset costs. The Federal Financial System requires key data Project Group – Established two-character codes for distinction
elements or codes for CA accounting and reporting purposes. of capital asset project types (i.e., OB, RB, OS, PT, and OE). This
code is used to generate custom reports.
Key Accounting Terminology
Cost Account Number – Code used to accumulate costs for a Project Description – Field on the PROJ table used to enhance
specific location or purpose. A cost account number is either 7 the project definition.
or 11 digits/characters in length. The first four characters or
organization code designates the office/park. The last three Project Management Information System (PMIS) – The PMIS
characters, or the program/primary work element (PWE), system is an NPS database of all unfunded one-time needs for
designate the source of fund (e.g., operations of the National which project-type funding is proposed.
Park System, construction, land acquisition, etc.). An account
number might have a four-character project or job number that
is used for project and/or cost accounting.

Costs – Direct or indirect project expenses incurred. Expenses

include salaries, benefits, travel, transportation of things,
printing and reproduction services, contracting services,
materials and supplies, equipment, etc.

National Park Service 9

FFS Project Table –

10 Procedures for the Accountability of Capital Assets

Coding Requirements for Capital Assets Project Accounts 2. INSTALLATION-WIDE PROJECT field: The code (IWPN)
All Project Management Information System capital assets entered in this PROJ table field serves two purposes. It ties each
projects identified through the formulation process must have account of a project together, regardless of fund source, fiscal
the necessary FFS cost accounts established under the following year, or number of accounts. It also is the link to the correspond-
procedures, beginning with pre-design costs. ing PMIS record. The code first must be established in the IWPT
table of FFS before the system will allow it to be entered in the
For major asset actions, separate project accounts are required in PROJ table.
each PWE/program to collect the total costs for each category/
subcategory. Use of more than one account within each cat- A. All accounts for a PMIS project should have an IWPN,
egory/subcategory is at the discretion of the program managers, regardless of the number of accounts, or whether or not
providing that the critical coding for each is the same, and the the project is a major capital asset activity.
PROJ DESC field is coded sufficiently to distinguish the pur- B. Beginning with FY 2002 appropriations, IWPNs will have
poses of each. The categories/subcategories are as follows: the following nomenclature: park’s alpha code, a space,
and the PMIS record number shown in six digits. For
■ Heritage Assets. example, if PMIS project 34657 is at John Johnson NHP, it
■ Non-Heritage Assets, Subcategory Residential Buildings. will have an IWPN of JOJO 034657. See Transitional
■ Non-Heritage Assets, Subcategory Other Non-Residential Instruction for nomenclature on assigning IWPNs for pre-
Buildings. FY 2002 appropriations.
■ Non-Heritage Assets, Subcategory Other Fixed Asset
Structures. 3. PROJ GROUP field: This code is used by AOC to prepare
■ Pass-Throughs. required annual asset reports by category type and to monitor
■ Other Expenses. the accuracy of activity by category/subcategory. All accounts
associated with major capital asset activity are to possess one
FFS Coding Requirements of six category/subcategory codes entered in this field as
When each capital asset project account is established, specific follows:
coding must be entered in selected fields of the PROJ table.
Coding accuracy in three fields is absolutely critical. Once the A. Heritage Assets – HA.
account is established, these codes should never be modified B. Non-Heritage Assets
without clearing of the changes by the capital asset coordinator 1. Subcategory Residential Buildings – RB
located in the Accounting Operations Center (AOC). 2. Non-Residential Buildings – OB
3. Other Fixed Asset Structures – OS
The fields of the FFS PROJ table for which coding accuracy is 4. Pass-Through – PT
critical at the time the capital asset project account is established 5. Other Expenses – OE
are G/L POST TYPE, INSTALLATION-WIDE PROJECT, and
PROJ GROUP. Since the PROJ GROUP field is not displayed on most FFS/AFS
reports, it is strongly recommended the PROJ DESC also begin
1. G/L POST TYPE field: Entering a code of “WP” in this field with the PROJ GROUP code for reference purposes. It is also
posts all costs (except for capitalized equipment) to general recommended the PROJ DESC field be used to enhance the
ledger account 1720 – construction-in-progress (CIP). It is definition of the capital asset project rather than duplicate the
critical to the accuracy of the project account for a capital asset project title. These are some examples: PT – Grant To Lucky
that the WP code is present when expenses are charged to County; RB – Rehab 3 Duplexes; and HA – Replace HQ Roof.
ensure the correct general ledger account is posted. Adding the
code later does not retroactively correct any prior postings.
Similarly, deleting the code at any time will cause reconciliation PAYMENT RECORD DOCUMENTATION
difference between the capital asset project accounts and the Distributing Payment Across Asset Accounts
construction-in-progress general ledger account. At any time, the Along with the proper establishment of project accounts for
total posted to general ledger 1720 for all open or active capital capital assets, accurately posting obligations and expenses is
asset projects should be equal to the expenditures charged to the equally critical to the success of managing capital asset records.
respective capital asset project accounts. The AOC is responsible It is the responsibility of the contracting officer’s technical
for reconciling all of the FFS general ledger accounts. Leave this representative (COTR) to determine the cost and budget object
field blank for projects associated with heritage asset class distribution as the individual approves invoices for pay-
accounts, pass-through accounts, and non-capital asset ment, and/or certifies time and attendance records. Cost
accounts. As facilities/structures are brought into service, the distribution should represent the best judgment at the time of
costs collected in CIP general ledger account 1720 are moved to the actual proportion of asset categories (asset accounts) to be
appropriate buildings, other structures, and/or equipment charged, even if the original obligation/undelivered order (UDO)
general ledgers to begin the capitalization of the asset. record or project budget authority dollars are posted otherwise.

National Park Service 11

For audit purposes, it also is good practice to document the The acquisition cost and/or budget object class for equipment
thought process involved when the backup documentation is acquired that is not part of a capital asset project will derive the
unclear about the decision being made on the specific project accounting treatment. Specifically, the budget object class codes
cost distribution. A brief narrative on how or what basis was assigned to the various types of equipment or personal property
used for the cost distribution might prove to be valuable infor- at the time of acquisition will direct the general ledger accounts
mation at some future time. Charging costs to a central account posting. Equipment purchased that costs less than the NPS
with the intent of redistributing costs via an expenditure transfer capitalization threshold amount of $15,000 will be charged
document later is not recommended. directly to operating expenses general ledger account 610A.
Equipment that is purchased which costs more than $15,000 will
The IWPN should be referenced on all invoices or contract be posted directly to the equipment general ledger account 1750
payment records to facilitate a complete audit trail and provide and tracked by the FFS fixed asset subsystem.
appropriate backup documentation to the cost account(s)
charged.
CORRECTING ACCOUNTING INFORMATION
A contract requirement or deliverable which includes a specifica- Corrections to accounting information or costs associated with
tion that requires progress payments to be itemized by the asset capital assets projects can be made anytime within the current
type affected will alleviate potential cost distribution problems fiscal year. After the fiscal year has closed, expenses may not be
for the COTR or project manager. To capture the true cost of a corrected between capital asset categories without prior ap-
major capital asset, it is vital to have the expense records reflect proval. These requests should be addressed to the Manager,
the actual capital asset(s) worked on and the necessary support- Accounting Operations Center, ATTENTION: Capital Assets
ing documentation for the record. Coordinator. The AOC reports annually all costs associated with
capital assets and any changes made after the reporting period
Some examples of contract requirement or deliverable specifica- closes would require a prior-period adjustment and submittal of
tions are: substantial backup documentation justifying the change/
correction.
1. Assume a contract for $2 million is awarded that includes work
on both a heritage asset and a non-heritage asset. The obligation
is posted as $800,000 for the heritage portion and $1.2 million for MANAGING BUDGET AUTHORITY FOR MAJOR CAPITAL
the non-heritage portion. If the contract terms specify that ASSET ACTIVITIES
billing documents are to be itemized by the two respective assets, For major capital asset projects, unless guidance from individual
the project accounts can be charged directly from the billing program managers dictates otherwise, the fund/activity level will
document. The IWPN should also be annotated on all billing manage budget authority and obligations for IWPN. Because
documents. these guidelines require creating multiple accounts for the
primary purpose of tracking different types of costs (rather than
2. If a contract progress bill or invoice represents work accom- to control spending), attempting to balance authorized amounts
plished on both assets, but the heritage asset was worked upon by individual accounts likely will prove very difficult. The use of
proportionately more than the non-heritage asset, the COTR or the IPWN capability allows managing budget authority at the
project manager would make the decision or judgment about “project” (IWPN) level by fund/activity source, rather than at the
what they feel is the most appropriate distribution of costs. individual account level. By utilizing IWPN reports, many
Written documentation about how the costs were distributed is accounts within a fund source can be established to isolate
required. different types of costs as needed, without having to balance
each individual account to zero with budget authority. Some
3. For capital asset work completed in-house, labor costs should accounts might show a deficit and others a surplus; however, net
be coded accordingly on time sheets to the respective capital fund/activity source surpluses or deficits would be determined
asset project account(s). The non-labor costs, such as supplies by totaling all the appropriate PWEs reporting to the IWPN.
and materials, should be charged to the appropriate asset on
which they are used. All costs for planning should be charged to
the appropriate capital asset project account as outlined above.

If the cost of capital equipment is included in the total cost of a

non-heritage capital asset project, this cost must be broken down
or distributed when the completion report is prepared by the
COTR or project manager and submitted to AOC. The portion
of the capital equipment cost of the total capital asset project
cost will be capitalized separately.

12 Procedures for the Accountability of Capital Assets

ANNUAL REPORTING AND FINANCIAL CLOSING
REQUIREMENTS

Annual reporting is required for all active major capital asset

projects and should be forwarded (both electronically and a
signed hard copy) to the AOC capital asset coordinator. A
different report is used, depending on the status and the classifi-
cation of the project.

1. An Annual/Final Major Capital Asset General Ledger

Completion Report is required for ALL active projects until ac-
counts are cleared of all undelivered orders and all future finan-
cial activity is finished. This annual report is the superintendent’s
certification that the accounting data for the project is accurate
for the previous fiscal year. A FINAL Major Capital Asset Gen-
eral Ledger Completion Report is required when ALL undeliv-
ered orders are cleared and financial accounting activity is com-
pleted. All project expenses will be capitalized and the budget
activity will be reconciled at this time.

2. An Annual/Final Report of Non-Heritage Capital Asset

placed in service is due to AOC when a project is substantially
complete/placed in service (i.e., the public is using the asset)
during the fiscal year.

3. An Annual Report of Capitalized Personal Property

purchased in association with major capital asset projects is
required if any information is reportable. This report should be
forwarded to the capital asset coordinator in AOC.

4. Reporting of major capital assets transferred or donated to the

NPS during the year is required at time of transfer. An example is
major capital assets constructed by the park’s concessioner that
has an assessed or fair market value of $500,000 or more. This
information should be forwarded to the capital asset coordinator
in AOC on a “Report of Survey.”

5. Reporting of any major capital asset where assessed value is

$500,000 or more conveyed with land purchases is also required
at time of purchase. This information should be forwarded to the
Manager, Accounting Operations Center ATTENTION: Capital
Asset Coordinator.

For additional information contact:

Management Systems Team Leader

Accounting Operations Center
13461 Sunrise Valley Drive
Suite 200
Herndon, Virginia 20171
703-487-9135

National Park Service 13

PAGE LEFT BLANK INTENTIONALLY

14 Procedures for the Accountability of Capital Assets

ANNUAL/FINAL MAJOR CAPITAL FIXED ASSET ACCOUNTING STATUS REPORT

IWPN (Project) No:

IWPN (Project) Title:

Date Report Prepared:

Annual (A) or Final (F) Report:

Current Total
Account Account Account Title Obligations Expenses Obligations
Asset Code* Number (Project Description) (UDOs) To Date To Date

HA xxxx-xxxx-402
HA xxxx-xxxx-402
Subtotal, PWE 402

HA xxxx-xxxx-403
Subtotal, PWE 403

HA xxxx-xxxx-404
HA xxxx-xxxx-404
HA xxxx-xxxx-404
Subtotal, PWE 404

Subtotal, Asset Type HA

OB xxxx-xxxx-402
OB xxxx-xxxx-402
Subtotal, PWE 402

OB xxxx-xxxx-403
Subtotal, PWE 403

OB xxxx-xxxx-404
OB xxxx-xxxx-404
Subtotal, PWE 404

OB xxxx-xxxx-601
Subtotal, PWE 601

Subtotal, Asset Type OB

GRAND TOTAL, ALL ACCOUNTS

ACCOUNT TOTALS BY PROGRAM WORK ELEMENT (PWE)

PWE 403
PWE 404
PWE 601
GRAND TOTAL, ALL ACCOUNTS

Project Manager Signature

I certify the above information is correct:

Park Superintendent Signature Date

* For each account, Asset Code the PROJ GROUP entry on the FFS PROJ table.

Appendix A l National Park Service 15

PAGE LEFT BLANK INTENTIONALLY

16 Procedures for the Accountability of Capital Assets

ANNUAL REPORT OF NON-HERITAGE FIXED ASSETS BROUGHT IN-SERVICE (DEPRECIATION TO BEGIN)

IWPN (Project) No:

IWPN (Project) Title:

Date Report Prepared:

Asset ID Asset Descripton Subcategory of Asset * Value To Be Date Facility

Depreciated ** Brought On-Line

* Equal To Depreciation Schedule: Options are RB (Residential Building); OB (Other Building); NB (Non-Building-Other Fixed Asset Structure).
** Value to include ALL costs beginning with pre-design. Costs must be reflected in asset accounts and posted to General Ledger 17 20 in FFS (call AOC Capital Asset Coordinator if you have
questions).

Explanation if value to be depreciate exceeds total of asset account subcategory value in FFS:

Report Prepared By Telephone Number

Submit report electronically to AOC-CIP Coordinator by COB, November 1 for the preceding FY.
Assign filename to include FY and IWPN of package. For example: 01 JOJO 034657.xls

Appendix B l National Park Service 17

PAGE LEFT BLANK INTENTIONALLY

18 Procedures for the Accountability of Capital Assets

ANNUAL REPORT OF CAPITALIZED PERSONAL PROPERTY PURCHASED IN ASSOCIATION WITH MAJOR CAPITAL ASSET PROCEDURES

IWPN (Project) No:

IWPN (Project) Title:

Date Report Prepared:

Property Numnber Assigned Property Descripton Account Charged Value

Report Prepared By Telephone Number

Submit report electronically to AOC-CIP Coordinator by COB, November 1 for the preceding FY.
Assign filename to include FY and IWPN of package. For example: 01 JOJO 034657.xls

Appendix C l National Park Service 19

The National Park
Service cares for special
places saved by the
American people so that
all may experience our
heritage.

Please Reduce, Reuse, and Recycle.

20 Procedures for the Accountability of Capital Assets

U.S. Department of the Interior
The mission of the Department of the Interior is to protect and provide access to our nation’s natural and cultural
heritage and honor our trust responsibilities to tribes. We:
• encourage and provide for the appropriate management, preservation, and operation of the nation’s public lands
and natural resources for use and enjoyment both now and in the future;
• carry out related scientific research and investigations in support of these objectives;
• develop and use resources in an environmentally sound manner, and provide an equitable return on these resources
to the American taxpayer; and
• carry out trust responsibilities of the U.S. Government with respect to American Indians and Alaska Natives.

National Park Service

The National Park Service is a bureau within the Department of the Interior. We preserve unimpaired the natural and
cultural resources and values of the National Park System for the enjoyment, education, and inspiration of this and
future generations. We also cooperate with partners to extend the benefits of natural and cultural resource conserva-
tion and outdoor recreation throughout this country and the world.

July 2002

National Park Service 21

National Park Service
U.S. Department of the Interior

Accounting Operations Center

13461 Sunrise Valley Drive
Suite 200
Herndon, Virginia 20171

TM
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