Federal Real Property
Progress Made in Reducing Unneeded Property, but VA Needs Better Information to Make Further Reductions Gao ID: GAO-08-939 September 10, 2008The Department of Veterans Affairs (VA) operates one of the largest healthcare-related real estate portfolios in the nation. However, many VA facilities are older and no longer well suited to providing care, leaving VA with millions of square feet of property it does not use to capacity (underutilized) or at all (vacant). VA has various legal authorities that allow it to dispose of such property. GAO was asked to identify (1) VA's progress in reducing underutilized or vacant property and how much VA spends operating the underutilized or vacant property it retains; (2) VA's use of its various legal authorities to reduce underutilized and vacant property and the extent to which VA tracks how these authorities contribute to reductions; and (3) the challenges VA faces in minimizing underutilized and vacant space and the strategies VA is using to address these challenges. To accomplish these objectives, GAO reviewed VA property data, and visited eight VA locations based on space utilization, use of authorities, and other factors. GAO also interviewed officials from various VA offices and stakeholders.
VA has made significant progress in cutting underutilized space in its buildings from 15.4 million square feet in fiscal year 2005 to 5.6 million square feet in fiscal year 2007, and although the number of vacant buildings decreased, the amount of vacant space remained relatively unchanged at approximately 7.5 million square feet. GAO estimated VA spent $175 million in fiscal year 2007 operating underutilized and vacant space at its medical facilities, where 98 percent of such space exists. GAO developed this estimate because VA does not track the cost of operating underutilized and vacant building space at the building level and has not developed a reliable method for doing so. VA's use of various legal authorities such as enhanced-use leases and sharing agreements likely contributed to the overall reduction of underutilized space, but VA does not track the effect of these authorities. Their use provides VA with revenue and services. Revenue comes from such diverse sources as rent for space and money paid for using buildings as film sets, among other things. For example, at Fort Howard, Maryland, in 2006, VA entered into a new enhanced-use lease with a developer to build a retirement community where veterans are given priority for occupancy. However, the lack of building-level information about the extent to which these authorities reduce underutilized or vacant space or provide benefits such as revenue or services means that VA cannot track, monitor, or evaluate their impact or determine which authorities have the greatest effect from year to year. VA faces several challenges to minimizing underutilized and vacant space and is using strategies at some facilities to mitigate them. One challenge is location: VA officials reported difficulty finding entities interested in using underutilized or vacant property in areas with low property values. Another challenge is cost: many of VA's underutilized or vacant buildings are in poor condition and require an estimated $3 billion in repairs before they can be fully utilized. Finally, competing stakeholder interests and legal and budgetary limitations can further impede VA's efforts. To mitigate these challenges, individual VA locations have used strategies such as improving communication with veterans groups and other external stakeholders, obtaining support from internal stakeholders, and entering into public-private partnerships.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-939, Federal Real Property: Progress Made in Reducing Unneeded Property, but VA Needs Better Information to Make Further Reductions
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Report to the Ranking Member, Committee on Veterans' Affairs, House of
Representatives:
United States Government Accountability Office:
GAO:
September 2008:
Federal Real Property:
Progress Made in Reducing Unneeded Property, but VA Needs Better
Information to Make Further Reductions:
GAO-08-939:
GAO Highlights:
Highlights of GAO-08-939, a report to the Ranking Member, Committee on
Veterans' Affairs, House of Representatives.
Why GAO Did This Study:
The Department of Veterans Affairs (VA) operates one of the largest
health care-related real estate portfolios in the nation. However, many
VA facilities are older and no longer well suited to providing care,
leaving VA with millions of square feet of property it does not use to
capacity (underutilized) or at all (vacant). VA has various legal
authorities that allow it to dispose of such property. GAO was asked to
identify (1) VA‘s progress in reducing underutilized or vacant property
and how much VA spends operating the underutilized or vacant property
it retains; (2) VA‘s use of its various legal authorities to reduce
underutilized and vacant property and the extent to which VA tracks how
these authorities contribute to reductions; and (3) the challenges VA
faces in minimizing underutilized and vacant space and the strategies
VA is using to address these challenges. To accomplish these
objectives, GAO reviewed VA property data, and visited eight VA
locations based on space utilization, use of authorities, and other
factors. GAO also interviewed officials from various VA offices and
stakeholders.
What GAO Found:
VA has made significant progress in cutting underutilized space in its
buildings from 15.4 million square feet in fiscal year 2005 to 5.6
million square feet in fiscal year 2007, and although the number of
vacant buildings decreased, the amount of vacant space remained
relatively unchanged at approximately 7.5 million square feet. GAO
estimated VA spent $175 million in fiscal year 2007 operating
underutilized and vacant space at its medical facilities, where 98
percent of such space exists. GAO developed this estimate because VA
does not track the cost of operating underutilized and vacant building
space at the building level and has not developed a reliable method for
doing so.
VA‘s use of various legal authorities such as enhanced-use leases and
sharing agreements likely contributed to the overall reduction of
underutilized space, but VA does not track the effect of these
authorities. Their use provides VA with revenue and services. Revenue
comes from such diverse sources as rent for space and money paid for
using buildings as film sets, among other things. For example, at Fort
Howard, Maryland, in 2006, VA entered into a new enhanced-use lease
with a developer to build a retirement community where veterans are
given priority for occupancy. However, the lack of building-level
information about the extent to which these authorities reduce
underutilized or vacant space or provide benefits such as revenue or
services means that VA cannot track, monitor, or evaluate their impact
or determine which authorities have the greatest effect from year to
year.
VA faces several challenges to minimizing underutilized and vacant
space and is using strategies at some facilities to mitigate them. One
challenge is location: VA officials reported difficulty finding
entities interested in using underutilized or vacant property in areas
with low property values. Another challenge is cost: many of VA‘s
underutilized or vacant buildings are in poor condition and require an
estimated $3 billion in repairs before they can be fully utilized.
Finally, competing stakeholder interests and legal and budgetary
limitations can further impede VA‘s efforts. To mitigate these
challenges, individual VA locations have used strategies such as
improving communication with veterans groups and other external
stakeholders, obtaining support from internal stakeholders, and
entering into public-private partnerships.
Figure: Photographs: Examples of Vacant Buildings at VA Medical
Facilities in Marion, Indiana and Dayton, Ohio:
[See PDF for image]
Source: GAO.
[End of figure]
What GAO Recommends:
GAO‘s recommendations to VA include (1) developing an annual cost
estimate of spending on underutilized and vacant property and (2)
collecting and maintaining building-level data by fiscal year. VA
concurred with the first recommendation but not the second, believing
its current analysis is adequate, which GAO continues to question.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-939]. For more
information, contact Mark Goldstein at (202) 512-2834 or
goldsteinm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
VA Reduced Underutilized Space by Nearly Two-thirds, but Vacant Space
Remained Relatively Unchanged, and the Cost of Operating and
Maintaining These Types of Space Is Substantial:
VA Does Not Track the Extent to Which Various Authorities Contribute to
the Overall Reduction in Underutilized Property:
Ongoing Challenges Impede VA's Efforts to Minimize and Reduce
Underutilized and Vacant Property, but Some Locations Have Taken Steps
to Address These Challenges:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Independent Cost Estimate Methodology:
Appendix III: Comments from the Department of Veterans Affairs:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Major Types of Authorities Available to VA:
Table 2: VA's Underutilized Square Feet and Number of Buildings with
Underutilized Square Feet, Fiscal Years 2005-2007:
Table 3: VA's Vacant Square Feet and Number of Vacant Buildings, Fiscal
Years 2005-2007:
Table 4: Comparison of Cost Estimating Best Practices and VA's Current
Approach:
Table 5: Number of VA Buildings Disposed, by Method and Fiscal Year:
Table 6: Summary of VA's Implementation of Best Practices for Cost
Estimating in Its Pricing Guide:
Table 7: 2007 Operations Cost per Square Foot:
Table 8: 2007 Operations Cost State-level Locality Indices:
Table 9: 2007 VA Facilities Square Feet of Underutilized and Vacant
Space:
Table 10: Percentile Rankings for 2007 Total Costs:
Figures:
Figure 1: Map of VA's Healthcare Networks:
Figure 2: Underutilized and Vacant Square Feet by Usage Type, Fiscal
Year 2007:
Figure 3: Age of VA's Buildings with Utilized, Underutilized, and
Vacant Space, Fiscal Year 2007:
Figure 4: Old Quarters Now Used to Provide Homeless Housing at
Milwaukee Medical Center:
Figure 5: Filming Sites at the Greater Los Angeles Healthcare System:
Figure 6: Energy Center Located at North Chicago Medical Center:
Figure 7: Vacant Building in Marion, Indiana, Where Location Is a
Challenge:
Figure 8: Vacant Buildings Difficult to Convert to Other Uses:
Figure 9: Deteriorating Vacant Buildings That Are Not Being Used by VA:
Figure 10: Vacant Buildings on the National Register of Historic
Places:
Figure 11: Cumulative Probability Distribution of Total 2007 Costs:
Abbreviations:
EUL: enhanced-use lease:
GSA: General Services Administration:
McKinney-Vento Act: Stewart B. McKinney Homeless Assistance Act:
NCA: National Cemetery Administration:
OMB: Office of Management and Budget:
VA: Department of Veterans Affairs:
VBA: Veterans Benefits Administration:
VHA: Veterans Health Administration:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 10, 2008:
The Honorable Steve Buyer:
Ranking Member Committee on Veterans' Affairs:
House of Representatives:
Dear Mr. Buyer:
With more than 32,000 acres of land and over 6,200 buildings on
approximately 300 sites, the Department of Veterans Affairs (VA) is
among the largest federal property-holding agencies and the operator of
one of the largest healthcare-related real estate portfolios in the
nation. However, many of VA's facilities were built more than 50 years
ago and are no longer well suited to providing care in the current VA
system. As a result, VA has millions of square feet of property that it
does not use to capacity (underutilized) or at all (vacant) because of
age, condition, location, or other factors. Operating and maintaining
unneeded property requires VA to spend appropriations that could
otherwise be used to provide direct medical care or other services. For
all federal agencies, including VA, we have identified real property
management as a high-risk area due to long-standing problems, including
underutilized and vacant building space and unneeded land.[Footnote 1]
Since 1999, VA has placed increased emphasis on reducing underutilized
and vacant property, including buildings and land. For example, the
agency initiated a process known as the Capital Asset Realignment for
Enhanced Services, a comprehensive, long-range assessment of its
healthcare system's capital asset requirements, to address its obsolete
infrastructure. VA also has various legal authorities that provide
options to help reduce its underutilized and vacant property. For
instance, VA has authority to enter into a particular type of lease,
called an enhanced-use lease (EUL), which allows the agency to enter
into long-term agreements with public and private entities for the use
of VA property, resulting in cash or in-kind consideration for VA.
Additionally, the Veterans Health Administration (VHA) has authority to
enter into sharing agreements with entities to provide the use of VHA
space for the benefit of veterans or nonveterans in exchange for
payment or services.
To provide you with information on VA's progress in reducing
underutilized and vacant property and challenges to VA's efforts, this
report addresses the following questions: (1) To what extent has VA
reduced underutilized or vacant property, and how much does it spend
maintaining the underutilized or vacant property it retains? (2) How
has VA used its authorities to reduce underutilized and vacant property
and to what extent does it track how these authorities contribute to
reductions? (3) What, if any, challenges does VA face in minimizing
underutilized and vacant property, using EULs and other agreements, and
what steps is VA taking to address these challenges?
To identify changes in the amount of underutilized and vacant property,
we analyzed property data from two VA databases: the Capital Asset
Inventory database for building-level data from fiscal years 2006 and
2007, and the Capital Asset Management System for station-level
[Footnote 2]data from fiscal years 2005 through 2007.[Footnote 3] The
earliest year for which VA property data were available was fiscal year
2005 for station-level data and fiscal year 2006 for building-level
data. We took steps to assess the reliability of the data used in this
report by interviewing agency officials knowledgeable about the data,
reviewing systems documentation, performing electronic testing to
identify obvious errors in accuracy and completeness, and corroborating
data we received with other sources. We determined that the data we
used were sufficiently reliable for our purposes. To estimate the cost
of operating and maintaining VA's underutilized and vacant property, we
conducted an independent cost estimate because VA did not provide its
own estimate for such operating costs at the time of our work (further
information is contained in app. II). To determine the extent to which
VA enters into agreements to reduce underutilized and vacant property,
we collected and analyzed data from the Capital Asset Management System
on the number of agreements VA entered into--such as EULs, sharing
agreements, and outleases--for fiscal years 2005 through 2007. In
addition, we visited and conducted interviews at locations where these
agreements were entered into to understand the benefits VA has received
from them and their impact on property management. Finally, to identify
the challenges VA faces when minimizing its underutilized and vacant
property, we spoke to VA headquarters officials to obtain their views
on these challenges and any improvements that could help VA better
utilize its property. We visited locations where VA encountered
challenges minimizing underutilized and vacant property at its
facilities and identified strategies for mitigating these challenges.
We also spoke with stakeholders, such as veterans service organizations
and lessees, interested in VA's decisions about property. We conducted
site visits at eight VA medical facilities including Dayton, Ohio; Fort
Howard, Maryland; Los Angeles, California; Marion, Indiana; Milwaukee,
Wisconsin; North Chicago, Illinois; Perry Point, Maryland; and North
Hills (Sepulveda), California. We selected this nonprobability sample
of sites to obtain a range of examples of VA's experiences with various
real property authorities; the amount of, or changes in, underutilized
and vacant property; and geographic dispersion. We also toured a
Veterans Benefits Administration (VBA) facility in Milwaukee,
Wisconsin, and a national cemetery in Alexandria, Virginia. While we
attempted to select varied locations, our sample cannot be
statistically projected to VA as a whole.
We conducted this performance audit from July 2007 through September
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. Appendix I
provides more detail on our objectives, scope, and methodology.
Results in Brief:
From fiscal year 2005 through 2007, VA made significant progress in
reducing underutilized space (space not used to full capacity) in its
buildings from 15.4 million square feet to 5.6 million square feet.
Although the number of vacant buildings decreased during this period,
the amount of vacant space remained relatively unchanged, and the total
cost of maintaining underutilized and vacant space is substantial. The
5.6 million square feet of underutilized space accounted for less than
4 percent of VA's total square feet in fiscal year 2007. Vacant space,
which totaled approximately 7.3 million square feet in fiscal year
2007, accounted for 5 percent of VA's total square feet in all 3 fiscal
years. We estimate that VA spent $175 million operating and maintaining
underutilized and vacant space at its medical facilities in fiscal year
2007; 98 percent of underutilized and vacant space were at these
facilities. We developed this estimate because VA does not track the
cost of operating and maintaining underutilized and vacant VA space at
the building level and has not developed a reliable method for
estimating these costs. Without a reliable cost estimate on operating
and maintaining vacant and underutilized property, VA cannot account
for the amount it spends each year on space that provides little or no
benefit to veterans and taxpayers, some of which could be used to
provide healthcare or other services. We are recommending that VA
develop an annual cost estimate for how much it spends on underutilized
and vacant property and that such estimates be factored into its
portfolio property practices.
While VA's use of various legal authorities, such as EULs and sharing
agreements, likely contributed to VA's overall reduction of
underutilized space since fiscal year 2005, VA does not track the
overall effect of the uses of these authorities on space reductions. VA
has used its authorities to enter into various types of agreements to
reduce underutilized space, but it does not uniformly track
information, such as the amount of square footage reduced, that would
help gauge the impact of such authorities at the building level. VA
officials we spoke with during the course of the audit acknowledge that
the ability to track this type of information at the building level is
desirable. The lack of such information precludes VA from knowing what
effect these authorities are having on reducing underutilized or vacant
space or knowing which types of authorities have the greatest effect.
The use of these authorities, which have remained relatively constant
in number at around 475 since fiscal year 2005, generates revenue and
provides services for veterans, such as homeless housing, drug
rehabilitation, and childcare. In Chicago, for example, VA leased
vacant land in 2005 to a local hospital in exchange for $28 million; VA
then used the funds to augment healthcare services for veterans at
other locations in the Chicago area. As with information on reducing
underutilized and vacant property, VA does not formally track and
evaluate information related to such benefits at the building level,
again leaving itself unable to determine what effect the authorities
are having. We are recommending that VA track, monitor, and evaluate
square footage reductions and financial and nonfinancial benefits
resulting from new agreements at the building level by fiscal year in
order to provide itself a better understanding of the utility of these
authorities and the overall effect they are having on underutilized and
vacant property from year to year.
VA faces several ongoing challenges--some of which include building
location, high building repair costs, and competing stakeholder
interests--to reducing underutilized and vacant property, but is using
several strategies in some locations to mitigate these challenges.
Officials reported difficulty finding entities interested in using
their underutilized or vacant property located in areas with low
property values. In addition, many of VA's vacant or underutilized
buildings are in poor condition and require costly repairs and
renovations before they can be utilized fully by VA or others. Fifty-
six percent of the buildings that VA determined were in "poor" or
"critical" condition at the end of fiscal year 2007 were underutilized
or vacant properties; VA estimated the repair costs for these
properties to be approximately $3 billion. Moreover, 66 percent of VA's
underutilized and vacant buildings are historic properties or eligible
for historic designation, therefore requiring more effort for disposal.
Disposal options, such as demolition, can be an expensive alternative,
often because of required remediation for asbestos and other
environmental problems. VA also cited competing stakeholder interests,
such as communities or veteran groups that want to limit development in
their community, as barriers to disposing of underutilized or vacant
property. For example, in some locations such as West Los Angeles and
Milwaukee, veterans' groups have opposed arrangements that did not
result in building uses that provide benefits exclusively for veterans.
Finally, legal restrictions--such as statutory limits on the length of
certain authorities--and administrative and budgetary disincentives
associated with some of VA's available authorities can further affect
VA's ability to enter into agreements. To address such challenges,
individual VA locations have used various strategies, including
communicating with external stakeholders, obtaining support from
internal stakeholders, and entering into public-private partnerships.
Federal agencies have other tools available for the disposal of
unneeded federal properties, including the public benefits conveyance
program administered by the General Services Administration (GSA). This
program allows agencies to convey surplus properties to state
governments, local governments, or nonprofit organizations for public
uses, such as homeless centers, educational facilities, and public
parks.
We provided a draft of this report to VA for review and comment. In
written comments, VA concurred with two of our three recommendations.
Specifically, it concurred with our two recommendations that VA develop
an annual cost estimate of spending on VA's underutilized and vacant
property and track, monitor, and evaluate square footage reductions and
financial and nonfinancial benefits when recording new agreements.
However, VA did not concur with our recommendation that the agency
collect and maintain building-level data by fiscal year in order to
correlate characteristics associated with underutilized and vacant
buildings, which may help to identify unneeded assets. VA stated that
it collects and analyzes a significant amount of data at the station
and building level, that it is in compliance with reporting
requirements established at the Federal Real Property Council, and that
it uses performance measures to identify unneeded assets that may be
candidates for disposal. Although we agree that VA collects a
significant amount of data at the station and building level, we do not
agree that this information is sufficient to correlate characteristics
with VA's underutilized and vacant buildings and therefore believe our
recommendation remains valid. In addition, VA's written comments
highlighted five areas of disagreement with our report, which we
address on p. 43 of this report. First, VA said that our report double-
counted vacant space. In response to this comment, we subtracted the
double-counted space and we now report that VA had 5.6 million square
feet of underutilized building space in fiscal year 2007. Second, VA
said that we overstated unit costs for operations and maintenance of
underutilized space. We revised this estimate after learning that our
original estimate had double-counted the costs for vacant space. Third,
VA said it does have valid cost information from which to make sound
and prudent decisions and provided examples to support its position. We
acknowledge that VA maintains certain information important for such
decision making but believe it needs to maintain more comprehensive
building-level information by fiscal year in order to determine the
operations and maintenance costs of underutilized space. Fourth, VA
stated that our report did not acknowledge VA's efforts to designate
properties for disposal based on mission dependency, utilization, and
cost. While we acknowledge VA has taken several steps such as using
performance measures to identify assets that may be candidates for
disposal, VA has not estimated the costs of many of the disposals on
its list, the disposals have not been funded, and the agency's disposal
plans are not prioritized. Finally, VA said that it does track revenue
generated, square footage reductions, and services received through
agreements; however, this is not accomplished systematically. While our
report generally reflects these facts, we added some additional
information to the report to clarify that VA does track some
information on agreements, and VA concurred with our related
recommendation to track, monitor, and evaluate square footage
reductions and financial and nonfinancial benefits when recording new
agreements, as of fiscal year 2008, as noted earlier. VA also provided
technical comments, which we incorporated, where appropriate.
Background:
VA is comprised of three administrations: VHA, VBA, and the National
Cemetery Administration (NCA). Additionally, seven staff offices and 12
staff organizations[Footnote 4] provide specific assistance to the
Secretary of VA. Each administration has a network[Footnote 5] of
regional facilities, which provides diverse program services to
veterans and their families including, among others, healthcare-related
services.
VHA operates the majority of VA's capital assets, and is primarily
responsible for VA's healthcare delivery to the veterans enrolled for
VA healthcare services. In 2007, VA served 5.6 million patients. In
addition, VHA operates the nation's largest integrated healthcare
system which includes 155 hospitals, 881 outpatient clinics, 135
nursing homes, 46 residential rehabilitation treatment programs, and
207 readjustment counseling centers totaling a combined 144.6 million
square feet. Within VHA, the management of facilities is decentralized
to 21 networks (see fig. 1).
Figure 1: Map of VA's Healthcare Networks:
[See PDF for image]
This figure is a map of the United States depicting the following VA
Healthcare Networks:
l. New England:
2. Upstate New York;
3. New York and New Jersey;
4. Stars and Stripes;
5. Capitol;
6. Mid-Atlantic;
7. Atlanta;
8. Sunshine;
9. Midsouth;
10. Ohio;
11. Partnership;
12. Great Lakes;
15. Heartland;
16. South Central;
17. Heart of Texas;
18. Southwest;
19. Rocky Mountain;
20. Northwest;
21. Sierra Pacific;
22. Desert Pacific;
23. Midwest.
Sources: U.S. Department of Veterans Affairs; MapArt (map); and GAO.
Note: In 2002, networks 13 and 14 were merged to create network 23.
[End of figure]
VBA is responsible for administering the VA's programs that provide
financial and other forms of assistance to veterans, their dependents,
and survivors. These programs include veterans' compensation, veterans'
pension, survivors' benefits, rehabilitation and employment assistance,
and education assistance. VBA has 57 regional offices and operates and
manages 4.3 million square feet of property.
NCA is responsible for providing burial space for veterans and their
eligible family members, maintaining national cemeteries, and
administering grants for establishing or expanding state veterans'
cemeteries. NCA operates and manages 972,000 square feet of building
space and 17,000 acres at 125 national cemeteries and 33 soldiers' lots
in the United States and its territories.
Since the mid 1990s, VA's healthcare system has undergone a substantial
transformation, shifting from predominately hospital-based inpatient
care to primary reliance on outpatient care, which has changed its
requirements for facilities to treat veterans. VA has taken steps to
manage its underutilized and vacant property as a result of this
transformation. For example, in 2007 we reported that VA had
established 3-year timelines for meeting strategic goals identified in
its asset management plans and had provided evidence that it was (1)
implementing these plans; (2) using real property inventory information
and performance measures in decision making; and (3) managing its real
property in accordance with its strategic plan, asset management plan,
and performance measures.[Footnote 6]To monitor progress in meeting its
strategic goals, VA's portfolio goals include decreasing underutilized
space as a key performance measure. We also previously reported that VA
had expanded its sharing agreements to include joint ventures with the
Department of Defense to construct or share medical facilities.
Congress and the administration have encouraged VA to look for more
opportunities for joint ventures as a means of avoiding costs by
maximizing available resources to build a new facility or to jointly
use a facility.[Footnote 7]
VA has a variety of legal authorities available, such as EULs and
sharing agreements, and others, to help it manage real property (see
table 1 for types of available authorities).
Table 1: Major Types of Authorities Available to VA:
Authority: Enhanced-use leasing (EUL); 38 U.S.C. §§ 8161-8169;
Definition: VA leases underutilized or vacant property to a public or
private entity for up to 75 years if the agreement enhances the use of
the property or results in an improvement of services to veterans in
the network in which the property is located. The EUL shall be for fair
consideration, and lease payments may be monetary or be made for in-
kind consideration, such as construction, repair, or remodeling of
department facilities; providing office, storage, or other usable
space; or for services, programs, or facilities that enhance services
to veterans;
Proceeds: Proceeds generated from the EUL are used to pay for expenses
incurred by VA in connection with the EUL and can be used for any
expense incurred in the development of future EULs. Any remaining funds
are to be deposited in the VA Medical Care Collections Fund. At the
discretion of the VA Secretary, proceeds also may be deposited into
construction major project and construction minor project accounts to
be used for construction, alterations, and improvements of any medical
facility.
Authority: Sharing agreements; 38 U.S.C. §§ 8151-8153;
Definition: VA may enter into sharing agreements to provide the use of
VHA space (including parking, recreational facilities, and vacant land)
for the benefit of veterans or nonveterans in exchange for payment or
services if VA's resources would not be used to their maximum effective
capacity and would not adversely affect the care of veterans. Sharing
agreements do not convey an interest in real property and can be
entered into for up to 20 years, with the initial term not to exceed 5
years;
Proceeds: Proceeds generated from sharing agreements are to be credited
to the applicable department medical appropriation of the facility that
furnished the space.
Authority: Outlease; 38 U.S.C. § 8122; 38 U.S.C. § 2412;
Definition: VA's outlease-related authorities include the following:
Outlease: VA may lease real property to public or private interests
outside of VA for up to 3 years (10 years for NCA property). Lease
payments may be made for maintenance, protection, or restoration of the
property as part of the consideration of the lease; License: Gives a
nonfederal party permission to enter upon and do a specific act or
series of acts upon the land without possessing or acquiring any estate
therein. A license can be revoked at any time; Permit: Gives another
federal agency permission to enter upon and do a specific act or series
of acts upon the land without possessing or acquiring any estate
therein. The permit can be revoked at any time;
Proceeds: Proceeds generated from outleases of VHA space, minus
expenses for maintenance, operation, and repair of buildings leased for
building quarters, are deposited into the Department of the Treasury as
miscellaneous receipts. Proceeds generated from outleases of NCA
property are to be deposited into the NCA Facilities Operation Fund and
are available for costs incurred by NCA for operations and maintenance
of NCA property. Proceeds generated from licenses and permits are
deposited into the Department of the Treasury.
Source: GAO.
[End of table]
When disposing of unneeded property, VA must comply with numerous laws
and regulations. For example, the Stewart B. McKinney Homeless
Assistance Act (McKinney-Vento Act), as amended, provides that property
identified by agencies as unnecessary for mission requirements must
first be made available to assist the homeless.[Footnote 8] In
addition, the National Historic Preservation Act, as amended, requires
agencies to manage historic properties under their control and
jurisdiction and to consider the effects of their actions on historic
preservation.[Footnote 9]
VA Reduced Underutilized Space by Nearly Two-thirds, but Vacant Space
Remained Relatively Unchanged, and the Cost of Operating and
Maintaining These Types of Space Is Substantial:
VA has made significant progress reducing underutilized space in its
buildings by nearly two-thirds from fiscal year 2005 through 2007.
However, vacant space remained relatively unchanged, although the
number of vacant buildings decreased. The total cost of operating and
maintaining underutilized and vacant space is substantial. Nearly all
underutilized space and vacant space was at VHA facilities. VA does not
track operations and maintenance costs on a building-by-building basis
and therefore does not have a reliable cost estimate for what it spends
on underutilized and vacant space. We estimate that VA spent $175
million in fiscal year 2007 operating and maintaining underutilized and
vacant space at VHA facilities. Furthermore, because VA does not
maintain building-level data, we were unable to determine trends
related to the reductions in underutilized space at the building level
during fiscal years 2005 through 2007. The absence of building-level
data prior to fiscal year 2006 prevented VA from running certain trend
analyses, including the correlations, if any, between utilization and
building location, condition, and age--information that can be
beneficial in identifying assets for disposal.
VA Reduced Its Underutilized Space by Nearly Two-thirds since Fiscal
Year 2005:
VA reduced underutilized space in its buildings by approximately 64
percent from 15.4 million square feet in fiscal year 2005 to 5.6
million square feet in fiscal year 2007.[Footnote 10] Further
demonstrating VA's progress, underutilized space accounted for
approximately 10 percent of VA's total gross square feet in fiscal year
2005; by fiscal year 2007 it accounted for less than 4 percent. Ninety-
eight percent of VA's underutilized space is at facilities operated by
VHA.[Footnote 11]
Table 2: VA's Underutilized Square Feet and Number of Buildings with
Underutilized Square Feet, Fiscal Years 2005-2007:
Fiscal year: 2005;
Underutilized square feet: 15,374,292;
Underutilized buildings: Not available.
Fiscal year: 2006;
Underutilized square feet: 9,795,006;
Underutilized buildings: 2,513.
Fiscal year: 2007;
Underutilized square feet: 5,591,257;
Underutilized buildings: 2,381.
Source: GAO analysis of data provided by VA.
[End of table]
While we were able to identify changes in underutilized space at the
station level,[Footnote 12] we were unable to determine trends relating
to the reductions in underutilized space at the building level during
fiscal years 2005 through 2007.[Footnote 13] The absence of building-
level data prior to fiscal year 2006 prevented VA from running certain
trend analyses, including the correlations, if any, between utilization
and building location, condition, and age. VA does not analyze such
correlations, according to a VA official, because it does not have the
staff or time. However, such analyses at the building level can be very
beneficial when identifying assets for disposal. According to the
Office of Management and Budget (OMB), prioritizing assets based on
their importance to mission is one of the most significant criteria
used in both focusing reinvestment funds and finding candidates for
disposition. As OMB noted in its Capital Programming Guide,[Footnote
14] correlating an asset's importance to an agency's mission and
another characteristic, such as an asset's condition, can help agencies
identify which assets are acceptable and unacceptable. Because VA uses
utilization to determine an asset's importance to its mission, it is
critical to know how this information corresponds to other
characteristics that may help identify unneeded assets.
Our analysis of VA's fiscal year 2007 data indicated that the greatest
number of buildings with underutilized space were in the categories of
"service," "office," and "warehouse." Together these three categories
accounted for 50 percent of the buildings with underutilized space.
These same three categories also had the greatest percentage of
underutilized buildings. Figure 2 depicts the amount of underutilized
square feet by building usage type.
Figure 2: Underutilized and Vacant Square Feet by Usage Type, Fiscal
Year 2007:
[See PDF for image]
This figure is a chart depicting the following data:
Usage type: Hospital;
Total square footage: 90,356,019;
Utilization:
- Vacant: 1%;
- Underutilized: 8%;
- Fully utilized: 91%.
Usage type: Other institutional uses;
Total square footage: 20,113,459;
Utilization:
- Vacant: 2%;
- Underutilized: 11%;
- Fully utilized: 87%.
Usage type: Office;
Total square footage: 12,260,419;
Utilization:
- Vacant: 6%;
- Underutilized: 19%;
- Fully utilized: 75%.
Usage type: All other;
Total square footage: 7,790,018;
Utilization:
- Vacant: 22%;
- Underutilized: 18%;
- Fully utilized: 59%.
Usage type: Service;
Total square footage: 6,334,876;
Utilization:
- Vacant: 2%;
- Underutilized: 26%;
- Fully utilized: 73%.
Usage type: Warehouses (storage/sheds);
Total square footage: 5,316,358;
Utilization:
- Vacant: 6%;
- Underutilized: 16%;
- Fully utilized: 78%.
Usage type: Laboratories;
Total square footage: 3,985,763;
Utilization:
- Vacant: 1%;
- Underutilized: 16%;
- Fully utilized: 83%.
Usage type: Housing;
Total square footage: 3,899,666;
Utilization:
- Vacant: 20%;
- Underutilized: 7%;
- Fully utilized: 74%.
Usage type: Industrial;
Total square footage: 1,779,052;
Utilization:
- Vacant: less than 1%;
- Underutilized: 14%;
- Fully utilized: 86%.
Usage type: School;
Total square footage: 877,677;
Utilization:
- Vacant: 21%;
- Underutilized: 5%;
- Fully utilized: 74%.
Usage type: Dormitories/Barrackes;
Total square footage: 440,934;
Utilization:
- Vacant: 22%;
- Underutilized: 8%;
- Fully utilized: 70%.
Usage type: Post Office;
Total square footage: 15,055;
Utilization:
- Vacant: 0%;
- Underutilized: 28%;
- Fully utilized: 72%.
Usage type: Communications systems;
Total square footage: 2,700;
Utilization:
- Vacant: 0%;
- Underutilized: 14%;
- Fully utilized: 86%.
Source: GAO analysis of VA data.
Note: Percentages may not add to 100 percent due to rounding.
[End of figure]
VA's underutilized buildings generally are older than the other
buildings in its portfolio, in poor condition, and no longer useful in
fulfilling VA's mission. For example, in fiscal year 2007, 68 percent
of VA's underutilized buildings were aged 51 years or older compared to
57 percent of utilized buildings.[Footnote 15] As of fiscal year 2007,
97 percent of underutilized buildings assessed had a component deemed
to be in "poor" or "critical" condition.[Footnote 16]
Vacant Space Has Remained Relatively Unchanged since Fiscal Year 2005:
Our analysis showed that the number of VA's vacant buildings decreased
from fiscal year 2006 to 2007; however, the amount of vacant square
feet changed little from fiscal years 2005 through 2007. During this
time period, VA retained approximately 7.5 million square feet of
vacant space, which accounted for about 5 percent of its total gross
square feet.[Footnote 17] According to VA's station-level data, all
vacant square feet were at VHA-operated facilities.[Footnote 18]
Table 3: VA's Vacant Square Feet and Number of Vacant Buildings, Fiscal
Years 2005-2007:
Fiscal year: 2005;
Vacant square feet: 7,367,340;
Vacant buildings: Not Available.
Fiscal year: 2006;
Vacant square feet: 7,635,489;
Vacant buildings: 684.
Fiscal year: 2007;
Vacant square feet: 7,297,407;
Vacant buildings: 482.
Source: GAO analysis of data provided by VA.
[End of table]
As with underutilized space, trends relating to changes in vacant space
at the building level could not be determined because of the absence of
data prior to fiscal year 2006. Additionally, snapshots from fiscal
years 2006 and 2007 were not comparable. Our analysis of VA's fiscal
year 2007 data indicated that the greatest number of buildings with
vacant space were in the categories of "housing" and "all
other."[Footnote 19] Together, these two categories accounted for 63
percent of VA's vacant buildings that year.
Similar to underutilized buildings, vacant buildings were generally
older and in poor condition. Eighty-nine percent of VA's vacant
buildings were aged 51 years or older and just over half were over 75
years old[Footnote 20] (see fig. 3). As of fiscal year 2007, 99 percent
of VA's vacant buildings had a component deemed to be in "poor" or
"critical" condition.
Figure 3: Age of VA's Buildings with Utilized, Underutilized, and
Vacant Space, Fiscal Year 2007:
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Age in years: 10 or less;
Number of buildings, Utilized: 196;
Number of buildings, Underutilized: 110;
Number of buildings, Vancant: 5.
Age in years: 11 to 25;
Number of buildings, Utilized: 427;
Number of buildings, Underutilized: 302;
Number of buildings, Vancant: 22.
Age in years: 26 to 50;
Number of buildings, Utilized: 426;
Number of buildings, Underutilized: 285;
Number of buildings, Vancant: 20.
Age in years: 51 to 75;
Number of buildings, Utilized: 827;
Number of buildings, Underutilized: 900;
Number of buildings, Vancant: 149.
Age in years: 76 or older;
Number of buildings, Utilized: 545;
Number of buildings, Underutilized: 614;
Number of buildings, Vancant: 233.
Source: GAO analysis of VA Data.
[End of figure]
In addition to identifying vacant and underutilized space in its
buildings, VA identifies the amount of land it has available for reuse
by another entity. As with vacant building space, most available acres
are located at VHA facilities. In fiscal year 2007, VHA had 2,716
available acres, an increase from 2,356 acres in fiscal year
2005.[Footnote 21] Over 90 percent of VA's stations had less than 25
available acres, while 11 of VA's 392 stations had more than 51
available acres.
VA Does Not Estimate the Annual Cost to Operate and Maintain
Underutilized and Vacant VHA Space:
VA does not track operations and maintenance costs, including building
repair and utilities, on a building-by-building basis and therefore
does not calculate what it is spending to operate and maintain
underutilized and vacant properties.[Footnote 22] VA's cost estimating
service, within the Office of Construction and Facilities Management,
developed a pricing guide that contains estimates of operating costs
per square foot for various levels of occupancy (including vacant
space). Specifically, the VA pricing guide includes costs associated
with electricity, water, gas, sewage, major systems maintenance,
building shell maintenance,[Footnote 23] janitorial services, and
security. However, the estimates did not meet the best practices we
identified in our July 2007 report as the basis of effective program
cost estimating.[Footnote 24] Additionally, there is no formal policy
across VA on how to develop cost estimates for operating and
maintaining underutilized and vacant property at the building level.
For example, the medical facilities we visited either had their own
process to develop annual cost estimates for underutilized and vacant
space or did not know what they were spending to operate this type of
space.
A reliable cost estimate is critical for informed investment decision
making, realistic budget formulation and program resourcing, meaningful
progress measurement, proactive course correction when warranted, and
accountability for results. Our past research on this issue, which we
summarized in our July 2007 report, identified best practices for
effective program cost estimating, which can be grouped into four main
characteristics--comprehensive, well-documented, accurate, and credible
(see table 4). VA's current approach does not meet best practices for
any of the four characteristics. For example, the VA pricing guide
cannot be used to produce a fully comprehensive cost estimate because
it does not include such pertinent costs as property management and
grounds maintenance. Appendix II discusses our comparison of the VA
pricing guide and industry best practices in more detail.
Table 4: Comparison of Cost Estimating Best Practices and VA's Current
Approach:
Best practice area: Comprehensive;
Examples of standards: Include both government and contractor costs
over program's full life cycle;
Examples of our findings on VA's current approach: VA pricing guide
does not include all potential operations and support costs or disclose
some key assumptions, such as labor rates or inflation indexes.
Best practice area: Well-documented;
Examples of standards: Estimates should be supported by documented
descriptions and captured in such a way that the data used can be
traced back to and verified against sources;
Examples of our findings on VA's current approach: Calculations and
methodologies for deriving cost estimates in VA pricing guide are not
documented; Cost estimates in VA pricing guide are not traced back to
source data.
Best practice area: Accurate;
Examples of standards: Estimates should provide unbiased results and be
grounded in documented assumptions and a historical record of cost
estimating and actual experiences on other comparable programs;
Examples of our findings on VA's current approach: VA pricing guide
omits pertinent costs associated with general property management and
grounds maintenance, and contains inconsistencies in how other costs
were calculated.
Best practice area: Credible;
Examples of standards: Limitations in the analysis should be disclosed,
and estimates should be cross-checked using other methods and
comparisons with independent cost estimates;
Examples of our findings on VA's current approach: Cost estimates in VA
pricing guide are not subject to sensitivity or risk analysis; Cost
estimates are not cross-checked using independent estimates.
Source: GAO.
[End of table]
We Estimate VA Spent $175 Million in Fiscal Year 2007 to Operate and
Maintain Underutilized and Vacant VHA Space:
Because VA does not have a reliable cost estimate for what it is
spending to operate and maintain underutilized and vacant space, we
conducted an independent analysis that yielded a cost estimate of $175
million to operate and maintain underutilized and vacant VHA facilities
in fiscal year 2007. We developed this estimate using cost model data
provided by the Whitestone Building Operations Cost Reference--a
published document reflecting industry standards. We also were able to
model the cost uncertainty (statistical bounds) of our estimate, which
enabled us to understand the potential variability of our cost estimate
should the facts, circumstances, and assumptions change. Our
sensitivity and risk analyses indicated that this estimate could vary
from $175 million to $185 million at the 50 percent and 70 percent
confidence levels, respectively.[Footnote 25] Performing an uncertainty
analysis enabled us to quantify the risk and uncertainty associated
with our cost estimate and allowed us to provide a level of confidence
for our cost estimate by providing us with a statistical perspective on
the potential variability within it. Appendix II explains in more
detail our estimating approach and results.
By not following practices associated with developing reliable cost
estimates, VA does not have valid cost information from which to make
sound and prudent decisions. Furthermore, the lack of a reliable cost
estimate results in VA not knowing how much it spends each year on
space that provides little or no benefit to veterans or taxpayers. As
we have previously reported,[Footnote 26] unneeded assets present
significant potential risks to federal agencies not only for lost
dollars because such properties are costly to maintain, but also for
lost opportunities because the properties could be put to more cost-
beneficial uses, exchanged for other needed property, or sold to
generate revenue for the government. In addition, continuing to hold
real property that no longer may be needed does not present a positive
image of the federal government in local communities. Instead, it can
present an image of waste and inefficiency that erodes taxpayers'
confidence and can negatively impact 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 if such a partnership provides
the best economic value for the government. According to VA, the agency
is developing requirements for a real property cost accounting system
that will track costs at the building level.
VA Does Not Track the Extent to Which Various Authorities Contribute to
the Overall Reduction in Underutilized Property:
VA's use of various legal authorities, such as EULs and sharing
agreements, likely contributed to VA's overall reduction of
underutilized space since fiscal year 2005, but VA does not track the
overall effect of these authorities on space reductions and therefore
does not know what effect they are having.[Footnote 27] VA does not
systematically track information, such as the amount of square footage
involved in each agreement, and therefore does not know the cumulative
effect of its authorities on underutilized and vacant property square
footage. VA's use of these authorities, which have remained relatively
constant in number at around 475 since fiscal year 2005, generates
revenue and provides services for veterans, including homeless housing,
substance abuse treatment, and childcare. Although VA derives benefits
from using its authorities, it does not formally track and evaluate
information related to their overall effect on veterans' care or
operations. VA continues to explore possibilities for using EULs and
has efforts underway to further reduce underutilized and vacant
property.
VA Uses Various Authorities to Reduce Underutilized and Vacant Property
but Does Not Know the Full Extent of Their Effect:
VA has used its legal authorities, such as EULs, sharing agreements,
and outleases,[Footnote 28] to reduce underutilized and vacant property
but is not aware of the full extent of their effect.[Footnote 29] In
fiscal year 2007, VA reported having approximately 46 EULs, 185 sharing
agreements, and 250 outleases. VA reported similar numbers for its
authorities in the 2 previous fiscal years.
According to VA officials, using these authorities often contributes to
reductions in VA's underutilized and vacant property. For example:
* In 2005, in Lakeside (Chicago), Illinois, VA reduced its
underutilized property at the medical center by nearly 600,000 square
feet by using its EUL authority with Northwestern Memorial Hospital.
This EUL involved a consolidation of existing services where VA
relocated inpatient beds and support services to other campus sites and
leased the property to Northwestern, therefore reducing VA's
underutilized property at the medical center.
* In 2006, at Fort Howard, Maryland, VA entered into an EUL that will
use approximately 297,613 square feet of vacant space to develop a
retirement community, with priority placement for veterans. While VA
has retained a portion of space on its medical campus for an outpatient
clinic, it has largely reduced the vast majority of its total space at
Fort Howard through the EUL.
* The medical center in Milwaukee, Wisconsin, has several sharing
agreements in place, including one with the Milwaukee Housing
Authority, which is using a formerly vacant 10,635 square foot VA
building to provide housing for the homeless where veterans are given
priority (see fig. 4).
Figure 4: Old Quarters Now Used to Provide Homeless Housing at
Milwaukee Medical Center (photograph):
[See PDF for image]
Source: GAO.
[End of figure]
* In 2005, in Leavenworth, Kansas, VA entered into an EUL that leased
38 vacant historic buildings located on 50 acres of land. According to
VA, it will save approximately $227,000 annually as a result of the
EUL.
While VA has taken strides to reduce underutilized and vacant property
through its various authorities, the cumulative effect of these
authorities on reductions is largely unknown.[Footnote 30] According to
VA officials, the EUL authority is the primary contributing factor to
reductions in vacant and underutilized property over the long term. VA
has established capital asset portfolio goals to support its capital
asset management initiative, which include decreasing underutilized
capacity in its assets. However, VA does not track the overall impact
of all agreements on reducing such space at the building level. VA's
existing data systems limit the ability to compare new agreements,
including EULs, in a way that identifies and distinguishes resulting
reductions in underutilized and vacant property. Therefore,
comprehensive information on square footage reductions that have
occurred as a result of the implementation of certain agreements is not
recorded at the building level.
VA also uses its EUL authority as a method to dispose of unneeded real
property.[Footnote 31] During the term of an EUL, if VA determines that
the underlying land and buildings are no longer needed, VA is
authorized to dispose of the property.[Footnote 32] VA data show that
in fiscal years 2005 through 2007, VA disposed of 91 buildings through
EULs.[Footnote 33] VA also can demolish, sell, donate, or dispose of
property through GSA (see table 5).
Table 5: Number of VA Buildings Disposed, by Method and Fiscal Year:
Fiscal year: 2005;
Number of buildings: Disposed as part of EUL: 38;
Number of buildings: Demolished: 35;
Number of buildings: Sold or donated: 1;
Number of buildings: Disposed through GSA: 3.
Fiscal year: 2006;
Number of buildings: Disposed as part of EUL: 52;
Number of buildings: Demolished: 19;
Number of buildings: Sold or donated: 4;
Number of buildings: Disposed through GSA: 2.
Fiscal year: 2007;
Number of buildings: Disposed as part of EUL: 1;
Number of buildings: Demolished: 44;
Number of buildings: Sold or donated: 0;
Number of buildings: Disposed through GSA: 1.
Fiscal year: Total;
Number of buildings: Disposed as part of EUL: 91;
Number of buildings: Demolished: 98;
Number of buildings: Sold or donated: 5;
Number of buildings: Disposed through GSA: 6.
Source: GAO analysis of VA data.
[End of table]
Use of Authorities Provides VA with Financial and Nonfinancial Benefits
but Information on These Benefits Is Not Tracked:
Besides reducing underutilized or vacant property, VA benefits from
using its various authorities in other ways. Generating revenue is one
such benefit. For example:
* In January 2005, VA executed a 75-year EUL with Northwestern Memorial
Hospital in Chicago, Illinois, for two parcels of land and, in turn,
received $28 million upon execution of the lease, as well as the right
to lease back space for 3 years to house its existing outpatient
clinic. In October 2005, VA determined that it did not need to retain
this property over the long term and sold it outright to the lessee for
an additional $22 million, bringing the total amount received to $50
million. VA officials reported that the transaction resulted in a
demonstrable improvement of services to eligible veterans by permitting
VA to use the proceeds of the lease and sale to help with
implementation of VA's Capital Asset Realignment for Enhanced Services
in Chicago and other locations, and avoid the future costs of operating
aging healthcare facilities.
* The VA Greater Los Angeles Healthcare System enters into a number of
sharing agreements with the film industry. According to VA officials,
these agreements are typically temporary arrangements--sometimes
lasting a few days--during which film production companies use VA
facilities to shoot television or movie scenes. Figure 5 shows two
examples of sites used. The second of these examples is a barrack built
in the 1930s that otherwise sits vacant. According to VA officials,
these agreements generate roughly $1 million to $2 million a year.
Figure 5: Filming Sites at the Greater Los Angeles Healthcare System:
[See PDF for image]
Photograph: Outpatient clinic in Sepulveda, California;
Photograph: Barrick in West Los Angeles, California.
Source: GAO.
[End of figure]
* VA's medical center in North Chicago shares space on one of its
buildings for cell phone tower usage.[Footnote 34] Sprint, VoiceStream,
and AT&T are part of the sharing agreement, which provides VA with
revenues of about $40,000 annually. According to one senior VHA
official, more than half of VHA's sharing agreements involve the use of
cell phone towers.
* In 2002, the North Chicago medical center entered into a 35-year EUL
with a contractor to develop an energy center on 1.3 acres of what had
been vacant land (see fig. 6).[Footnote 35] The contractor produces and
sells energy to the medical center. The medical center had been
purchasing steam from the Navy at above-market rates. The energy center
also saves VA $4 million per year by selling energy to the Navy to heat
its new barracks.
Figure 6: Energy Center Located at North Chicago Medical Center
(photograph):
[See PDF for image]
Source: GAO.
[End of figure]
In addition to revenue, such agreements can provide VA or veterans with
a variety of services. For example:
* In Dayton, Ohio, the medical center entered into an EUL with Catholic
Social Services to operate a childcare facility in VA space. Under the
agreement, VA employees' children receive preferred placement in this
facility. Catholic Social Services located the childcare center on VHA
property because it was looking for a long-term lease that would allow
Catholic Social Services to obtain a loan for building renovations.
* At the Greater Los Angeles Healthcare System, VA entered into a 50-
year lease with New Directions, Inc., an organization that provides
supportive housing and long-term substance abuse treatment to veterans.
According to a New Directions official, the leased building New
Directions now occupies had been vacant for 20 years. Benefits to VA,
according to a New Directions official, include not having to pay
maintenance costs for the leased building and land. Also, New
Directions is able to provide service to veterans that VA had been
unable to fulfill, such as job training and placement, as well as legal
and financial assistance.
Although VA receives financial and nonfinancial benefits from certain
agreements, and has a data system to record the revenue received, the
information is not complete and therefore VA cannot systematically
track and monitor related information to determine the authorities'
effect. According to VA's data system, VA generated roughly $8 million
for all of its agreements in fiscal year 2007, mostly from sharing
agreements and outleases; however, we found instances of missing
agreement data that indicate that this dollar figure may actually be
higher. For example, VA officials in West Los Angeles had not recorded
in VA's data systems revenue the West Los Angeles and Sepulveda medical
centers received as a result of several sharing agreements with the
filming industry. According to those officials, the total amount of
revenue VA received was between $1 million and $2 million per year. VA
produces a comprehensive annual report for Congress that describes the
financial and nonfinancial impacts of its EULs. For example, the report
includes estimates of the amount of money VA saves on purchasing energy
and parking and the value of new services available to veterans or VA
employees as a result of EULs. However, the agency does not conduct a
similar analysis for other types of agreements, which greatly outnumber
the EULs, and VA's data systems do not provide information on the
nonfinancial benefits it receives from those agreements. This lack of
information means that VA cannot make year-to-year comparisons or
determine which types of agreements provide the most benefits. This
information would be helpful in measuring the utility of each of the
agreements and ultimately the benefits VA receives in return. For
example, VA could measure the impact of each of the authorities and the
benefits each provides, including financial and nonfinancial benefits.
VA officials we spoke with during the course of this audit acknowledge
that the ability to track this type of information at the building
level is desirable.
VA Continues to Explore New EULs to Further Reduce Underutilized and
Vacant Property:
VA continues to explore possibilities for using EULs and has efforts
underway to further reduce underutilized and vacant property. For
example, the Dayton medical center is proposing an EUL with Volunteers
of America for a 50-bed transitional housing unit for the area's
homeless male and female veterans. This building was constructed in
1937 for female veterans. According to VA officials, formulation of the
lease is currently underway. In addition, in Albany, New York, VA has
proposed an EUL for approximately 3 acres of land for a new 1,220-
space parking garage with the Albany medical center. According to VA
officials, as consideration for the lease, VA will receive free use of
approximately 610 parking spaces in the garage and perhaps other
negotiated considerations.
VA also is considering EULs for many of its stations with underutilized
and vacant property. In 2007, VA's Office of Asset and Enterprise
Management performed a site review initiative of each of its real
property assets that included vacant land. The purpose of these reviews
was to provide the Secretary with a list of the facilities VA believes
are prime candidates for EULs. Recently, VA identified 15 sites for
inclusion on the Secretary's EUL priority list for further action.
Ongoing Challenges Impede VA's Efforts to Minimize and Reduce
Underutilized and Vacant Property, but Some Locations Have Taken Steps
to Address These Challenges:
VA faces several ongoing challenges to reducing underutilized and
vacant property, including building location, high building repair
costs, and competing stakeholder interests; however, VA is using
several strategies in some locations to mitigate these challenges. VA
officials reported challenges with finding organizations interested in
using underutilized or vacant property located in areas with low
property values. In addition, many of VA's vacant and underutilized
buildings are in poor condition and require an estimated $3 billion in
repairs before they could be fully utilized by VA or others. Another
complicating factor is that most VA buildings are eligible for historic
designation. Challenges to reducing vacant and underutilized properties
are further exacerbated by competing stakeholder interests. Moreover,
legal restrictions and budgetary and administrative limitations can
impede VA's ability to enter into agreements. Some VA locations have
used strategies to address some of these challenges. In addition,
federal agencies have other tools available for the disposal of federal
properties, such as the public benefits conveyance program administered
by GSA, which allows agencies to convey surplus properties to state
governments, local governments, or nonprofit organizations for approved
public benefit uses such as homeless centers, educational facilities,
and public parks, at a discount of up to 100 percent fair market value.
Building Location, Condition, and Repair Costs Limit VA's Ability to
Minimize Underutilized and Vacant Properties:
Although some vacant and underutilized properties have potential for
alternate uses, factors such as building location, condition, and
associated repair costs limit VA's ability to reuse or dispose of them.
Specifically, VA officials we interviewed at some of the sites we
visited reported difficulties finding partners interested in using
underutilized or vacant properties that are either considered not
desirable or are located in areas with low property values or in
markets with little or no demand for new space.
* According to VA officials we interviewed at the medical facility in
Marion, Indiana, a combination of low property values, a weak market
demand for property, and low financial development potential made it
difficult for VA to find partners interested in leasing space. These
conditions contributed to Marion retaining the greatest amount of both
vacant and underutilized space in fiscal years 2005 through 2007.
Additionally, VA did not have any outleases or sharing agreements in
place for vacant or underutilized properties in Marion (see fig. 7).
Figure 7: Vacant Building in Marion, Indiana, Where Location Is a
Challenge (photograph):
[See PDF for image]
Source: GAO.
[End of figure]
VA officials also cited difficulty finding alternate reuse options for
properties that are not centrally located within a medical facility, or
that lacked direct access to roads, making the properties difficult to
use by VA and other entities. In fiscal year 2008, VA conducted a
sample review of 15 stations that had been identified as having the
most vacant space within VA and found that 37 percent of the vacant
space lacked direct access to a public road.[Footnote 36]
In addition, officials explained that some vacant and underutilized
buildings, such as old medical in-patient facilities, cannot easily be
converted to other uses, which contributed to VA's inability to reuse
some of its properties. Some of the sites we visited illustrated these
challenges. For example, in Milwaukee, Wisconsin, VA has a 139-year-old
building, previously used as a domiciliary, which would require
extensive upgrades to the electrical system to accommodate a modern
computer network. Similarly, in Dayton, Ohio, VA has a building
previously used as a monkey exhibit; the building currently is vacant
and cannot easily be converted to other uses (see fig. 8).
Figure 8: Vacant Buildings Difficult to Convert to Other Uses:
[See PDF for image]
Photograph: Former monkey exhibit, Dayton, Ohio;
Photograph: Old hospital, Milwaukee, Wisconsin.
Source: GAO.
[End of figure]
Many of VA's vacant or underutilized buildings are aging or in poor
condition, requiring an estimated $3 billion in repairs before they can
be fully utilized by VA or others, an issue which has led to our
designation of federal real property as high risk.[Footnote 37] VA
officials reported that VA faces challenges addressing the needs of
aging and deteriorating buildings as a result of the high costs
associated with repairs. VA conducts facility condition assessments at
its facilities every 3 years on a rotating basis and identifies
buildings in "poor" or "critical" condition, and subsequently estimates
the useful and remaining life of those systems. Of the buildings that
VA determined were in "poor" or "critical" condition at the end of
fiscal year 2007, 56 percent were underutilized or vacant properties;
VA estimated the repair costs for these properties to be approximately
$3 billion.[Footnote 38] Twenty-nine percent of VA's underutilized and
vacant properties require repairs that cost a minimum of $1 million per
building; 7 percent required repairs costing more than $5 million per
building (see fig. 9).
Figure 9: Deteriorating Vacant Buildings That Are Not Being Used by VA:
[See PDF for image]
Photograph: Deteriorating ceiling and wall, Dayton, Ohio;
Photograph: Signs of mold and asbestos on the wall of a vacant
building, Marion, Indiana;
Photograph: Yellowed windows, asbestos on wall, peeling paint, and
floor panels breaking off, West Los Angeles, California;
Photograph: Greenhouse roof is deteriorating and has several broken
windows, Marion, Indiana.
Source: GAO.
[End of figure]
Other factors that contribute to high repair costs, according to VA
officials, include the cost of environmental cleanup associated with
removing lead paint and asbestos contamination from some buildings.
Federal agencies are required to assess and pay for needed
environmental cleanup before renovating or disposing of property--a
process that can require years of study and result in significant
costs. High clean-up costs can impede VA's ability to dispose of some
of its properties. For example, Dayton medical center officials said
many of the older buildings at the facility have lead paint and
asbestos, and the associated abatement costs are very high. The
buildings have remained vacant because the needed repairs are costly
and other VA projects--mainly those that provide a service to veterans--
are considered a higher priority.
Another complicating factor is that most VA buildings are eligible for
historic designation. In fiscal year 2007, 54 percent of VA's buildings
were designated as historic properties or eligible for designation; of
these, 56 percent were underutilized and vacant.[Footnote 39] Under the
National Historic Preservation Act,[Footnote 40] VA, like other federal
agencies, is required to manage historic properties under its control
and to take into account the effects of its action on historic
preservation. VA consults with the State Historic Preservation Office
[Footnote 41] before taking any action, including demolition or
construction, on a property that has been designated as historic. The
Secretary of the Interior is responsible for establishing standards for
all national preservation programs and advising federal agencies on the
preservation of historic properties listed or eligible for listing on
the National Register of Historic Places. According to VA officials,
although demolition is not prohibited, it is generally not an option
for historic buildings because of stakeholder interest in preserving
the historic properties. Figure 10 shows some of VA's vacant buildings
that are on the National Register of Historic Places.
Figure 10: Vacant Buildings on the National Register of Historic
Places:
[See PDF for image]
Photograph: Chapel, West Los Angels, California;
Photograph: Trolly depot, West Los Angels, California;
Photograph: Former residence, Dayton, Ohio;
Photograph: Grist Mill, Perry Point, Maryland.
Source: GAO.
[End of figure]
Moreover, according to VA officials, preserving historic buildings in
accordance with historic standards is very costly and obtaining funding
to restore historic sites can be difficult. VA can seek private funding
with public-private partners for restoring historic properties.
However, according to VA officials, the cost of restoring historic
properties can make it prohibitive for some nonprofit organizations to
use the buildings.
As summarized below, experiences at medical facilities in West Los
Angeles and Dayton (shown in fig. 10) illustrate some of the challenges
associated with a property's historical status:
* Two vacant properties at the West Los Angeles medical facility are
listed on the National Register of Historic Places--the chapel and
trolley depot. Any renovations to these buildings must preserve the
features of the property that are significant to its historic,
architectural, and cultural values. According to VA officials at West
Los Angeles, it will cost approximately $12 million to restore the
chapel in accordance with historic standards and $1 million to restore
the trolley depot, which is 600 square feet.
* The Dayton medical center, originally established as a home for Civil
War veterans, is the third-oldest site within VA, with several
buildings listed on the National Register of Historic Places. According
to officials, some of the historic properties could be converted into
museums if funding were available, but other properties are not in any
condition to be occupied or used without prohibitively costly
renovations. VA officials would have to consult with the Ohio State
Historic Preservation Office before making any alterations to any of
these buildings in Dayton.
Officials reported that some underutilized and vacant buildings are
unsafe and should be demolished, but obtaining the necessary funds to
demolish these buildings is a challenge. As we previously reported,
demolition can be a cost-effective alternative for federal property
when the associated costs can be recovered within a reasonable period,
primarily through the avoidance of maintenance costs.[Footnote 42]
However, some VA officials we spoke with stated that demolishing a
building also can be costly, particularly when asbestos or other
hazardous material abatement is required. For example, in fiscal year
2007, VA spent $3,449,568 demolishing 44 buildings totaling 216,952
square feet.
Facility managers can use facility funding to keep up with minimal
maintenance on vacant buildings and to fund the cost of demolishing a
building. However, according to VA officials, facility funds are
generally used for healthcare-related construction projects, which they
consider a higher priority than demolition projects. Because funds for
renovations, maintenance, and demolition are limited, necessary repairs
and maintenance for vacant properties often are deferred because of
lack of funding. As repairs are delayed, building deterioration can
worsen and repair costs can escalate. For example, VA officials in
Marion, Indiana, reported that a lack of funding to demolish unsafe
deteriorating buildings is the primary challenge at that site. They
estimated the cost of demolishing four buildings on their site to be $5
million, much of it resulting from required lead paint and asbestos
abatement.
Competing Stakeholder Priorities Affect VA's Ability to Reduce
Underutilized and Vacant Property:
Challenges to reducing vacant and underutilized properties are
exacerbated by competing stakeholder interests in real property
decisions. Several key stakeholders, including veterans groups,
community members, state and local governments, historic preservation
organizations, advocacy groups, and the public in general, have an
interest in how VA utilizes its properties.
VA officials reported that disposal often is not an option for some
properties, in particular historic properties, because of political
stakeholders and constituencies, including historic building advocates
or local communities that want VA to maintain these properties. In
addition, some veterans groups that we met with during our site visits
were opposed to any reuse of VA property that does not benefit veterans
directly or provide benefits for veterans exclusively. This was
illustrated primarily through site visits we conducted in West Los
Angeles and Milwaukee.
* In West Los Angeles, community stakeholders and veteran stakeholders
have opposed several land use agreements that VA has negotiated with
other entities; several of these agreements generate revenue for VA.
According to VA officials, many residents of West Los Angeles are
opposed to any kind of development on the West Los Angeles campus that
will make traffic in the surrounding area worse than it already is. For
example, according to VA, community stakeholders were opposed to a mail
outpatient pharmacy that was previously located on the West Los Angeles
campus. As a result of the opposition, VA moved the service offsite.
Similarly, VA had a revenue-generating sharing agreement with the Fox
Entertainment Group for use of property on the West Los Angeles campus.
However, VA terminated the agreement because of community stakeholder
opposition.
* In Milwaukee, VA negotiated a preliminary EUL concept proposal with
the City of Milwaukee for approximately 35 acres of vacant land and
buildings. Under the terms of the proposal, the City planned to build a
biomedical research park, assisted living apartments, and a
columbarium--a place for cremation urns--on the property. Additionally,
VA would have received revenue under the terms of the agreement. The
City of Milwaukee eventually dropped negotiations for this EUL proposal
because of opposition from veterans. According to VA officials,
veterans were opposed to the proposal because it would not benefit
veterans exclusively. At the request of several members of Congress, a
moratorium on EULs, except for an EUL of the campus chapel, was put in
effect in Milwaukee until September 2008. A veterans group that was
formed to advocate for preserving the Milwaukee VA facility for the
exclusive benefit of veterans told us that the group was opposed to
lease agreements that may result in the commercialization of property
that the group believed should be used instead for healthcare-related
uses. Veterans said VA land is a symbol of the nation's commitment to
healthcare for veterans and should be preserved for use by veterans.
Legal Restrictions and Administrative and Budgetary Disincentives also
Affect VA's Ability to Reduce Underutilized and Vacant Property:
Legal restrictions and administrative-and budget-related disincentives
associated with implementing some authorities affect VA's ability to
dispose and reuse property in some locations. For example, legal
restrictions limit VA's ability to dispose and reuse property in West
Los Angeles and Sepulveda. The Cranston Act of 1988[Footnote 43]
precluded VA from taking any action to dispose of 109 of 388 acres in
the West Los Angeles medical center and 46 acres of the Sepulveda
ambulatory care center. In 1991, when EUL authority was provided to VA,
VA was prohibited from entering into any EUL relating to the 109 acres
at West Los Angeles unless the lease is specifically authorized by law
or for a childcare center.[Footnote 44] The Consolidated Appropriations
Act of 2008[Footnote 45] expanded the EUL restrictions to include the
entire West Los Angeles medical center. The Consolidated Appropriations
Act of 2008 also prohibits VA from declaring as excess or otherwise
taking action to exchange, trade, auction, transfer, or otherwise
dispose of any portion of the 388 acres comprising the VA West Los
Angeles medical center. In addition, until September 2008, there is a
temporary moratorium on implementing EULs--except for an EUL pertaining
to the campus chapel--at the Milwaukee medical center.
Finally, budgetary and administrative disincentives associated with
some of VA's available authorities may in some instances limit VA's
ability to utilize these authorities to reduce underutilized and vacant
property.[Footnote 46] For example:
* VA cannot retain revenue that it obtains from outleases, revocable
licenses, or permits; such receipts must be deposited in the Department
of the Treasury.[Footnote 47] VA has said that, except for EUL
disposals, restrictions on retaining proceeds from disposal of
properties are a disincentive for VA to dispose of property. [Footnote
48]
* In 2004, VA was authorized until 2011 to transfer real property under
its jurisdiction or control and to retain the proceeds from the
transfer in a capital asset fund for property transfer costs, including
demolition, environmental remediation, and maintenance and repair
costs. In our previous work, we reported several administrative and
oversight challenges with using capital asset funds.[Footnote 49]
Moreover, VA officials told us that this authority has significant
limitations on the use of any funds generated by disposal. For example,
VA officials we spoke with reported that the capital asset fund is too
cumbersome to be utilized, and VA does not have immediate access to the
funds because they have to be reappropriated before VA can use them.
* The maximum term for an outlease, according to VHA law, is 3 years;
according to VA officials, this can discourage potential lessees from
investing in the property.
* Implementing an EUL agreement can be a lengthy process. According to
VA officials, EULs are a relatively new tool, and every EUL is unique
and involves a learning process. In addition, VA officials commented
that the EUL process can be complicated. According to VA officials, the
average time it takes to implement an EUL can range generally from 9
months to 2 years. The officials noted that land due diligence
requirements (such as environmental and historic reviews), public
hearings, congressional notification, lease drafting, negotiation, and
other phases contribute to the length of the overall process. VA has
taken actions to reduce the length of time it takes to implement an EUL
agreement, but despite changes to streamline the EUL process, some
officials stated that the process is still time consuming and
cumbersome.
* VA can dispose of underutilized and vacant property under the
McKinney-Vento Act to other federal agencies and programs for the
homeless.[Footnote 50] However, VA officials stated that disposing of
property under the McKinney-Vento Act also can be a lengthy, cumbersome
process.[Footnote 51] According to VA officials the process can average
2 years. Under this law, all properties deemed suitable for homeless
use by the Department of Housing and Urban Development go through a 60-
day holding period, during which the property is ineligible for
disposal for any purpose other than for homeless use. Interested
homeless representatives submit to the Department of Health and Human
Services a written notice of intent to apply for a property for
homeless use during the 60-day holding period. After applicants have
given notice of intent to apply, they are provided up to 90 days to
submit their application to the Department, and the Department has the
discretion to extend the time frame if necessary. Once the Department
has received an application, it has 25 days to review, accept, or
decline the application. Furthermore, according to VA officials, VA may
not receive compensation from agreements entered into under the
McKinney-Vento Act.
Strategies Used at Some VA Sites and by Other Agencies to Mitigate
Stakeholder Challenges and Identify Public-Private Partners Could Be
Useful in Other Locations:
At some sites we visited, VA has used several strategies to mitigate
challenges associated with addressing competing stakeholder interests
and preserving older and historic properties. The mitigation strategies
we identified included the following:
* Communication with external stakeholders. Experiences in three
locations we visited illustrated how communicating with external
stakeholders helped VA mitigate stakeholder concerns. At Fort Howard,
Maryland, VA officials said it was very important to get community
stakeholders involved when trying to implement an EUL. VA held several
public forums to explain the terms of the proposed EUL. VA advertised
these meetings to the local community and according to VA officials,
more than 200 community members attended each of these meetings. In
Dayton, Ohio, the medical center also held hearings and public forums,
which were advertised in local papers, and Dayton officials made
special efforts to notify veterans groups about proposed EUL plans.
Similarly, at the North Chicago, Illinois, medical center, VA officials
reported that although veterans groups in the community expressed
initial concern about a proposed EUL at that location, VA conducted
outreach efforts to the community to explain the project. As a result
of these efforts, VA officials said that these groups voiced little
opposition to the proposed EUL. VA officials reported that
communicating often with external stakeholders helped VA obtain
community buy-in and support for the EUL proposal.
* Obtaining buy-in and support from internal stakeholders, particularly
from high-level senior management. Strategies in this area also have
helped VA address challenges to reducing vacant and underutilized
properties, as demonstrated by experiences in some locations. For
example, at Fort Howard and Dayton, medical center directors were
supportive and active in outreach efforts to minimize vacant and
underutilized properties. Directors at these medical centers sought out
entities to enter into EULs and other agreements. In addition,
directors at these facilities maintained regular communication with
potential lessees when negotiating lease agreements. For example, VA
entered into an EUL with a private developer for a property in Fort
Howard. VA communicated regularly with the developer. According to the
developer, VA did a good job informing the public of the plans for Fort
Howard and took a very open approach, which according to the director,
made the transition easier.
* Use of partnerships. VA also has entered into various public-private
partnerships to help improve the use of some of its vacant and
underutilized property. We previously reported that public-private
partnership authority could be an important management tool to address
problems in deteriorating federal buildings, and we stated that further
study of how the tool would work and its benefits compared to other
options is needed. In addition, we recommended that Congress consider
providing the Administrator of GSA with the authority to proceed with a
pilot program to demonstrate the actual benefits that may be
achieved.[Footnote 52] We also have reported that although public-
private partnership arrangements can be beneficial, they also increase
the need for effective implementation and monitoring by agencies to
ensure that the government's interests are protected.[Footnote 53]
Examples cited earlier in this report include several in which VA
entered into partnerships with service providers and received such
services as childcare for VA employees and substance abuse treatment
for veterans. In addition, under VA's disposal policy, VA may enter
into partnerships or agreements with public or private entities
dedicated to historic preservation to facilitate transfer of properties
listed on the National Register of Historic Places. VA has entered into
public-private partnerships with organizations to renovate and preserve
historic properties. In West Los Angeles, for example, VA has sought
out private partners to fund and undertake the restoration of the
chapel on the campus. The Getty Foundation funded an architectural
study that included renovation plans for the chapel. In Dayton, VA
partnered with the local American Veterans Heritage Center for historic
facility preservation and development of the historic district. The
Veterans of Foreign Wars received a Veteran National Heritage Award of
$1 million to restore and stabilize the floor of the Protestant Chapel.
In addition, GSA has other practices for reducing unused property. GSA
administers the public benefits conveyance program, which is a means of
disposing of federal real property.[Footnote 54] Under the program,
state or local governments and certain tax-exempt nonprofit
organizations can obtain real property for approved public benefit
uses, including homeless centers, educational facilities, and public
parks, at a discount of up to 100 percent of fair market value.
[Footnote 55]
Conclusions:
VA has made progress in managing many aspects of its real property
portfolio--specifically, in reducing underutilized space in its
buildings in fiscal years 2005 through 2007. The agency also has
efforts underway to make further reductions. However, VA continues to
face challenges with the vacant building space in its portfolio, which
has remained relatively unchanged during this period. Stakeholders can
have competing interests as to how vacant and underutilized properties
should be reused or disposed of. In addition, VA faces challenges
reducing underutilized or vacant properties that have been designated
historic, and that require prohibitively high repair costs.
Nevertheless, the managers of several VA facilities have overcome some
of these challenges through effective stakeholder outreach efforts, by
obtaining buy-in support from internal stakeholders, and by entering
into various public-private partnerships.
Underutilized and vacant properties detract from mission effectiveness
by utilizing resources that could be used more effectively to support
other mission priorities. Without complete building-level data that are
comparable from year to year, it is difficult for VA to analyze
correlations between building utilization and location, condition, and
age--information that can be beneficial in identifying assets for
disposal. Furthermore, we estimated that VA spent about $481,000 each
day on underutilized and vacant VHA property in fiscal year 2007.
However, VA has not developed its own estimate and therefore does not
know how much it is spending maintaining underutilized and vacant
property, money that could be better spent providing healthcare
services to veterans. Without a reliable cost estimate to serve as a
benchmark from which to measure progress in decreasing these costs over
time, VA has no means to assess progress in reducing annual costs on
underutilized and vacant property.
VA's reduction of underutilized space by nearly two-thirds over the
last 2 fiscal years represents significant progress. However, VA's
inability to clearly identify the extent to which its use of
authorities contributed to reductions in underutilized space is a
matter of concern. While VA's use of various legal authorities has been
a likely contributor to these reductions, the extent of this
contribution is unknown because VA does not track how the use of these
authorities has helped reduce underutilized or vacant space or resulted
in monetary and other benefits that can improve services for veterans.
While VA's portfolio management goals include decreasing underutilized
space in its assets, further progress in reducing underutilized and
vacant space will largely depend on VA developing a better
understanding for why changes occurred and the impact of these
agreements. Although VA data systems limit their ability to analyze the
effect of agreements on underutilized and vacant property, archiving
and analyzing this data by fiscal year would allow VA to make year-to-
year comparisons. This type of information can better aid VA in
decision making and managing its underutilized and vacant property.
Recommendations for Executive Action:
We recommend that the Secretary of Veterans Affairs take the following
three actions:
To provide VA with an accurate picture of what it spends annually on
maintaining underutilized and vacant property and a benchmark from
which to work in decreasing these costs, develop an annual cost
estimate for how much it spends on underutilized and vacant property,
so that the estimate is comprehensive, accurate, well-documented, and
credible.
To provide VA with a better understanding of the overall effect of
various efforts on its underutilized and vacant property and to
identify properties for disposal: (1) collect and maintain building-
level data by fiscal year in order to correlate characteristics
associated with underutilized and vacant buildings, which may help to
identify unneeded assets; and (2) track, monitor, and evaluate square
footage reductions and financial and nonfinancial benefits when
recording new agreements as of fiscal year 2008.
Agency Comments and Our Evaluation:
We provided a draft of this report to VA for review and comment. VA
provided written comments, which are reprinted in appendix III. VA
concurred in principle with two of our three recommendations.
Specifically, VA concurred with our two recommendations that VA develop
an annual cost estimate of spending on VA's underutilized and vacant
property and track, monitor, and evaluate square footage reductions and
financial and nonfinancial benefits when recording new agreements.
However, VA did not concur with our recommendation that the agency
collect and maintain building-level data by fiscal year in order to
correlate characteristics associated with underutilized and vacant
buildings, which may help to identify unneeded assets. In addition,
VA's written comments highlighted five areas of disagreement with our
report. VA also provided technical clarifications, which we
incorporated, where appropriate. VA's comments are discussed in more
detail below.
VA did not concur with our recommendation regarding collecting and
maintaining building-level data because the agency maintains that it
collects and analyzes a significant amount of data at the station and
building-level. Furthermore, VA stated that it is in compliance with
reporting requirements established by the Federal Real Property Council
and that it uses performance measures to identify unneeded assets that
may be candidates for disposal.
Although we agree that VA collects a significant amount of data at the
station and building level, we do not agree that that this information
is sufficient to correlate characteristics with VA's underutilized and
vacant buildings. Because VA does not maintain and analyze building-
level data by fiscal year, VA was unable to determine trends relating
to reductions in underutilized space at the building level during
fiscal years 2005 through 2007. The absence of data prior to fiscal
year 2006 prevented VA from running certain trend analyses, including
the correlations, if any, between utilization and building location,
condition, and age--information that can be beneficial in identifying
assets for disposal. Furthermore, while VA does use performance
measures to identify assets that may be candidates for disposal, the
agency does not estimate the costs of these disposals, and they have
not been funded. In addition, the agency's disposal plans are not
prioritized. Because of the need to better correlate characteristics
associated with underutilized and vacant property, which may help to
identify unneeded assets, we believe this recommendation remains valid.
VA's first disagreement with our report was that we had double-counted
vacant space; this issue, however, was resolved prior to our receiving
VA's written response. After we sent our draft report to VA for
official agency comment, VA officials told us, for the first time, that
their data on underutilized square footage include vacant square
footage, and that these categories of space are not mutually exclusive
as we had previously identified. We subsequently provided VA officials
with revisions to our draft report and analysis on August 1, 2008,
reflecting VA's vacant square footage as a subset of underutilized
square footage. We are now reporting that VA had 5.6 million square
feet of underutilized building space in fiscal year 2007. VA officials
did not consider this revised information and the resulting changes we
made to the draft report in their subsequent agency comments.
VA's second and related disagreement was that we had overstated the
unit costs for operations and maintenance of underutilized space. Two
factors contributed to this comment. First, as noted previously, VA
said that we had double-counted vacant space. Therefore, we revised our
cost estimate after learning that our original estimate had double-
counted vacant space--from $307 million to $175 million--to reflect
that vacant square footage is a subset of its underutilized space (see
above). We provided VA officials with updated report language on August
1, 2008, including a newly revised cost estimate of $176 million (later
revised to $175 million) for VA's underutilized and vacant square
footage for fiscal year 2007. VA officials did not provide comments on
our revised cost estimates in their subsequent written agency comments.
Second, VA commented that VA and GAO differ in the approaches and
methodologies used to estimate unit costs for operating and maintaining
underutilized space. Because of these different methodologies, our
revised cost estimate of $175 million is higher than the estimate that
VA provided in its comments of $85.2 million.[Footnote 56] We did not
evaluate VA's $85.2 million estimate because the agency did not provide
this estimate during the course of our review, and its written comments
did not include the underlying cost elements or methodology for
comparison. Furthermore, VA concurred with our recommendation to
develop an annual cost estimate for how much it spends on underutilized
and vacant property, so that the estimate is comprehensive, accurate,
well-documented, and credible.
Regarding VA's third area of disagreement--that it does have valid cost
information from which to make sound and prudent decisions-
-we acknowledge that VA maintains some information important for such
decision making, but believe it needs to retain more comprehensive
building-level data by fiscal year. As discussed earlier, VA's prorated
approach to cost estimating does not lend itself to determining the
maintenance cost associated with underutilized or vacant property.
While we recognize that VA does collect current year building-level
data, such as square footage and type, VA does not archive this data in
its Capital Asset Inventory database and prior to 2006, overwrote
building-level data collected each year. VA maintains historical
inventory and financial data at the station level. However, VA has not
used its building-or station-level data to develop a reliable method
for estimating operating and maintenance costs for underutilized and
vacant properties. VA's written comments also note that it is
developing requirements for a real property cost accounting system to
replace VA's existing financial management system, and this new system
may allow VA to better track operations and maintenance for
underutilized and vacant properties. While this could be a significant
step in improving its ability to make decisions regarding vacant and
underutilized property, reviewing VA's plans for this cost accounting
system was outside the scope of this engagement.
VA's fourth area of disagreement was that our report did not
acknowledge VA's efforts to designate properties for disposal based on
mission dependency, utilization, condition, and cost; however, we
believe that more needs to be done in this area. We commend VA for
using performance measures to identify assets that may be candidates
for disposal, and we note in our report that VA has a plan that
includes a list of such assets. We also recognize VA's significant
reduction in its underutilized property since fiscal year 2005 and
provide examples throughout our report of ongoing VA efforts to make
further reductions. For instance, VA continues to identify potential
opportunities for EUL agreements. As previously noted, VA has not
estimated the costs of many of the disposals on its list, the disposals
have not been funded, and the agency's disposal plans are not
prioritized. For these reasons, we recommended that the VA collect and
maintain building-level data by fiscal year in order to correlate
characteristics associated with underutilized and vacant buildings,
which may help further identify unneeded assets.
VA's fifth area of disagreement was that VA does track revenue
generated, square footage reductions, and services received through
agreements, although this is not accomplished systematically. While we
believe that our report generally reflected these facts, in response to
VA's comments and new information provided, we added language to the
report stating that VA prepares a comprehensive annual report for
Congress that describes financial and nonfinancial impacts of its EULs.
VA officials brought this report to our attention after we had
submitted our draft for their comment. However, we note that VA does
not conduct a similar analysis for other agreements, which greatly
outnumber EULs. Our report also notes that VA receives financial and
nonfinancial benefits from certain agreements, and now also states that
VA has a data system to record the revenue received. However, we also
note that the information is not complete and therefore VA cannot
systematically track and monitor related information to determine the
effect the authorities are having, as VA acknowledged. VA concurred
with our related recommendation to track, monitor, and evaluate square
footage reductions and financial and nonfinancial benefits when
recording new agreements, as of fiscal year 2008.
We are sending copies of this report to the Secretary of Veterans
Affairs and other interested parties. We also will make copies
available to others on request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you have any questions about this report, please contact me at (202)
512-2834 or goldsteinm@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Sincerely yours,
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to identify (1) to what extent the Department of
Veterans Affairs (VA) has reduced underutilized or vacant property, and
how much it spends maintaining the underutilized or vacant property it
retains; (2) how VA has used its authorities to reduce underutilized
and vacant property and to what extent it tracks how these authorities
contribute to reductions; (3) what, if any, challenges VA faces in
minimizing underutilized and vacant property, using enhanced-use leases
(EUL) and other agreements, and what steps VA is taking to address
these challenges.
To better understand the actions taken by VA to reduce its
underutilized and vacant property, we reviewed relevant documents,
including asset management plans, policy handbooks and directives, and
the most recent strategic plan. We reviewed VA's performance goals and
measures related to reducing underutilized and vacant property. For
instance, we reviewed VA's 5-Year Capital Plan, a key document that
identifies how VA manages its real property and outlines its capital
portfolio goals. To identify changes in the amount of underutilized and
vacant property, we analyzed property data from two VA databases: the
Capital Asset Inventory database for building-level data from fiscal
years 2006 and 2007 and the Capital Asset Management System for station-
level data from fiscal years 2005 through 2007.[Footnote 57] Since
building-level data were snapshots taken at different points in time,
the data were not comparable. As a result, we only reported
correlations relating to a building's utilization and characteristics,
including age and condition, in fiscal year 2007. To estimate the cost
of operating and maintaining VA's underutilized and vacant property, we
used space utilization information from the Capital Asset Inventory and
industry data on maintaining space to develop our own independent cost
estimate, which included conducting an uncertainity and sensitivity
analysis. Further information on the methodology used to conduct our
independent cost estimate is provided in appendix II.
To determine the extent to which VA tracks the impact of its
authorities on reducing underutilized and vacant property, we collected
and analyzed data from the Capital Asset Management System on the
number of asset-related agreements (including EULs, sharing agreements,
and outleases). Specifically, we reviewed VA's use of various real
property authorities from fiscal years 2005 through 2007. We attempted
to measure the impact these authorities had on underutilized and vacant
property, including whether they may have resulted in square footage
reductions, generated revenue, or provided various services to VA. We
attempted to quantify this information where possible. In addition, we
visited and conducted interviews at locations where these agreements
were entered into to understand the benefits VA has received from them
and their impact on property management.
Finally, to identify the challenges VA faces when minimizing its
underutilized and vacant property, we spoke to VA headquarters
officials to obtain their views on these challenges and any
improvements that could be made to allow VA to better utilize its
property. We visited selected locations where VA encountered challenges
minimizing underutilized and vacant property and identified strategies
for mitigating these challenges. We also spoke with stakeholders,
including veterans service organizations and lessees, interested in
VA's real property decisions. We conducted our site visits at eight VA
medical facilities including Dayton, Ohio; Fort Howard, Maryland; Los
Angeles, California; Marion, Indiana; Milwaukee, Wisconsin; North
Chicago, Illinois; Perry Point, Maryland; and North Hills (Sepulveda),
California. We selected this nonprobability sample of sites to obtain a
range of examples of VA's experiences with various real property
authorities; the amount of, or changes in, underutilized and vacant
property; and geographic dispersion. We also toured a Veterans Benefits
Administration (VBA) facility in Milwaukee and a national cemetery in
Alexandria, Virginia. While we attempted to select varied locations,
our sample cannot be statistically projected to VA as a whole. We also
analyzed condition data from VA's Facility Condition Assessment
database for fiscal years 2006 and 2007 to identify estimated repair
costs for buildings that received a D or F rating.
To assess the reliability of the data from each of the VA databases
used in our work, we (1) obtained information from the system owner or
manager on their data reliability procedures, (2) reviewed systems
documentation, (3) performed electronic testing to identify obvious
errors in accuracy and completeness, (4) compared the data with
information we obtained from each of the site visits, and (5) compared
the building-and station-level data with various national data reports
that VA provided. When we found obvious discrepancies, such as abrupt
changes in the amount of a station's underutilized property or data
that did not match what we observed during site visits, we brought them
to the attention of agency management for corrective action. After
reviewing possible limitations of all the data sources, we determined
that the data provided were sufficiently reliable for the purposes for
which we have used them in this report.
We conducted this performance audit from July 2007 to September 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Independent Cost Estimate Methodology:
Using a methodology based on best practices, we estimate that VA spent
$175 million in fiscal year 2007 operating and maintaining
underutilized and vacant Veterans Health Administration (VHA) property.
We developed our own independent cost estimate for what VA is spending
on underutilized and vacant property using cost model data provided by
the Whitestone Building Operations Cost Reference--a document published
and updated annually that reflects industry standards and surveys
building operations costs. Our analysis used average cost per square
foot for each operations cost element, such as security and maintenance
and repair, and adjusted for variations in cost by locality.
A reliable cost estimate is critical for informed investment decision
making, realistic budget formulation and program resourcing, meaningful
progress measurement, proactive course correction when warranted, and
accountability for results. According to the Office of Management and
Budget (OMB),[Footnote 58] programs must maintain current and well-
documented estimates of program costs, and these estimates must
encompass the full life cycle of the program. Among other things, OMB
states that generating reliable program cost estimates is a critical
function to supporting OMB's capital programming process. Without this
capability, agencies are at risk of experiencing program cost overruns,
missed deadlines, and performance shortfalls.
Our research has identified a number of best practices that are the
basis of effective program cost estimating. We have grouped these
practices into four characteristics of a high-quality and reliable cost
estimate:[Footnote 59]
* Comprehensive. The cost estimates should include both government and
contractor costs of the program over its full life cycle, from
inception of the program through design, development, deployment, and
operation and maintenance to retirement of the program. They also
should provide a level of detail appropriate to ensure that cost
elements are neither omitted nor double counted, and they should
document all cost-influencing ground rules and assumptions.
* Well-documented. The cost estimates should have purposes that are
clearly defined, and be supported by documented descriptions of key
program or system characteristics (e.g., relationship to other systems,
performance parameters, etc.) Additionally, it should capture in
writing such things as the source data used and their significance, the
calculations performed and their results, and the rationale for
choosing a particular estimating method or reference. Moreover, this
information should be captured in such a way that the data used to
derive the estimate can be traced back to, and verified against their
sources. The final cost estimate should be reviewed and accepted by
management to ensure that there is a high level of confidence in the
estimating process and the estimate itself.
* Accurate. The cost estimates should provide for results that are
unbiased, and they should not be overly conservative or optimistic
(i.e., should represent most likely costs). In addition, the estimates
should be updated regularly to reflect material changes in the program,
and steps should be taken to minimize mathematical mistakes and their
significance. Among other things, the estimate should be grounded in
documented assumptions and a historical record of cost estimating and
actual experiences on other comparable programs.
* Credible. The cost estimates should discuss any limitations in the
analysis performed due to uncertainty or biases surrounding data or
assumptions, and their derivation should provide for varying major
assumptions and recalculating outcomes based on sensitivity analyses,
and the associated risk and uncertainty inherent in estimates should be
disclosed. Further, the estimates should be verified based on cross-
checks using other methods and by comparing the results with
independent cost estimates.
We found that VA does not have a reliable cost estimate for operating
and maintaining underutilized and vacant VHA property because it does
not have a system for tracking operations and maintenance costs on a
building-by-building basis. In recognizing this shortcoming, VA's
office responsible for cost estimating calculated operating costs for
VA medical facilities with various levels of occupancy, including fully
utilized, mothballed adjacent, and mothballed standalone.[Footnote 60]
Using the data VA provided to us on the number of underutilized and
vacant square feet it has retained in 2007, we multiplied these figures
with cost estimates from the VA pricing guide to determine the amount
VA spends to operate buildings at VHA facilities. Our estimate using
the VA pricing guide showed that VA may be spending $148 million a year
on operating and maintaining underutilized and vacant property. To test
the reliability of this cost estimate, we assessed the VA pricing guide
against our four characteristics of a high-quality and reliable cost
estimate and found it did not fully reflect best practices associated
with a reliable cost estimate, including being comprehensive, well-
documented, accurate, and credible (see table 6).
Table 6: Summary of VA's Implementation of Best Practices for Cost
Estimating in Its Pricing Guide:
Cost estimation best practice characteristic: Comprehensive;
Addressed in cost estimate?: Partial.
Cost estimation best practice characteristic: Well-documented;
Addressed in cost estimate?: No.
Cost estimation best practice characteristic: Accurate;
Addressed in cost estimate?: No.
Cost estimation best practice characteristic: Credible;
Addressed in cost estimate?: No.
Source: GAO analysis of VA pricing guide.
[End of table]
The annual cost estimate of $148 million is not fully comprehensive
because it does not include all potential operations and maintenance
costs. Specifically, the VA pricing guide includes costs associated
with electricity, water, gas, sewage, major systems maintenance,
building shell maintenance,[Footnote 61] janitorial services, and
security. However, it does not include other pertinent costs such as
property management, grounds maintenance, and pavement clearance. The
VA official responsible for the development of the pricing guide said
that these costs were omitted because the estimates he included were
those directly related to the buildings and not the surrounding area.
Our site visits to VHA medical facilities revealed that costs
associated with engineering project management, which we consider to be
similar to real property management, and grounds maintenance are annual
costs that should be considered. Moreover, the Federal Real Property
Council requires agencies to report annually the following operating
costs: recurring maintenance and repair costs, utilities (includes
plant operation and purchase of energy), cleaning and janitorial costs
(includes pest control, refuse collection, and disposal to include
recycling operations), and roads and grounds expenses (includes grounds
maintenance, landscaping, and snow and ice removal from roads, piers,
and airfields). Therefore, we determined that because some costs were
omitted, the cost estimate is not comprehensive and is likely
underestimated. Moreover, although the VA official who developed the
pricing guide identified some key assumptions, such as the cost
elements included in the estimate, other key assumptions, such as labor
rates and inflation indexes, were not known.
The cost estimate does not meet best practices for being well-
documented. For example, VA has neither documented the calculations and
results used to derive the cost estimate, including the methodologies
used, nor has it traced the cost estimate back to source data (e.g.,
vendor invoices, salary data, etc.) The VA official responsible for
developing the pricing guide described the estimating approach used,
such as contacting the Defense Health Program, Marshall Erdman, McFaul
& Lyons, Marshall & Swift, and the Building Owners and Managers
Association to collect data on utility (i.e., gas, electric, and
sewer), janitorial, security and maintenance costs in the Washington,
D.C., area, but could not provide detailed documentation of the
estimate that showed the methodology used to arrive at the total costs
of each of these elements and how they were summed to arrive at the
overall cost estimate. Therefore, the lack of documentation to support
the program's cost estimate raises questions about its accuracy.
The cost estimate does not meet best practices for accuracy in that it
does not reflect an assessment of the costs most likely to be incurred.
Specifically, the cost estimate omits pertinent costs associated with
general property management and grounds maintenance, which results in
underestimating the total annual costs. In addition, the data used to
develop the cost estimate are not accurate as some judgment calls had
to be made because the agencies VA contacted did not calculate
operations and maintenance costs consistently. For example, McFaul &
Lyons calculated heating and cooling costs but not maintenance costs.
Marshall Erdman did not include water and sewer costs. Moreover, the
Building Owners and Managers Association's costs were based on 10 hours
of operation per day whereas VA is a 24 hour/7 days a week operation.
Finally, VA warns users of the VA pricing guide that the data should be
used for strategic planning purposes only and not for budgeting because
the costs shown are averages to be used for establishing an order of
magnitude. It further cautions that actual costs will vary depending on
the complexity and unique conditions of each project.
The cost estimate does not meet best practices for being credible in
that cross-checks were not performed on the cost estimate for key cost
drivers, and sensitivity analysis and risk analysis were not conducted
on the cost estimate. While VA claimed that other organizations
reviewed the validity of the cost estimates in the VA pricing guide, it
provided no documentation for us to verify. A sensitivity analysis
reveals how the cost estimate is affected by a change in a single
assumption or cost driver, such as rising energy costs, while holding
all other parameters constant. By contrast, a risk analysis assesses
the aggregate variability of the cost estimate to determine a
confidence range around the estimate.[Footnote 62] Conducting a
sensitivity analysis could have enabled VA to estimate the potential
cost impacts due to rising energy costs and to capture the differences
in costs from one location to another. Conducting a sensitivity
analysis also could have enabled VA to estimate potential cost impacts
due to differences in costs from one location to another. In performing
a risk analysis, an organization varies the effects of multiple factors
on costs and, as a result, can express a level of confidence in the
cost estimate. Because VA has not conducted any analysis of
uncertainty, it has not produced a credible cost estimate. Absent this
analysis, VA's ability to identify and focus on major cost drivers,
better understand the potential for cost growth, quantify the risk and
uncertainty associated with the cost estimate, and provide a level of
confidence for the cost estimate is impeded. Further, VA did not have
an independent cost estimate prepared to try to validate its annual
cost estimate.
The senior VA official responsible for cost estimating stated that VA
does not have the resources it needs to develop cost estimates in
accordance with the best practices identified in our Cost Assessment
Guide. Additionally, there is no formal policy within VA on how to
develop cost estimates for operating and maintaining underutilized and
vacant space. For example, the medical facilities we visited either had
their own processes to develop annual cost estimates or did not know
what they were spending. By not following practices associated with
developing reliable cost estimates, VA does not have valid cost
information from which to make sound and prudent decisions.
Furthermore, the lack of a reliable cost estimate results in VA not
knowing how much it spends each year on space that provides no benefit
to veterans or taxpayers. Without a full accounting of the cost to
operate underutilized and vacant space, VA will continue to spend
millions of dollars each year on property it does not utilize.
The results of a high-quality, reliable cost estimate should be cross-
checked using an independent cost estimate to determine whether other
estimating methods produce similar results. An independent cost
estimate is considered to be one of the most reliable validation
methods. An independent cost estimate typically is performed by
organizations higher in the decision-making process than the office
performing the baseline cost estimate, using different estimating
techniques and, where possible, different data sources from those used
to develop the baseline cost estimate.
Given the VA pricing guide did not meet best practices, we felt it was
imperative to test the reasonableness of the $148 million estimate we
derived from using the VA pricing guide. In response, we developed our
own independent cost estimate for what VA is spending on underutilized
and vacant property using cost model data provided by the Whitestone
Building Operations Cost Reference--a document published and updated
annually, which reflects industry standards and surveys building
operations costs.[Footnote 63] This source provided an independent set
of raw data for operation cost elements.
* Energy includes all expenses related to the purchase, generation,
distribution, and conservation of energy and source fuels necessary to
operate a building; utilities maintenance and supervision are not
included.
* Maintenance and repair include all activities to keep a building in
good working order. Preventative maintenance, unscheduled maintenance,
and component repair and replacement costs are considered maintenance
and repair activities, while restoration and modernization are not.
* Property management includes services common to a large commercial
facility: public works, business services, contracts, material
procurement, facility data, furnishings, real estate, and engineering
services.
* Water and sewer include potable water, irrigation water, and sewage
service.
* Custodial includes services for cleaning offices, work areas,
restrooms, and common areas. Trash removal is not included in this cost
element.
* Grounds maintenance includes maintenance of exterior areas, such as
landscaping, sidewalks, and external parking lots.
* Telecom includes voice and data equipment and service subscriptions.
* Pest control includes both indoor and outdoor pest control programs.
* Refuse is trash collection and disposal, pick-up services, fees,
recycling operations and administration, composting, and more. Handling
and disposal of hazardous materials are not included.
* Security ensures the physical security of buildings and occupants,
including monitoring equipment, guards, and patrol services.
* Pavement clearance includes sweeping sand and debris and removing
snow and ice from paved areas, including sidewalks, walkways, and
parking lots.
From the Whitestone Building Operations Cost Reference, operations data
were presented for many different structure types, but a small subset
of VHA analogous facilities were selected for our analysis, including
hospitals and medical clinics. Based on a sample set of structures, we
calculated an average cost per square foot for each operations cost
element. In addition, costs were normalized for location using locality
indices. Since cities were not a one-for-one match with VHA cities, we
rolled the data up to the state level. Our analysis using average cost
per square foot for each operation's cost element and normalized for
state-level locality indices yielded a most likely cost estimate of
$175 million for 2007. In addition, the Whitestone publication provided
nominal upper bounds and lower bounds for each cost element. We modeled
the data dispersion using triangular probability distributions defined
by the lower bound and upper bound extended to two standard deviations,
and most likely values.[Footnote 64] Table 7 displays the 2007 cost per
square foot data range used in our cost uncertainty modeling.
Table 7: 2007 Operations Cost per Square Foot:
Cost element: Energy;
Lower bound: $4.18;
Most likely: $8.63;
Upper bound: $10.36.
Cost element: Maintenance and repair;
Lower bound: $2.16;
Most likely: $4.13;
Upper bound: $7.74.
Cost element: Real property management;
Lower bound: $0.00;
Most likely: $3.90;
Upper bound: $7.63.
Cost element: Custodial services;
Lower bound: $0.64;
Most likely: $3.82;
Upper bound: $7.20.
Cost element: Water/waste water;
Lower bound: $0.00;
Most likely: $1.71;
Upper bound: $10.18.
Cost element: Telecom;
Lower bound: $0.16;
Most likely: $0.42;
Upper bound: $0.64.
Cost element: Security;
Lower bound: $0.19;
Most likely: $0.35;
Upper bound: $2.91.
Cost element: Grounds maintenance;
Lower bound: $0.05;
Most likely: $0.21;
Upper bound: $0.39.
Cost element: Refuse collection;
Lower bound: $0.00;
Most likely: $0.10;
Upper bound: $0.34.
Cost element: Pest control;
Lower bound: $0.02;
Most likely: $0.07;
Upper bound: $0.10.
Cost element: Pavement clearance;
Lower bound: $0.00;
Most likely: $0.02;
Upper bound: $0.04.
Subtotal operations costs;
Most likely: $23.36.
Subtotal mothball costs;
Most likely: $8.70.
Source: GAO.
[End of table]
Mothball costs for vacant property were based on a subset of operations
costs; some cost elements were modeled at a reduced service level.
* Cost estimates for grounds maintenance, pest control, and pavement
clearance were based on 100 percent service.
* Energy costs were modeled with factor of full service, using a
triangular probability distribution ranging from 25 percent to 50
percent.
* Maintenance and repair costs were modeled with factor of full
service, using a triangular probability distribution ranging from 25
percent to 75 percent.
* Property management costs were modeled with factor of full service,
using a triangular probability distribution ranging from 50 percent to
100 percent.
* Security costs were modeled with factor of full service, using a
triangular probability distribution ranging from 25 percent to 50
percent.
* No custodial or telecom costs were included for vacant property.
Costs were normalized for location using locality indices. Since the
cities used in the Whitestone publication were not a one-for-one match
with VA cities, data were rolled up to the state level. For each state,
city-level locality indices were grouped. The grouped data were used to
calculate an average and a standard deviation. Our analysis used these
calculated average state-level locality indices to adjust for
differences in costs across the country. Table 8 displays the locality
indices and standard deviations associated with each state.
Table 8: 2007 Operations Cost State-level Locality Indices:
State: AK;
Mean: 1.045;
Standard deviation: 0.015.
State: AL;
Mean: 0.862;
Standard deviation: 0.017.
State: AR;
Mean: 0.808;
Standard deviation: NA.
State: AZ;
Mean: 0.878;
Standard deviation: 0.017.
State: CA;
Mean: 1.026;
Standard deviation: 0.044.
State: CO;
Mean: 0.890;
Standard deviation: 0.021.
State: CT;
Mean: 1.062;
Standard deviation: 0.030.
State: DC;
Mean: 1.000;
Standard deviation: NA.
State: DE;
Mean: 0.973;
Standard deviation: NA.
State: FL;
Mean: 0.879;
Standard deviation: 0.023.
State: GA;
Mean: 0.861;
Standard deviation: 0.043.
State: HI;
Mean: 1.287;
Standard deviation: 0.031.
State: IA;
Mean: 0.882;
Standard deviation: 0.023.
State: ID;
Mean: 0.812;
Standard deviation: 0.015.
State: IL;
Mean: 0.933;
Standard deviation: 0.028.
State: IN;
Mean: 0.883;
Standard deviation: 0.016.
State: KS;
Mean: 0.866;
Standard deviation: 0.021.
State: KY;
Mean: 0.863;
Standard deviation: 0.011.
State: LA;
Mean: 0.874;
Standard deviation: 0.016.
State: MA;
Mean: 1.057;
Standard deviation: 0.035.
State: MD;
Mean: 0.960;
Standard deviation: NA.
State: ME;
Mean: 0.929;
Standard deviation: NA.
State: MI;
Mean: 0.905;
Standard deviation: 0.044.
State: MN;
Mean: 0.921;
Standard deviation: 0.029.
State: MO;
Mean: 0.889;
Standard deviation: 0.053.
State: MS;
Mean: 0.844;
Standard deviation: 0.018.
State: MT;
Mean: 0.837;
Standard deviation: 0.011.
State: NC;
Mean: 0.822;
Standard deviation: 0.014.
State: ND;
Mean: 0.815;
Standard deviation: 0.006.
State: NE;
Mean: 0.848;
Standard deviation: NA.
State: NH;
Mean: 0.999;
Standard deviation: NA.
State: NJ;
Mean: 1.080;
Standard deviation: 0.027.
State: NM;
Mean: 0.853;
Standard deviation: 0.023.
State: NV;
Mean: 0.924;
Standard deviation: 0.001.
State: NY;
Mean: 1.084;
Standard deviation: 0.084.
State: OH;
Mean: 0.926;
Standard deviation: 0.012.
State: OK;
Mean: 0.836;
Standard deviation: 0.013.
State: OR;
Mean: 0.893;
Standard deviation: 0.011.
State: PA;
Mean: 0.951;
Standard deviation: 0.042.
State: RI;
Mean: 1.021;
Standard deviation: NA.
State: SC;
Mean: 0.818;
Standard deviation: 0.006.
State: SD;
Mean: 0.792;
Standard deviation: 0.022.
State: TN;
Mean: 0.851;
Standard deviation: 0.023.
State: TX;
Mean: 0.879;
Standard deviation: 0.025.
State: UT;
Mean: 0.822;
Standard deviation: 0.005.
State: VA;
Mean: 0.823;
Standard deviation: 0.019.
State: VT;
Mean: 0.926;
Standard deviation: 0.001.
State: WA;
Mean: 0.892;
Standard deviation: 0.024.
State: WI;
Mean: 0.911;
Standard deviation: 0.022.
State: WV;
Mean: 0.866;
Standard deviation: 0.001.
State: WY;
Mean: 0.788;
Standard deviation: NA.
Source: GAO.
[End of table]
Square footage across sites was sorted and summed to the state level.
Table 9 presents space claims for underutilized and vacant facilities.
Table 9: 2007 VA Facilities Square Feet of Underutilized and Vacant
Space:
State: Alaska;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Alabama;
Summarized: Underutilized 2007 (sq ft): 434,641;
Summarized: Vacant 2007 (sq ft): 382,873.
State: Arkansas;
Summarized: Underutilized 2007 (sq ft): 136,243;
Summarized: Vacant 2007 (sq ft): 58,824.
State: Arizona;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 13,618.
State: California;
Summarized: Underutilized 2007 (sq ft): 411,243;
Summarized: Vacant 2007 (sq ft): 803,820.
State: Colorado;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 12,799.
State: Connecticut;
Summarized: Underutilized 2007 (sq ft): 41,635;
Summarized: Vacant 2007 (sq ft): 59,175.
State: District of Columbia;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Delaware;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 15,184.
State: Florida; Summarized:
Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 23,104.
State: Georgia;
Summarized: Underutilized 2007 (sq ft): 136,834;
Summarized: Vacant 2007 (sq ft): 251,728.
State: Hawaii;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Iowa;
Summarized: Underutilized 2007 (sq ft): 69,686;
Summarized: Vacant 2007 (sq ft): 275,140.
State: Idaho;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 4,276.
State: Illinois;
Summarized: Underutilized 2007 (sq ft): 260,319;
Summarized: Vacant 2007 (sq ft): 558,152.
State: Indiana;
Summarized: Underutilized 2007 (sq ft): 289,985;
Summarized: Vacant 2007 (sq ft): 473,365.
State: Kansas;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 25,833.
State: Kentucky;
Summarized: Underutilized 2007 (sq ft): 136,940;
Summarized: Vacant 2007 (sq ft): 302,567.
State: Louisiana;
Summarized: Underutilized 2007 (sq ft): 261,843;
Summarized: Vacant 2007 (sq ft): 9,604.
State: Massachusetts;
Summarized: Underutilized 2007 (sq ft): 148,210;
Summarized: Vacant 2007 (sq ft): 260,730.
State: Maryland;
Summarized: Underutilized 2007 (sq ft): 72,652;
Summarized: Vacant 2007 (sq ft): 93,779.
State: Maine;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 25,594.
State: Michigan;
Summarized: Underutilized 2007 (sq ft): 312,247;
Summarized: Vacant 2007 (sq ft): 235,761.
State: Minnesota;
Summarized: Underutilized 2007 (sq ft): 18,372;
Summarized: Vacant 2007 (sq ft): 27,322.
State: Missouri;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 140,718.
State: Mississippi;
Summarized: Underutilized 2007 (sq ft):[Empty];
Summarized: Vacant 2007 (sq ft): 7,367.
State: Montana;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 107,457.
State: North Carolina;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 54,456.
State: North Dakota;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Nebraska;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 65,552.
State: New Hampshire;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: New Jersey;
Summarized: Underutilized 2007 (sq ft): 160,728;
Summarized: Vacant 2007 (sq ft): 186,621.
State: New Mexico;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Nevada;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: New York;
Summarized: Underutilized 2007 (sq ft): 865,651;
Summarized: Vacant 2007 (sq ft): 868,299.
State: Ohio;
Summarized: Underutilized 2007 (sq ft): 226,486;
Summarized: Vacant 2007 (sq ft): 352,457.
State: Oklahoma;
Summarized: Underutilized 2007 (sq ft): 54,596;
Summarized: Vacant 2007 (sq ft): 8,733.
State: Oregon;
Summarized: Underutilized 2007 (sq ft): 22,672;
Summarized: Vacant 2007 (sq ft): 62,257.
State: Pennsylvania;
Summarized: Underutilized 2007 (sq ft): 407,547;
Summarized: Vacant 2007 (sq ft): 173,098.
State: Puerto Rico;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Rhode Island;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 100.
State: South Carolina;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 67,369.
State: South Dakota;
Summarized: Underutilized 2007 (sq ft): 44,773;
Summarized: Vacant 2007 (sq ft): 60,145.
State: Tennessee;
Summarized: Underutilized 2007 (sq ft): 290,566;
Summarized: Vacant 2007 (sq ft): 102,406.
State: Texas;
Summarized: Underutilized 2007 (sq ft): 121,707;
Summarized: Vacant 2007 (sq ft): 277,042.
State: Utah;
Summarized: Underutilized 2007 (sq ft): 68,940;
Summarized: Vacant 2007 (sq ft): [Empty].
State: Virginia;
Summarized: Underutilized 2007 (sq ft): 239,458;
Summarized: Vacant 2007 (sq ft): 161,154.
State: Vermont;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): [Empty].
State: Washington;
Summarized: Underutilized 2007 (sq ft): 10,217;
Summarized: Vacant 2007 (sq ft): 37,788.
State: Wisconsin;
Summarized: Underutilized 2007 (sq ft): [Empty];
Summarized: Vacant 2007 (sq ft): 396,053.
State: West Virginia;
Summarized: Underutilized 2007 (sq ft):
Summarized: Vacant 2007 (sq ft): 19,139.
State: Wyoming;
Summarized: Underutilized 2007 (sq ft): 6,734;
Summarized: Vacant 2007 (sq ft): 29,886.
Total;
Summarized: Underutilized 2007 (sq ft): 5,250,925;
Summarized: Vacant 2007 (sq ft): 7,091,345.
Source: GAO.
[End of table]
For each cost element, the operations cost per square foot was
multiplied by the underutilized and vacant square footage, and the
result was adjusted for locality using a state-index.
Given the importance of sensitivity and uncertainty analyses[Footnote
65] for producing a high-quality cost estimate, we conducted these
analyses for our independent cost estimate. Using the Whitestone data,
we were able to model the cost uncertainty (statistical bounds) of our
independent cost estimate, which enabled us to understand the potential
variability of our cost estimate should the facts, circumstances, and
assumptions change. Performing an uncertainty analysis enabled us to
quantify the risk and uncertainty associated with our cost estimate and
allowed us to provide a level of confidence for our cost estimate by
providing us with a statistical perspective on the potential
variability within it.
Based on this analysis we estimate that the annual cost of operating
and maintaining underutilized and vacant VHA space could vary from $175
million to $185 million at the 50 percent and 70 percent confidence
levels, respectively (see fig. 11).
Figure 11: Cumulative Probability Distribution of Total 2007 Costs:
[See PDF for image]
This figure is a line graph depicting the following data:
Percentage:
Dollars in millions: $116;
Percentage: 0.02%.
Dollars in millions: $134;
Percentage: 0.88%.
Dollars in millions: $152;
Percentage: 8.78%.
Dollars in millions: $170;
Percentage: 36.7%.
Dollars in millions: $175;
Percentage: 48.52%.
Dollars in millions: $185;
Percentage: 70.6%.
Dollars in millions: $187;
Percentage: 73.94%.
Dollars in millions: $205;
Percentage: 94.62%.
Dollars in millions: $240;
Percentage: 100%.
Source: GAO.
[End of figure]
When compared to the $148 million cost estimate we produced using the
VA pricing guide, there is less than a 10 percent probability that the
estimate will be $148 million or lower based on the amount of variation
that exists within the operating cost elements and locality indices
(see table 10). The analysis also revealed that energy, maintenance,
and property management are the cost drivers and contribute the most
variability within the independent cost estimate.
Table 10: Percentile Rankings for 2007 Total Costs:
Percentile: 0%;
Value: $116,486,663.
Percentile: 10%;
Value: $153,184,555.
Percentile: 20%;
Value: $160,645,545.
Percentile: 30%;
Value: $166,572,771.
Percentile: 40%;
Value: $171,012,617.
Percentile: 50%;
Value: $175,463,250.
Percentile: 60%;
Value: $180,112,142.
Percentile: 70%;
Value: $185,090,415.
Percentile: 80%;
Value: $190,506,295.
Percentile: 90%;
Value: $199,187,043.
Percentile: 100%;
Value: $240,229,959.
Source: GAO.
[End of table]
The estimate at this confidence level represents an assumption that the
inputs--i.e., VA's data on underutilized and vacant square footage--are
accurate. According to VA officials, the data on vacant square feet are
inputted directly into the Capital Asset Inventory. Underutilized
square footage, on the other hand, is calculated by subtracting ideal
square footage from the total square footage available at each station.
Ideal square footage, in turn, is imputed using a VA program--
SpaceDriver--from many inputs, including patient workloads and medical
service standards. Moreover, according to VA officials, underutilized
square footage includes vacant square footage. To calculate
underutilized square footage for this report, we subtracted the vacant
square footage from VA's reported underutilized square footage. There
were several VHA stations for which vacant square footage exceeded the
reported underutilized square footage, however, resulting in a negative
number. A VA official said that these were due to reporting
deficiencies, where common space and other incidental space were not
properly recorded in the Capital Asset Inventory. In addition, we
identified some other data errors during the course of our audit that
VA is working to correct. We do not know the extent to which such
reporting deficiencies or errors are prevalent in the system. VA is in
the process of completing an audit of the Capital Asset Inventory
database to determine if the data at the station level reflect the
actual utilization of VA's assets. The outcome of this audit could
affect our cost estimate.
[End of section]
Appendix III: Comments from the Department of Veterans Affairs:
The Secretary Of Veterans Affairs:
Washington:
August 14, 2008:
Mr. Mark Goldstein:
Director:
Physical Infrastructure:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Goldstein:
The Department of Veterans Affairs (VA) has reviewed your draft report,
Federal Real Property: Progress Made in Reducing Unneeded Property, but
VA Needs Better Information to Make Further Reductions GAO-08-939. VA
officials appreciate the opportunity to comment.
VA concurs in principle with the majority of your recommendations. Our
response highlights five areas of concern and provides additional focus
on important distinctions. VA manages its portfolio of capital assets
aggressively and the use of special authorities is critical to the
success of our efforts. The continuing implementation of the Capital
Asset Realignment for Enhanced Services (CARES) decisions, coupled with
the site review initiative and other targeted projects, demonstrate
that VA is taking appropriate steps to ensure a well-grounded strategy
to managing its real property. Not only has VA made great strides in
reducing its underutilized and vacant property inventory over the past
3 years, but significant initiatives are underway.
The enclosures provide details and context to address VA's concerns.
The enclosures are: VA's five key points of disagreement; a listing of
VA's fiscal years 2008 to 2012 planned disposals; VA's response to
GAO's recommendations; and technical comments on the draft report.
Sincerely, yours,
Signed by:
James B. Peake, M.D.
Enclosures:
Enclosure:
Department of Veterans Affairs (VA) Comments to Government
Accountability Office (GAO) Draft Report Federal Real Property:
Progress Made in Reducing Unneeded Property, but VA Needs Better
Information to Make Further Reductions (GAO-08-939):
Five Key Points of Disagreement Between VA and GAO:
Following is a brief summary of the five major points of disagreement
between VA and GAO:
1. Vacant space is double counted.
GAO based its calculations throughout the draft report on a combination
of underutilized and vacant square footage (sq ft), adding the two
together. (For example, for fiscal year (FY) 2007 GAO used 11,604,885
sq ft of underutilized space plus 7,297,407 sq ft of vacant space for a
total of more than 19 million sq ft.) This calculation is not correct.
VA includes vacant square footage as a subset of its underutilized
space. For the same FY, VA's underutilized and vacant space totaled
11,058,491 sq ft.
2. Unit costs for operations and maintenance of underutilized space is
overstated.
VA and GAO differ in approach and methodologies used to estimate unit
costs for operating and maintaining (O&M) underutilized space. No one
in the Federal government links O&M costs to an accounting system by
building. Instead, VA uses actual monthly costs at the station level
and prorates these costs based on hours of operation and predominant
use. This approach has been approved by Office of Management and Budget
(OMB) and the Federal Real Property Council (FRPC). GAO developed an
independent cost model for this report that produced a unit cost over
$14 more per sq ft than VA's approach. This resulted in a difference of
close to $222 million in the estimated total O&M costs for FY 2007 (GAO
estimated $307 million; VA prorated the same costs at $85.2 million).
3. VA does have valid cost information from which to make sound and
prudent decisions.
This report raises questions about VA's ability to develop
"comprehensive, accurate, well-documented, and credible" annual cost
estimates of the overhead expenses required to maintain our inventory
of underutilized and vacant properties. In fact,
a) VA reports prorated building costs to the FRPC annually based on an
OMB approved methodology. The prorated costs are based on actual
stations' costs and adjusted for hours of operation and predominant
use.
b) VA maintains current year building level inventory, including square
footage, type, condition, corrections costs and disposals (planned and
actual).
c) VA maintains historical inventory and financial data at the station
level in VA's capital asset management system (CAMS) for FY 2005-2007,
and the data is updated monthly.
d) VA is developing requirements for a real property (asset level) cost
accounting system that will replace VA's existing financial management
system (FMS).
4. VA does analyze data with respect to FRPC Tier 1 metrics (mission
dependency, utilization, condition, cost).
VA was instrumental in developing the disposal algorithm used by the
Federal community. The algorithm is used to identify assets that are
nonmission-dependent, underutilized, in poor condition, and with high
costs as potential buildings for disposal. VA develops and updates a 5-
year disposal plan annually and provides OMB with a quarterly report of
disposals. This extensive plan is a key component of VA's short and
long-term capital asset management strategy, yet it is omitted from
GAO's report. Over the next 5 years, VA plans to dispose of 72
buildings and 1,118,653 sq ft based on FRPC Tier 1 metrics, using our
disposal authorities. In short, VA is aware of its underutilized and
vacant properties and is using numerous strategies to dispose of or
find alternative uses for these capital assets.
5. VA does track revenue generated, sq ft reductions and services
received through agreements; however it is not done systematically or
in a standard way across all agreement types.
VA does track and can provide the amount of revenue generated for space
and services at a local level, although the data is not systematically
or uniformly entered across all agreement types in a single data
system. Revenue generated through enhanced-use leasing, outleases,
sharing and other partnership agreements are tracked using revenue
source codes. VA provided GAO with the revenue generated through
agreements from FY 2005-2007. Annual one-time payments included $28
million in FY 2005 and $22 million in FY 2006. Annual recurring revenue
from outleased space generated $1.4 million in FY 2005; $.9 million in
FY 2006; and $1.1 million in FY 2007. VA tracks, monitors and evaluates
square foot reduction by building by disposal type. GAO received a list
of FY 2005-2007 disposals and the list of FY 2008-2012 planned
disposals is attached. VA will redouble its effort to ensure that data
is captured consistently and uniformly, especially for services
received through agreements. The new accounting system is being
designed in part to track real property asset level costs and capture
more uniformly all revenues generated.
Responses to GAO Recommendations:
Recommendation 1: To provide VA with an accurate picture of what it
spends annually on maintaining underutilized and vacant property and a
benchmark from which to work in decreasing these costs, develop an
annual cost estimate for how much it spends on underutilized and vacant
property, so that the estimate is comprehensive, accurate, well-
documented, and credible.
Concur- Over the last 3 years, VA has focused its efforts on reducing
the amount of underutilized and vacant buildings and land parcels in
its real property inventory. VA has developed a 5-year disposal plan
that identifies 460 properties for disposal over the next 5 fiscal
years. The 5-year plan includes eliminating 72 specific properties
using our disposal authorities. VA has also identified 49 sites through
its site review initiative to develop as transitional housing for
homeless veterans. VA uses a combination of actual prorated operational
and maintenance costs and a disposal algorithm as a basis for making
well-informed capital asset management and disposal decisions. VA has
the strategies and plans in place to continue monitoring and taking
action to reduce its real property inventory. VA will, however,
investigate the use of additional estimating tools and commercial
benchmarks.
Recommendation 2: Collect and maintain building-level data by fiscal
year in order to correlate characteristics associated with
underutilized and vacant buildings which may help to identify unneeded
assets.
Non Concur- VA collects and analyzes a significant amount of data at
the station and building level. VA is in full compliance with all
reporting requirements of the Office of Management and Budget, the
President's Management Agenda Initiative on Federal Real Property Asset
Management, and the Federal Real Property Council at both the station
and building levels. In addition, VA already identifies unneeded assets
using a disposal algorithm and targeted programs such as the site
review initiative and implementation of the Capital Asset Realignment
for Enhanced Services (CARES) decisions.
Recommendation 3: When recording new agreements, as of fiscal year
2008, track, monitor, and evaluate square footage reductions and
financial and non-financial benefits.
Concur- VA records information on all types of agreements. We agree
with the need to improve the consistency of data on some types of
agreements, especially sharing agreements, and to report in a more
centralized manner. VA will work to make these improvements.
[End of section]
Appendix IV GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark Goldstein, Director, Physical Infrastructure, (202) 512-2834 or
GoldsteinM@gao.gov:
Staff Acknowledgments:
Individuals making key contributions to this report include Lisa
Canini, Jeff Cherwonik, Cindy Gilbert, Ed Laughlin, Jessica Lucas-Judy,
Maria Mercado, Susan Michal-Smith, John Mingus, Karen Richey, Stan
Stenersen, and Gary Stofko.
[End of section]
Footnotes:
[1] We have reported that more than 30 federal agencies, including VA,
control a valuable portfolio of facilities and land that is at high
risk due to vulnerabilities to waste, fraud, abuse, and mismanagement
or major challenges associated with managing it in an efficient or
effective manner. See GAO, Federal Real Property: Progress Made Toward
Addressing Problems, but Underlying Obstacles Continue to Hamper
Reform, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-349]
(Washington, D.C.: Apr. 13, 2007); Federal Real Property: Excess and
Underutilized Property Is an Ongoing Problem, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-06-248T] (Washington, D.C.: Feb.
6, 2006); and High-Risk Series: Federal Real Property, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-03-122] (Washington, D.C.:
January 2003).
[2] For the purposes of this report, the term "station" refers to a VA
medical center, Veterans Benefit Administration office, national
cemetery, or staff office. Stations can be composed of multiple
buildings.
[3] Fiscal year 2005 represented the first year all data elements were
fully collected in the Capital Asset Management System.
[4] VA's staff offices include the Office of Public and
Intergovernmental Affairs; Office of Management; Office of Information
and Technology; Office of Human Resources and Administration; Office of
Operations, Security and Preparedness; Office of Policy and Planning;
and the Office of Congressional and Legislative Affairs. VA's staff
organizations include the Board of Veterans' Appeals, Office of General
Counsel, Inspector General, Veterans Service Organizations Liaison,
Center for Minority Veterans, Center for Women Veterans, Employment
Discrimination Complaint Adjudication, Office of Regulation Policy and
Management, Small and Disadvantaged Business Utilization, Center for
Veterans Enterprise, Center for Faith-Based and Community Initiatives,
and Office of Construction and Facilities Management.
[5] A network is a group of facilities located in the same geographic
area of the country.
[6] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GA0-07-349].
[7] GAO, VA Health Care: Additional Efforts to Better Assess Joint
Ventures Needed, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-
399] (Washington, D.C.: Mar. 28, 2008).
[8] 42 U.S.C. § 11411. VA properties that are leased to another party
under an EUL are not considered to be unutilized or underutilized for
purposes of the McKinney-Vento Act.
[9] 16 U.S.C. § 470 et seq.
[10] The underutilized square footage numbers we are reporting are
different from the utilization numbers that VA reports. Our analysis
only included underutilized square feet, whereas when VA measures its
rate of utilization, it adds together underutilized square feet and
overutilized square feet (additional square feet needed at a facility).
[11] VHA's underutilized space made up 98 percent of VA's total
underutilized space in fiscal years 2006 and 2007, and made up 99
percent in fiscal year 2005.
[12] Station" refers to a VA medical center, VBA office, national
cemetery, or staff office. Stations can be composed of multiple
buildings.
[13] According to the VA official responsible for data management,
building-level data for fiscal years prior to 2006 were unavailable
because VA overwrote the data in its Capital Asset Inventory database.
VA began archiving the data in fiscal year 2006 by taking snapshots of
the data, but because these were taken at different points in time,
data from fiscal years 2006 and 2007 are not comparable for purposes of
our analysis.
[14] OMB, Capital Programming Guide: Supplement to Circular A-11, Part
7, Planning, Budgeting, and Acquisition of Capital Assets (Washington,
D.C., Executive Office of the President, June 2006).
[15] This analysis is based on 5,061 buildings that had age data
available. VA does not know the age of 1,151 of its buildings.
According to VA officials, VA does not maintain detailed information
for small miscellaneous buildings, such as sheds, which could account
for the lack of age data.
[16] VA assesses the condition of its buildings' structure and systems
(for example, structural, mechanical, and plumbing) to estimate
remaining useful life and identify buildings that need immediate
attention. Each facility is rated on an A to F grade scale. Buildings
rated "D" are considered to be in "poor" condition, and buildings
receiving a rating of "F" are in "critical" condition. The buildings
are assessed in a 3-year cycle; approximately one-third are assessed
each year.
[17] There was a small increase in vacant space from fiscal year 2005
through 2006 as a result of consolidating services at medical centers
in Biloxi/Gulfport, Mississippi; Lexington, Kentucky; and Murfreesboro,
Tennessee.
[18] During the course of our work we learned NCA had vacant space at
its cemetery lodges, but did not report it to VA's central office.
According to our analysis, NCA had 9 vacant buildings totaling 10,459
square feet in fiscal year 2007 as compared to VHA's 473 vacant
buildings totaling 7,297,407 square feet. NCA is now entering vacant
space information in VA's database, according to VA officials.
[19] Although VA's database did not contain information on the number
of vacant square feet at the building level, we identified this
information based on our own analysis of the data.
[20] This analysis is based on 5,061 buildings that had age data
available. As previously noted, VA does not know the age of 1,151 of
its buildings.
[21] In 2007, VA identified 20 NCA sites with more than 100 undeveloped
acres. However, NCA intends to use these sites for future burials, with
the exception of 54 acres in the Dallas/Ft. Worth, Texas, area.
[22] VA does track operations and maintenance costs at the station
level. VA is implementing a pilot program to meter its buildings so
that it can track utility usage at the building level. According to VA
officials, there are no criteria for operating and maintaining vacant
buildings; each medical center relies on its own judgment to determine
requirements. Locations we visited reported making judgments on utility
use and maintenance based on the perceived future use of the building.
[23] Shell maintenance includes tuck pointing (i.e., the replacement of
mortar), roof repair, and window replacement.
[24] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs--Exposure Draft, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP] (Washington, D.C.:
July 2007).
[25] An uncertainty analysis provides decision makers with a
perspective on the potential variability of the estimate should the
facts, circumstances, and assumptions change. By examining the effects
of varying the estimate elements, a degree of uncertainty about the
estimate can be expressed, possibly as an estimated range or qualified
by some factor of confidence. The 50 percent confidence level, $175
million in the case of our estimate, is the median and therefore the
most likely outcome. The 70 percent confidence level is provided to
offset the risk of underestimating. The $175 million estimate
represents an assumption that VA's data on underutilized square footage
are correct; however, we have some concerns about the accuracy of those
numbers. VA is conducting an audit of its data systems, the outcome of
which could affect our estimate. See app. II for more information.
[26] See GAO, Federal Real Property: Vacant and Underutilized
Properties at GSA, VA, and USPS, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-747] (Washington, D.C.: Aug. 19, 2003).
[27] At some of the locations we visited, VA officials identified other
factors that may have contributed to changes in its underutilized and
vacant space, including consolidation of services, reconfiguring space,
increased workloads, and reclassification of certain space types. For
example, VA's efforts to consolidate healthcare services could result
in reductions in underutilized space but increases in vacant space.
Because these factors were outside of the scope of our work, we did not
evaluate the extent to which they contributed to reductions in
underutilized and vacant property.
[28] VA includes permits and licenses within its outlease category in
the Capital Asset Management System.
[29] VA has other authorities available but uses them to a far lesser
extent, if at all. For example, VA has the authority to: transfer
property and deposit the proceeds in a Capital Asset Fund until 2011
(38 U.S.C. § 8118); transfer any interest in real property to a state
for use as a state nursing home or domiciliary (38 U.S.C. § 8122); or
transfer the real property to GSA for disposal (38 U.S.C. § 8122).
[30] Our past work has shown that whether agreements are beneficial
governmentwide is largely dependent on individual circumstances. We did
not formally evaluate, verify, or validate the impact of these
agreements or measure their overall effect.
[31] According to VA officials, VA only disposes of property if it is a
"win-win" situation, meaning that the disposal provides both a benefit
to the veterans and is acceptable to the local community.
[32] 38 U.S.C. § 8164.
[33] According to VA officials, VA plans to dispose of 436 buildings
from fiscal year 2008 through fiscal year 2012; however, VA has not
estimated the costs of these disposals and they have not yet been
funded.
[34] VHA allows a company to place a cell phone tower on VA property in
exchange for financial compensation.
[35] For more information on this EUL, see GAO, Capital Financing:
Partnerships and Energy Savings Performance Contracts Raise Budgeting
and Monitoring Concerns, GAO-05-55 (Washington, D.C.: Dec. 16, 2004).
[36] Stations reviewed included Northern Indiana Healthcare System
(Marion Campus), Indiana; West Los Angeles, California; Tuskegee,
Alabama; Milwaukee, Wisconsin; Montrose, New York; Sepulveda (North
Hills), California; Hines, Illinois; Knoxville, Iowa; Waco, Texas;
Dayton, Ohio; Augusta (Lenwood), Georgia; Lexington/Leestown, Kentucky;
Marlin, Texas; Northport, New York; and Lyons, New Jersey; with a total
of 4,101,038 vacant square feet, representing 57 percent of all VA
vacant space.
[37] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-122].
[38] This estimate is just for underutilized and vacant buildings. VA's
estimated repair cost for all buildings in "poor" or "critical"
condition was $6.5 billion.
[39] For the purposes of this report, historic properties include
properties that have been designated as National Historic Landmarks,
have been listed or are eligible to be listed in the National Register,
or have a contributing element in a National Historic Landmark or
National Register Listed district.
[40] 16 U.S.C. 470 §et seq. The Act establishes roles and
responsibilities of the federal government to preserve and protect
historic properties.
[41] The State Historic Preservation Office is a state government
agency that has legal responsibilities under the National Historic
Preservation Act to, among other things, consult federally funded
undertakings that affect historic properties.
[42] GAO, Improved Planning Needed for Management of Excess Real
Property, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-326]
(Washington D.C.: Jan. 29, 2003).
[43] P.L. No. 100-322, Section 421(b)(2), 102 Stat. 487, 553 (1988).
[44] 38 U.S.C. § 8162(c).
[45] P.L. No. 110-161, Section 224(a), 121 Stat. 1844, 2272 (2007).
[46] In GAO-07-349, we discuss the administration's focus on real
property management as a positive step but note that certain areas
warrant further action. Specifically, problems are exacerbated by
underlying obstacles, such as legal and budgetary limitations that, in
some cases, may be barriers to agencies disposing of excess property.
[47] 38 U.S.C. § 8122.
[48] 38 U.S.C. § 8164.
[49] GAO, Capital Financing: Potential Benefits of Capital Acquisition
Funds Can Be Achieved through Simpler Means, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-249] (Washington, D.C.: Apr.
8, 2005).
[50] As noted earlier, VA properties that are leased to another party
under an EUL are not considered to be unutilized or underutilized for
purposes of the McKinney-Vento Act (see 38 U.S.C. § 8162).
[51] We have reported elsewhere on this process. See GAO, Federal Real
Property: Most Public Benefit Conveyances Used as Intended, but
Opportunities Exist to Enhance Federal Oversight, GAO-06-511
(Washington, D.C.: June 21, 2006).
[52] GAO, Public-Private Partnerships: Pilot Program Needed to
Demonstrate the Actual Benefits of Using Partnerships, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-01-906] (Washington, D.C.: July
25, 2001).
[53] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-55].
[54] VA is authorized to provide real property to GSA for disposal
after the VA secretary determines the property is no longer needed by
the department in carrying out its functions and is not suitable to be
used to provide services to homeless veterans under an EUL (see 38
U.S.C. § 8122).
[55] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-511].
[56] The Federal Real Property Council requires federal agencies to
report annual operation and maintenance costs at the constructed asset
(i.e., building) level. Because VA does not meter its buildings, the
agency uses a prorated distribution of actual operations and
maintenance costs at the station level to estimate operational costs at
the building level. However, VA officials told us that this approach
does not lend itself to determining the operations and maintenance
costs associated with underutilized or vacant property. We therefore
developed an independent cost estimate for what VA is spending on
underutilized and vacant property using cost model data provided by the
Whitestone Building Operations Cost Reference--a document published and
updated annually, which reflects industry standards and surveys
building operations costs.
[57] The earliest year in which VA property data were available was
fiscal year 2005 for station-level data and fiscal year 2006 for
building-level data. Fiscal year 2005 represented the first year all
data elements were fully collected in the Capital Asset Management
System.
[58] OMB, Circular No. A-11, Preparation, Submission, and Execution of
the Budget (Washington, D.C., Executive Office of the President, June
2006); Circular No. A-130 Revised, Management of Federal Information
Resources (Washington, D.C., Executive Office of the President, Nov.
28, 2000); and Capital Programming Guide: Supplement to Circular A-11,
Part 7, Preparation, Submission, and Execution of the Budget
(Washington, D.C., Executive Office of the President, June 2006).
[59] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs--Exposure Draft, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP]. (Washington, D.C.:
July 2007).
[60] Mothballed-adjacent properties are sections of a building that are
vacant (e.g., a wing that has been shut down), but are attached to a
building that is still in operation. Mothballed-adjacent properties
incur more maintenance costs due to leakage from ventilation systems,
the possibility of a pipe bursting and flooding the vacant area, etc.
Mothball-standalone properties are vacant properties.
[61] Shell maintenance includes tuck pointing (i.e., the replacement of
mortar), roof repair, and window replacement.
[62] A risk analysis can be accomplished by the use of Monte Carlo
simulation, which involves the use of random numbers and probability
distributions to examine random outcomes.
[63] Our independent cost estimate was developed only for VHA
facilities since those were the facilities VA developed cost estimates
for in its pricing guide, and we wanted the estimates to be comparable.
Furthermore, the majority of underutilized and vacant space is at VHA
facilities.
[64] The data printed in the Whitestone publication represent nominal
bounds. We extended both tails of the distribution from one standard
deviation to two standard deviations to reflect 95 percent of all
possible outcomes based on discussion with the publication lead author.
[65] An uncertainty analysis is a technique used to quantitatively
assess the extent to which the variability of an outcome variable is
caused by uncertainty in the input parameters. Inputs to the model are
assigned probability distributions, and values from these distributions
are selected randomly and inserted into the cost model. The model then
yields a point estimate according to these randomly selected inputs.
Using Monte Carlo simulation, this process is repeated thousands of
times to construct a distribution of all possible final output costs.
Percentiles of this final output distribution may then be compared to
the percentile represented by the model's original point estimate to
measure the risk associated with the point estimate. Using Crystal Ball
software, we ran the calculations through a Monte Carlo simulation of
5,000 trials in which costs (and indices) are pulled from the defined
probability distributions as previously described. This process yielded
a cost estimate of $175 million for fiscal year 2007.
[End of section]
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