Federal Real Property
Government's Fiscal Exposure from Repair and Maintenance Backlogs Is Unclear Gao ID: GAO-09-10 October 16, 2008In 2003, GAO designated federal real property as a high-risk area. In 2007, GAO reported that real-property-holding agencies and the administration had made progress toward managing their real property, but underlying problems, such as backlogs in repair and maintenance, still existed and six agencies reported having over $1 billion in repair and maintenance backlogs. Owning real property creates a fiscal exposure for the government from the expectation that agencies will incur future maintenance and operations costs. GAO was asked to (1) describe how six agencies estimate their repair and maintenance backlogs, (2) determine how these agencies manage their backlogs and the expected future changes in these backlogs, and (3) identify how backlogs have affected operations at some sites. GAO reviewed agency documents, interviewed officials, and visited two sites at each of the six agencies.
The six agencies that GAO reviewed all periodically assess the condition of their assets to identify needed repairs and maintenance but then use different methods to define and estimate their repair and maintenance backlogs. As a result, the agencies' estimates are not comparable. Three of the six agencies--the Departments of Energy (DOE), the Interior (DOI), and the National Aeronautics and Space Administration (NASA)--defined their backlogs as work that was identified to correct deficiencies. A fourth agency, the Department of Veterans Affairs (VA), also defined its backlog as work identified to correct deficiencies, but VA's backlog included only work on systems, such as mechanical and plumbing systems, found to be in poor or critical condition. The General Services Administration (GSA) and the Department of Defense (DOD) both did not track a backlog. Instead, GSA calculated its reinvestment liability--the cost of repairs and maintenance needed now and in the next 10 years. DOD assigned a quality rating to each facility which was based on the ratio of repair costs to the asset's value. The backlog estimates do not necessarily reflect the costs the agencies expect to incur to repair and maintain assets essential to their missions or to avert risks to their missions. For example, these estimates could understate an agency's backlog because they are based on industry-standard costs, or could overstate an agency's backlog because they include inactive assets that are not essential to the agency's mission or may be demolished. The six agencies GAO reviewed generally manage their backlogs as part of their overall real property management and expect the size of their future backlogs to increase. Agencies focus on maintaining and repairing real property assets that are critical to their missions and have processes to prioritize maintenance and repair items based on the effects those items may have on their missions, regardless of whether the items are considered part of the backlogs. For example, VA officials told us that their first priority is to perform maintenance and repairs at places that directly affect patient care, such as operating rooms. Agencies are using strategies such as demolishing assets that are no longer needed to reduce their overall backlogs. However, agency officials generally expect their backlogs to increase as the federal portfolio of real property continues to age and construction costs increase. At the six agencies GAO reviewed, officials have managed their facility repairs and maintenance to minimize the impact of their backlogs on their operations. Officials said that postponing repairs and maintenance generally leads to higher operating and maintenance costs and short-term inconveniences, but they have managed the risks so that the agencies can continue to accomplish their missions. For example, maintenance costs increase when a roof that is due for replacement is repeatedly patched rather than replaced. While several officials said their maintenance staffs have been able to limit the impact of backlogs on operations, they cautioned that there is a real potential for an incident to adversely affect an agency's mission. At one site GAO visited, a multimillion-dollar piece of equipment could have been damaged by a leak from an air conditioning system if it had not been covered with a tarp.
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-09-10, Federal Real Property: Government's Fiscal Exposure from Repair and Maintenance Backlogs Is Unclear
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Report to the Committee on Oversight and Government Reform, House of
Representatives:
United States Government Accountability Office:
GAO:
October 2008:
Federal Real Property:
Government's Fiscal Exposure from Repair and Maintenance Backlogs Is
Unclear:
GAO-09-10:
GAO Highlights:
Highlights of GAO-09-10, a report to the Committee on Oversight and
Government Reform, House of Representatives.
Why GAO Did This Study:
In 2003, GAO designated federal real property as a high-risk area. In
2007, GAO reported that real-property-holding agencies and the
administration had made progress toward managing their real property,
but underlying problems, such as backlogs in repair and maintenance,
still existed and six agencies reported having over $1 billion in
repair and maintenance backlogs. Owning real property creates a fiscal
exposure for the government from the expectation that agencies will
incur future maintenance and operations costs.
GAO was asked to (1) describe how six agencies estimate their repair
and maintenance backlogs, (2) determine how these agencies manage their
backlogs and the expected future changes in these backlogs, and (3)
identify how backlogs have affected operations at some sites. GAO
reviewed agency documents, interviewed officials, and visited two sites
at each of the six agencies.
What GAO Found:
The six agencies that GAO reviewed all periodically assess the
condition of their assets to identify needed repairs and maintenance
but then use different methods to define and estimate their repair and
maintenance backlogs. As a result, the agencies‘ estimates are not
comparable. Three of the six agencies”the Departments of Energy (DOE),
the Interior (DOI), and the National Aeronautics and Space
Administration (NASA)”defined their backlogs as work that was
identified to correct deficiencies. A fourth agency, the Department of
Veterans Affairs (VA), also defined its backlog as work identified to
correct deficiencies, but VA‘s backlog included only work on systems,
such as mechanical and plumbing systems, found to be in poor or
critical condition. The General Services Administration (GSA) and the
Department of Defense (DOD) both did not track a backlog. Instead, GSA
calculated its reinvestment liability”the cost of repairs and
maintenance needed now and in the next 10 years. DOD assigned a quality
rating to each facility which was based on the ratio of repair costs to
the asset‘s value. The backlog estimates do not necessarily reflect the
costs the agencies expect to incur to repair and maintain assets
essential to their missions or to avert risks to their missions. For
example, these estimates could understate an agency‘s backlog because
they are based on industry-standard costs, or could overstate an
agency‘s backlog because they include inactive assets that are not
essential to the agency‘s mission or may be demolished.
The six agencies GAO reviewed generally manage their backlogs as part
of their overall real property management and expect the size of their
future backlogs to increase. Agencies focus on maintaining and
repairing real property assets that are critical to their missions and
have processes to prioritize maintenance and repair items based on the
effects those items may have on their missions, regardless of whether
the items are considered part of the backlogs. For example, VA
officials told us that their first priority is to perform maintenance
and repairs at places that directly affect patient care, such as
operating rooms. Agencies are using strategies such as demolishing
assets that are no longer needed to reduce their overall backlogs.
However, agency officials generally expect their backlogs to increase
as the federal portfolio of real property continues to age and
construction costs increase.
At the six agencies GAO reviewed, officials have managed their facility
repairs and maintenance to minimize the impact of their backlogs on
their operations. Officials said that postponing repairs and
maintenance generally leads to higher operating and maintenance costs
and short-term inconveniences, but they have managed the risks so that
the agencies can continue to accomplish their missions. For example,
maintenance costs increase when a roof that is due for replacement is
repeatedly patched rather than replaced. While several officials said
their maintenance staffs have been able to limit the impact of backlogs
on operations, they cautioned that there is a real potential for an
incident to adversely affect an agency‘s mission. At one site GAO
visited, a multimillion-dollar piece of equipment could have been
damaged by a leak from an air conditioning system if it had not been
covered with a tarp.
What GAO Recommends:
To provide a realistic estimate of the government‘s fiscal exposure
from backlogs, GAO recommends that the Office of Management and Budget
(OMB), in consultation with the Federal Accounting Standards Advisory
Board, explore the potential for adding a uniform reporting requirement
to the Federal Real Property Profile to capture the government‘s fiscal
exposure related to real property repair and maintenance. OMB agreed
with GAO‘s recommendation.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-10]. For more
information, contact Mark Goldstein at (202) 512-2834 or
goldsteinm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Agencies Estimate Their Backlogs through Condition Assessments, Though
Estimates Are Not Comparable:
Agencies Manage Their Backlogs as Part of Their Overall Mission-Driven
Real Property Management Programs:
Impact of Backlogs Has Been Limited at Sites We Visited:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Office of Management and Budget:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Selected Agencies' Processes for Conducting Condition
Assessments and Estimating Repair Needs to Calculate FRPP Condition
Index for Fiscal Year 2007 (Backlogs):
Table 2: DOD Services' Definitions of Quality Ratings and Corresponding
Condition Indexes Reported to FRPP:
Table 3: Deferred Maintenance Reported by Selected Agencies, Fiscal
Year 2007:
Figures:
Figure 1: Dilapidated Maintenance Shed:
Figure 2: Steam Escaping from Pipes:
Figure 3: Roof Leak Drainage System:
Abbreviations:
API: asset priority index:
DOD: Department of Defense:
DOE: Department of Energy:
DOI: Department of the Interior:
FASAB: Federal Accounting Standards Advisory Board:
FIRP: Facilities, Infrastructure, and Recapitalization Program:
FRPC: Federal Real Property Council:
FRPP: Federal Real Property Profile:
GSA: General Services Administration:
NASA: National Aeronautics and Space Administration:
NNSA: National Nuclear Security Administration:
OMB: Office of Management and Budget:
PRV: plant replacement value:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
October 16, 2008:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
In January 2003, we designated federal real property as a high-risk
area, in part due to deteriorating facilities and unreliable real
property data.[Footnote 1] In 2007, we reported that the administration
and real-property-holding agencies had made progress toward
strategically managing federal real property but that underlying
problems, such as backlogs in repair and maintenance, still existed.
Federal agencies reported holding real property assets valued at about
$1.5 trillion and spending over $47 billion in fiscal year 2007 to
maintain and operate these assets. Yet, these agencies estimated they
would need additional tens of billions of dollars to repair or restore
their assets--which include office buildings, military bases,
hospitals, national parks, and laboratories--to a fully functional
condition.
We have reported that our nation's fiscal policy is on an unsustainable
course and that Congress, the President, and the public should have
information about any long-term commitments embodied in a current
policy decision. While we have also reported that it can be more cost-
effective to own real property assets than to lease them,[Footnote 2]
such ownership represents a long-term commitment for the government in
that agencies incur maintenance and operating costs associated with
their assets. We use the term "fiscal exposures" to provide a framework
for considering the range of responsibilities that may expose the
government to future spending. We identified real property as an
implied fiscal exposure because it creates an implied commitment for
the government. The decision to own a building or other real property
asset implicitly commits the government to the life-cycle costs
associated with its future operation and maintenance.
Concerned about the high cost estimates for repair and maintenance
backlogs associated with real property, you asked us to review how
agencies develop these estimates and manage their backlogs.
Accordingly, this report (1) describes how selected agencies estimate
their repair and maintenance backlogs, (2) determines how agencies
manage their backlogs and the expected future changes in repair and
maintenance backlogs, and (3) identifies how backlogs have affected
operations at some sites.
To accomplish our objectives, we reviewed the six agencies that had
each told us in 2007 that they had over $1 billion in repair and
maintenance backlogs associated with their held assets: the Departments
of Defense (DOD), Energy (DOE), the Interior (DOI), and Veterans
Affairs (VA); the General Services Administration (GSA); and the
National Aeronautics and Space Administration (NASA). For each agency,
we interviewed officials, reviewed agency documents, and visited two
sites at each of these six agencies to determine how the sites estimate
and manage their repair and maintenance backlogs as well as the extent
to which the sites' operations have been affected by the backlogs. To
select each site, we used agency data reported in the governmentwide
federal real property profile (FRPP) on the condition of each real
property asset identified as a building or structure and agency-
provided data on the repair and maintenance backlog for each asset.
While the definition of real property includes land, our review focused
on buildings and structures and excluded land because backlogs are
generally associated with buildings (such as offices and hospitals) or
structures (such as airfields or ports). We performed our site visits
in two geographic areas of the country--Washington, D.C., and San
Francisco, California--because each agency had significant sites in
these areas. Within the geographic locations, using FRPP data, we
determined the average condition for each agency's assets and then
selected sites that (1) were at or near the average condition of the
agency's assets, and (2) reported a relatively high repair and
maintenance backlog compared to other sites in average or near-average
condition. Although our site selection was systematic, the information
from our 12 site visits is illustrative and cannot be generalized to
sites agencywide.
We conducted this performance audit from September 2007 through October
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. We
determined the data were sufficiently reliable for the purposes of this
report. Appendix I contains a detailed description of our scope and
methodology.
Results in Brief:
The six agencies that we reviewed all periodically assess the condition
of their assets to identify needed repairs and maintenance and schedule
the needed work but then use different methods to define and estimate
their repair and maintenance backlogs. As a result, the agencies'
estimates are not comparable. Three of the six agencies--DOE, DOI, and
NASA--define and estimate their backlogs as work that was identified to
correct deficiencies. A fourth agency, VA, defines its backlog as work
required to correct deficiencies and estimates the cost to address
deficiencies associated with sites and systems, such as mechanical and
plumbing systems, found to be in poor or critical condition. While GSA
and DOD both periodically inspect their facilities to assess their
condition, neither agency tracks a backlog. Instead, GSA calculates its
reinvestment liability--that is, the cost of repairs and maintenance
needed now to bring its assets up to current standards plus the cost of
any additional repairs and maintenance that it expects will be needed
within the next 10 years. Instead of calculating a backlog, each DOD
military service assigns a quality rating to its facilities as an
indicator of their condition. DOD quality ratings are based on the
ratio of repair costs to an asset's value. These estimates include a
variety of items, from current repair and maintenance costs and costs
estimated up to 10 years into the future for all assets to only costs
associated with correcting deficiencies on building systems in the
poorest condition. The backlog estimates do not necessarily reflect the
costs the agencies expect to incur to repair and maintain assets
essential to their missions or to avert risks to their missions.
Instead, agency officials told us that their estimate reflects the
magnitude of identified repair needs associated with their assets.
The six agencies we reviewed generally manage their backlogs as part of
their overall real property management and most expect the size of
their future backlogs to increase. Agencies focus on maintaining and
repairing real property assets that are critical to their missions and
have processes in place to prioritize maintenance and repair items
based on the effects those items may have on their missions, regardless
of whether the items are considered part of the backlogs. For example,
officials at a VA Medical Center told us that their first priority is
to perform maintenance and repairs at places that directly affect
patient care, such as operating rooms. Thus, replacing an aging air
conditioning system in a hospital would take priority over replacing
the same type of system in an office building. Agencies are using
strategies such as disposing assets that they determine are no longer
needed to reduce their overall repair and maintenance backlogs. Agency
officials generally expect their backlogs to increase as the federal
portfolio of real property continues to age and construction costs
increase.
At the six agencies we reviewed, officials have managed their facility
repairs and maintenance to minimize the impact of their backlogs on
their operations. Officials said that postponing repairs and
maintenance generally leads to higher operating and maintenance costs
and short-term inconveniences, but they have managed the risks so the
agencies can continue to accomplish their missions. For example,
maintenance costs increase when a roof that is due for replacement is
repeatedly patched rather than being replaced. While several officials
said their maintenance staff has been able to limit the impact of
backlogs on operations at their sites, they cautioned that there is a
real potential for an incident to adversely affect an agency's mission.
For example, at one site we visited, a multimillion-dollar piece of
equipment, which the agency needed to carry out its mission, could have
been damaged by a leak from an air conditioning system if the equipment
had not been covered with a tarp.
We are recommending that the Deputy Director for Management, Office of
Management and Budget (OMB), explore the potential for developing a
uniform reporting requirement to the FRPP that would capture the
government's fiscal exposure from repair and maintenance backlogs,
since this exposure may have a significant effect on future budget
resources and our nation's long-term fiscal sustainability. OMB agreed
with our recommendation.
Background:
In January 2003, we designated federal real property as a high-risk
area because of long-standing problems with excess and underutilized
property, deteriorating facilities, unreliable real property data, and
overreliance on costly leasing.[Footnote 3] Real property is generally
defined as land and anything constructed on, growing on, or attached to
land.[Footnote 4] In updates to our high-risk report, we acknowledged
that the administration and real-property-holding agencies had made
progress toward strategically managing federal real property and
addressing some long-standing problems. Real-property-holding agencies
had, among other things, designated senior real property officers,
established asset management plans, standardized real property data
reporting, and adopted various performance measures to track progress.
The administration also established a Federal Real Property Council
(FRPC) that supports reform efforts. FRPC has created the FRPP to be
the inventory system for the federal real property portfolio. FRPP,
which is overseen by OMB, includes 25 data elements[Footnote 5] that
agencies are mandated to report annually, including performance
measures on asset utilization, condition, mission dependency, and
operating cost. Although progress has been made, in 2007, we also
reported that the problems that led us to designate real property as a
high-risk area still largely persisted, such as repair and maintenance
backlogs, and the underlying obstacles remained. We also reported on
the condition of facilities at the Smithsonian Institution, where we
found that the deterioration of facilities had threatened collections
and increased the cost of restoring historic items.[Footnote 6] We
recommended that the Smithsonian make improvements to its cost
estimates for facilities projects.
According to data reported in the 2007 FRPP, the federal government
owns about 1,115,000 real property assets worldwide with a replacement
cost of over $1.5 trillion. The six agencies we reviewed reported that
they had 568,618 real property assets in the U.S. with a replacement
cost of approximately $1.2 trillion. Five of the six agencies estimated
that their assets had approximately $30.5 billion in repair needs.
[Footnote 7] DOD did not estimate repair needs for its FRPP reporting.
FRPP does not require agencies to report their repair and maintenance
backlogs, but requires agencies to determine a condition index for each
asset by computing a formula that compares the asset's repair needs
with its plant replacement value (PRV). Specifically a condition index
equals (1-repair needs/PRV) * 100. Based on this formula, a condition
index is reported as a whole number from 1 to 100, with 100
representing the best possible condition for an asset. FRPP guidance
defines repair needs as "the amount necessary to ensure that a
constructed asset is restored to a condition substantially equivalent
to the originally intended and designed capacity, efficiency, or
capability."
Real-property-holding agencies are generally responsible for the cost
of maintaining and repairing their assets. We have reported that owning
an asset creates an implicit fiscal exposure for the government.
[Footnote 8] This fiscal exposure is created because there is an
expectation that the government will incur costs associated with
maintaining and operating the assets it owns. As the National Research
Council has observed, federal assets must be well maintained to operate
adequately and cost effectively; protect their functionality and
quality; and provide a safe, healthy, productive environment for the
American public, elected officials, federal employees, and foreign
visitors who use them every day. Facilities and the systems within the
facilities such as electrical, heating, and air conditioning systems
and roofs generally have a finite, expected useful life, over which
time they should be maintained and after which time they can be
reasonably expected to need replacement. The useful lives of facilities
can be extended through adequate and timely repairs and maintenance.
Conversely, delaying or deferring repairs and maintenance can, in the
short term, diminish the quality of building services, and in the long
term, shorten building lives and reduce asset values. Deferring needed
maintenance indefinitely may ultimately result in significantly higher
costs.
Agencies Estimate Their Backlogs through Condition Assessments, Though
Estimates Are Not Comparable:
At the six agencies we reviewed, we found processes in place for the
agencies to periodically assess the condition of their assets--
processes that the agencies also generally used to identify repair and
maintenance backlogs for their assets. However, the agencies differed
in how they conducted these condition assessments and how they define
and estimate their repair and maintenance backlogs. Thus, the
information is not comparable across agencies and cannot be used to
understand the government's potential fiscal exposure associated with
its real property repair and maintenance needs.
Agencies Have Processes to Determine the Condition of Their Assets and
Estimate Their Backlogs:
Each agency we reviewed conducted facility condition assessments either
itself or through a contractor to identify repair and maintenance
deficiencies associated with their assets. The intent of conducting a
facility condition assessment is to obtain an overall understanding of
the condition and repair and maintenance needs of an asset. Condition
assessments can range from staff walking through a facility and
visually inspecting its condition and identifying repair and
maintenance issues to a more comprehensive assessment in which the
individual building systems, such as the plumbing, heating, and
electrical systems, are assessed by a professional and deficiencies are
identified. Condition assessments may also identify projects for future
years, such as a roof replacement expected within the next couple of
years. As shown in table 1, each of the six agencies we reviewed
periodically conducted condition assessments. How agencies define and
estimate their repair needs or backlogs varies. This variation is not
unexpected because, according to OMB officials, FRPP was purposefully
vague in defining repair needs so agencies could use their existing
data collection and reporting processes. In addition, there is no
governmentwide definition or reporting requirement for repair and
maintenance backlogs.[Footnote 9]
Table 1: Selected Agencies' Processes for Conducting Condition
Assessments and Estimating Repair Needs to Calculate FRPP Condition
Index for Fiscal Year 2007 (Backlogs) (Dollars in billions):
Agency: DOE;
Assets assessed: All assets;
Frequency of assessments: At least every 5 years;
What is included in the estimate of repair needs (backlog): Work not
done in time frame identified;
Identified repair needs: $3.3.
Agency: NASA;
Assets assessed: All assets;
Frequency of assessments: Annually;
What is included in the estimate of repair needs (backlog): Work
required to bring the asset up to current standards;
Identified repair needs: $2.3.
Agency: DOI;
Assets assessed: Assets valued at $5,000 or more;
Frequency of assessments: Every 5 years;
What is included in the estimate of repair needs (backlog): Work not
done in time frame identified;
Identified repair needs: $12.0[A].
Agency: VA;
Assets assessed: All assets;
Frequency of assessments: At least every 3 years;
What is included in the estimate of repair needs (backlog): Work
required to correct identified deficiencies in systems determined to be
in poor or critical condition;
Identified repair needs: $5.9.
Agency: GSA;
Assets assessed: All assets;
Frequency of assessments: Every 2 years; What is included in the
estimate of repair needs (backlog): Work identified to be done now or
within the next 10 years;
Identified repair needs: $7.0.
Agency: DOD;
Assets assessed: All assets;
Frequency of assessments: Varies by military service;
What is included in the estimate of repair needs (backlog): No backlog
estimated;
Identified repair needs: [B].
Source: GAO analysis.
[A] According to DOI officials, DOI recognizes that due to the scope,
nature and variety of DOI assets, exact estimates of backlogs are very
difficult to determine. As a result, DOI prefers to think of its
estimate as a range.
[B] DOD did not compute a dollar amount for repair needs in 2007.
[End of table]
DOE requires its sites to perform condition assessments on all real
property assets at least once during any 5-year period (some assets,
such as nuclear facilities, are assessed more frequently). The results
of the assessments are reported to a DOE-wide database. While
individual DOE sites have some flexibility in which assessment surveys
they use, inspection methods must be in accordance within general DOE
guidelines. For example, one DOE laboratory developed its own
assessment tool in the early 1990s and uses in-house inspectors to
perform the assessments, while other sites use contractors to conduct
their assessments. For all the assessments, each identified deficiency
is assigned an optimum year for correction through maintenance. If a
maintenance activity is not performed within the optimum period, it is
considered deferred maintenance and part of DOE's backlog.[Footnote 10]
The condition assessments also include cost estimates, developed using
nationally-recognized databases of repair costs, for correcting the
deficiencies.
NASA has used a contractor since 2002 to conduct annual deferred
maintenance assessments of all its facilities and their component
systems. NASA contractors visually assess nine different systems within
each facility (such as the roof and the electrical system), and rate
each facility using an overall condition index with a scale from 0 to
5. Based on that rating, the contractor uses an industry cost database
and other information to estimate the costs of correcting the
identified deficiencies. According to NASA officials, using a
contractor and a standard estimating methodology to assess all its
facilities provides consistent information across sites.
DOI has comprehensively assessed the condition of what it calls its
standard assets such as roads, bridges, trails, water structures, and
buildings but has not yet conducted contractor-performed comprehensive
assessments of the condition of heritage assets such as monuments,
fortifications, and archaeological sites. In May 2008, DOI issued
guidance on how to estimate the condition of and maintenance costs
associated with its heritage assets. For assessed assets with a value
over $5,000, DOI conducts annual inspections to determine the condition
of an asset and to determine the nature of needed repairs. DOI conducts
condition assessments of assets with a value over $50,000 at least
every 5 years to identify and estimate the cost of correcting repair
and maintenance deficiencies. Either contractors or internal bureau
staff perform the assessments and industry-standard cost-estimating
databases are used, if available, to estimate the costs to correct
identified deficiencies. If maintenance is needed, work is scheduled;
if the work is not completed on time, it becomes part of DOI's backlog.
VA uses contractors to conduct facility condition assessments to
evaluate the condition of its assets at least once every 3 years.
[Footnote 11] The contractor inspects all major systems in each
building (e.g., structural, mechanical, plumbing, and others) and gives
each a grade of A (for a system in like-new condition) through F (for a
system in critical condition that requires immediate attention). As
part of this assessment, the contractor uses an industry cost database
to estimate the correction costs for each system graded D or F--in poor
or critical condition. VA's reported backlog is the sum of all
identified correction costs. In addition, if repair and maintenance is
not completed, VA escalates the correction cost each year for
inflation.
GSA assesses all of its assets and estimates all repair and maintenance
needs that may need to be done in the next 10 years. GSA conducts
inspections known as physical condition surveys every 2 years on each
asset. From these, GSA develops what it refers to as its reinvestment
liability, which includes cost estimates for repair and maintenance
items that GSA has determined need to be done now and expects will need
to be done within the next 10 years. To conduct physical condition
surveys, GSA staff walk throughout each facility answering a list of 37
standard questions about the asset and identifying the time frame
within which the identified needs should be corrected, ranging from
immediately to 6 to 10 years from now. GSA staff also develop cost
estimates to repair each identified need. According to agency
officials, the use of a standard survey allows some comparison between
assets.
DOD reported a condition index to FRPP based on what it calls a quality
rating (Q-rating), ranging from Q1 (best condition) to Q4 (poorest
condition). As shown in table 2, three of the four services determined
the Q-rating by comparing an asset's estimated repair and maintenance
costs to the asset's value. The fourth service assigned Q-ratings by
considering the adequacy and age of the asset. DOD reported one of four
condition indexes for its assets to FRPP based on the Q-rating of the
asset. Thus, DOD did not provide an estimate of its repair and
maintenance backlog.[Footnote 12] In determining Q-ratings for their
assets, officials from the Army, Navy, and Marines told us that they
used the results of facility assessments. According to these officials,
these assessments were conducted either annually (by the Army), in 2005
(by the Navy) or at various times (by the Marines). According to Air
Force officials, the Air Force totaled the cost of all maintenance
projects for each asset but did not inspect the assets to determine if
the assets had other repair and maintenance needs. For its fiscal year
2008 reporting, DOD plans to report the condition index for its assets
as a percentage value consistent with FRPP rather than using the Q1-Q4
rating scheme.
Table 2: DOD Services' Definitions of Quality Ratings and Corresponding
Condition Indexes Reported to FRPP:
Quality rating: Q1;
Definition used by Army, Navy, and Air Force: Cost of repairs was 10
percent or less of the asset's value;
Definition used by Marines: Adequate asset less than 25 years old;
Condition index assigned by DOD: 95.
Quality rating: Q2;
Definition used by Army, Navy, and Air Force: Cost of repairs was 11 to
20 percent of an asset's value;
Definition used by Marines: Adequate asset more than 25 years old;
Condition index assigned by DOD: 85.
Quality rating: Q3;
Definition used by Army, Navy, and Air Force: Cost of repairs was 21 to
40 percent of an asset's value;
Definition used by Marines: Substandard asset;
Condition index assigned by DOD: 70.
Quality rating: Q4;
Definition used by Army, Navy, and Air Force: Cost of repairs was more
than 40 percent of an asset's value;
Definition used by Marines: Inadequate asset;
Condition index assigned by DOD: 30.
Source: GAO analysis of DOD information.
[End of table]
Backlog and Deferred Maintenance Estimates Are Not Comparable Across
Agencies and Do Not Capture the Government's Fiscal Exposure:
Because agencies define their backlogs differently, estimates cannot be
compared across agencies or totaled to obtain a governmentwide
estimate. For example, as discussed above, DOE, NASA, and DOI include
the costs of all backlog work identified on their assessed assets while
VA includes the cost of work on asset systems in the poorest condition
and GSA includes costs for work it has identified to be done up to 10
years in the future. Additionally, because these estimates are not
comparable, the condition indexes reported in FRPP cannot be compared
across agencies to understand the relative condition or management of
agencies' assets. Thus, condition indexes should not be used to inform
or prioritize funding decisions between agencies. While not comparable
between agencies, backlog information collected in a consistent manner
over several years can be useful within individual agencies for
tracking trends. NASA officials noted, as of October 2008, they have 5
years of data from their annual assessment reports, which they are
using to examine trends.[Footnote 13] The data show that NASA's
backlogs have been increasing recently, but the rate at which it has
increased dropped between fiscal years 2007 and 2008. The consistency
of reporting established by FRPC should allow for trend analysis for
individual agencies starting with the 2008 data. While intra-agency
trends could provide useful information for policymakers, it is not
possible to compare backlog data between agencies since agencies
develop their estimates differently.
While there is no governmentwide reporting of repair and maintenance
backlogs, agencies have been required to report deferred maintenance as
part of their annual financial statements since 1996, and
governmentwide totals for deferred maintenance have then appeared
annually in the Financial Report of the U.S. Government. Since 1999,
agencies have reported deferred maintenance as required supplemental
information, which is not audited. For the six agencies we reviewed, we
found differences in the basis of their deferred maintenance reported
in their financial statements similar to the differences we found in
their reporting of repair and maintenance backlogs. Statement of
Federal Financial Accounting Standards No. 6, as amended, defines
deferred maintenance as "maintenance that was not performed when it
should have been or was scheduled to be and which, therefore, is put
off or delayed for a future period." The definition excludes any
activities that would expand or upgrade an asset from its originally
intended use (such as capital improvements) and any maintenance on an
asset that is in acceptable condition.[Footnote 14] Federal Accounting
Standards Advisory Board (FASAB) standards allow each agency's
management to both define "acceptable condition" and determine if its
assets are in acceptable condition. FASAB staff told us that agencies
use different methods to estimate their deferred maintenance and the
standards for reporting are designed to accommodate these different
methods. FASAB is currently considering a project to review
requirements for reporting deferred maintenance as well as asset
impairment.
Table 3: Deferred Maintenance Reported by Selected Agencies, Fiscal
Year 2007 (Dollars in billions):
Agency: DOE;
2007 deferred maintenance: $3.4[A].
Agency: NASA;
2007 deferred maintenance: $2.3.
Agency: DOI;
2007 deferred maintenance: $11.3-$19.8.
Agency: VA;
2007 deferred maintenance: $3.7.
Agency: GSA;
2007 deferred maintenance: 0.
Agency: DOD;
2007 deferred maintenance: $72.0.
Source: Agency financial reports.
[A] Numbers in FRPP and financial statements vary due to timing.
[End of table]
We found that the six agencies' deferred maintenance estimates reported
in their financial statements, like their backlog estimates, were not
comparable. Specifically, DOE, NASA, and DOI equate deferred
maintenance with their backlogs. For these agencies, the estimated
repair and maintenance costs identified through their condition
assessments for all assets are reported in the agencies' deferred
maintenance estimate.[Footnote 15] However, officials from all three
agencies said that they do not consider their assets be in unacceptable
condition just because they have some identified deferred maintenance
associated with them. DOD reported about $72 billion in deferred
maintenance for 2007.[Footnote 16] This figure represents the cost to
repair and modernize each facility so that it is in acceptable
operating condition, which is defined differently within each of DOD's
services. According to DOD's 2007 Financial Report, this estimate
includes costs that are not precisely equivalent to deferred
maintenance, but the costs were reported because they are considered
"generally representative" of the magnitude of the agency's deferred
maintenance requirements. GSA officials said that GSA has no reportable
deferred maintenance because it has determined that, at the overall
portfolio level, their building inventory is in acceptable condition.
However, GSA noted in its 2007 financial statements that it has
approximately $6.3 billion in capital improvements that are not normal
repair and maintenance costs. Since capital improvements are not
classified as deferred maintenance under the accounting standard, these
costs are not considered deferred maintenance. Similarly, VA's reported
deferred maintenance does not include capital projects or assets with
less than $100,000 in estimated repairs. VA officials told us that VA's
deferred maintenance estimate is used only to comply with FASAB's
requirement and does not represent the cost to repair and maintain VA's
facilities.
The estimates for both backlogs and deferred maintenance cannot be used
to provide a governmentwide perspective on the cost of repair and
maintenance needs. While officials at the six agencies we reviewed use
these estimates internally to help inform their real property
decisionmaking, the estimates are based on industry-standard cost
factors and are not detailed estimates of project costs. According to
officials at each agency, these estimates should not be viewed as
accurate cost estimates for repair and maintenance, but are valid as an
indicator of the magnitude of work that an asset needs. In addition,
these estimates occur at a single point in time. The actual repair and
maintenance project for an asset may occur well after the deferred
maintenance or repair needs are estimated, and construction costs can
rise significantly after the estimates are made but before the project
is undertaken. Also, some officials told us that while these estimates
address the cost to correct identified deficiencies, as projects are
bundled together and a work plan is determined, additional work may
need to be done to complete the project. For example, additional work
such as removing and replacing ceilings to access pipes or
reconfiguring a space to accommodate new systems equipment may need to
be done although it was not in the estimate to correct the identified
deficiency.
In addition, FRPP requires agencies to report data on every asset. As a
result, agencies reported backlog estimates associated with assets that
are inactive, that are not critical to their missions, or that have
been identified for demolition in the next few years. In addition, for
those agencies that equate deferred maintenance with backlogs, their
deferred maintenance estimate also included the costs associated with
these assets. Agencies may not have any intention of repairing some
assets and would not seek funding for the identified repair and
maintenance deficiencies. Thus, for some agencies, simply totaling the
estimated repair and maintenance cost for each asset may overstate the
costs.
Agencies Manage Their Backlogs as Part of Their Overall Mission-Driven
Real Property Management Programs:
Each agency that we reviewed manages its backlog as part of its overall
real property management. Agencies focus on maintaining and repairing
assets that are critical to safety and accomplishing their missions,
and each agency has processes in place to prioritize repair and
maintenance work based on the potential impact of not doing the work on
the agency's mission. In addition to performing the identified repair
and maintenance work, agencies use other techniques, such as asset
disposal and replacement, to reduce their overall repair and
maintenance backlogs. In spite of these efforts, agency officials
generally expect their backlog estimates to increase as the federal
portfolio of real property continues to age and the cost of making
repairs increases.
Agencies Manage Repair and Maintenance Work Based on Safety and
Potential Impact on Mission:
Real property managers at the six agencies told us that it is more
important to prioritize repair and maintenance work on the basis of
safety and the potential impact of not doing the work on the agencies'
missions rather than on when the work was identified to be done. DOE is
the only agency we reviewed with a specific program to reduce its
repair and maintenance backlog. DOE's National Nuclear Security
Administration (NNSA) has the Facilities, Infrastructure and
Recapitalization Program (FIRP), which was established in 2000 to
reduce NNSA's repair and maintenance backlog from the 1990s. The
current goal for the program is to eliminate $900 million of this 1990s-
era backlog by 2013. The program does not address new growth in the
backlog. So far, the program has eliminated about $500 million of this
backlog. For example, one DOE laboratory recently used FIRP funds to
build four new office buildings because staff were moved into the new
buildings from older buildings that had a backlog from the 1990s.
Agency officials--both at headquarters and at the sites we visited--
told us that they prioritize repair and maintenance for assets that
they consider to be important to their mission when deciding which
projects to fund. Many of the sites we visited used a risk assessment
process to prioritize their projects for funding. This process
considers the probability of a failure, such as an electrical outage or
a roof leak, and the probable impact of such a failure on the agency's
mission. The higher the probability of failure and the higher the
probable impact of such a failure on the agency's mission, the higher
the priority the project would receive for funding. Projects related to
safety also received high priority for funding.
The following are illustrative of comments we heard from agency
officials on our site visits:
* At VA's Palo Alto Medical Center, mission is the main factor that
determines project priorities, and the focus is on patient care
buildings. Administrative buildings are always a lower priority. If a
building does not house any patients or research, then it may not be as
thoroughly studied for seismic issues and is a lower priority for
funding.
* At NASA's Ames Research Center, officials told us that they
prioritize repair and maintenance projects based on how the project
will affect the center's mission, safety, or compliance with new
regulatory requirements. As a result, employees at Ames are able to
accomplish the center's mission. According to NASA officials, this
prioritization is typical for all NASA Centers.
* At DOD's Travis Air Force Base, maintenance officials told us that
they focus their repair and maintenance funds on those buildings that
directly affect the mission of the base, such as airplane hangars and
runways. As a result, those facilities are in good condition.
* At DOI's Patuxent Wildlife Refuge, priority is given to health and
safety concerns and those assets that are concerned with wildlife.
According to Patuxent officials, caring for wildlife is the core
mission of the refuge and therefore repair and maintenance items for
facilities that affect wildlife receive higher priority than items that
affect other buildings, such as offices.
* At GSA's federal office building in New Carrollton, Maryland,
officials told us that they prioritize repair and maintenance work
based on how the repair need affects the customer and the extent of any
safety concerns.
* At DOE's Lawrence Livermore National Laboratory, a facilities
governance board develops a prioritized list of repair and maintenance
projects by considering the effect on the laboratory's mission and the
probability of failure. The laboratory's program staff determine the
potential effect on mission and provide input into the prioritization
of projects.
Some agencies have developed other tools, processes, and performance
measures to help manage their real property portfolios and prioritize
repair and maintenance projects. For example, DOI established an
agencywide process for prioritizing assets based on its mission.
Specifically, DOI uses an asset priority index (API) in combination
with information on an asset's condition to establish a clearer link
between individual assets and mission, and to assist managers in
deciding where to focus their resources. API scores range from 0 to 100
and are based on two components--mission dependency (80 percent) and
asset substitutability (20 percent). Mission dependency criteria are
determined at the bureau level and reflect each bureau's unique
mission. For example, the National Park Service ranks its assets as
having high, medium, low, or no importance in three areas: resource
protection, visitor services, and park operations. Assets are scored on
substitutability depending on whether there is a substitute asset that
can perform comparable functions and serve a comparable purpose. The
Washington Monument, for example, is unique and would receive the
highest score in this category. On the other hand, if there are two
similar warehouses close to each other, they would score much lower.
After considering health and safety priorities, API scores are compared
with the condition of each asset and those with high API scores and low
condition ratings are generally given priority for repair and
maintenance projects while those with low API scores and low condition
ratings are considered for disposal.
NASA requires their Centers to conduct their own detailed condition
assessments at least every 5 years. These assessments, which are
separate from the annual deferred maintenance assessments, are used by
the Centers to identify and prioritize repair and maintenance projects.
According to officials at the Ames Research Center, their assessment
focuses more on active, mission-critical assets and repairs and
maintenance that they will try to get funded within the next 5 years.
Information provided by NASA's centers identified a backlog of about $1
billion, far lower than the $2.3 billion in deferred repair and
maintenance needs NASA report for fiscal year 2007. According to NASA
officials, the backlog reported by these individual NASA centers is
lower than the deferred repair and maintenance needs NASA reported
because the centers include only the most important projects that they
believe should receive funding, instead of all projects to address
their backlog as estimated in NASA's annual deferred maintenance
assessment report.
Within each agency that we reviewed, repair and maintenance projects
can be prioritized at different levels. For example, while DOI has an
agencywide policy about how each bureau should prioritize repair and
maintenance projects, DOD generally provides the base commander (or
equivalent official responsible for a military base) with substantial
discretion in deciding how to prioritize repair and maintenance
projects. GSA officials told us that their prioritization process is a
collaborative effort between property managers, asset managers, and
other regional staff, and headquarters staff. At NASA, the centers
assign priorities, with headquarters involved in the funding decisions
for more expensive projects. At VA, projects are prioritized first at
the local level, then at the regional and national levels. While
projects are prioritized at different levels within an agency, each
project competes against other potential projects within that agency
but does not compete with projects at other agencies.
Agencies Have a Few Strategies to Reduce Maintenance Backlogs but
Expect Backlogs to Increase:
Agency officials told us that they have a few strategies to address
their repair and maintenance backlogs aside from correcting the
identified deficiencies. Specifically, officials at DOD, DOE, DOI, GSA,
and NASA told us that disposing of buildings and structures that no
longer serve their missions, including through demolition, is an
effective way to reduce their repair and maintenance backlogs. As these
buildings are disposed, the repair and maintenance backlogs at the
buildings are eliminated. However, agency officials told us that it can
be expensive to demolish a building and they cannot always demolish as
many as they would like. Officials at DOI's Patuxent Wildlife Refuge
told us that they would like to demolish 20 to 25 buildings, but they
have not received the funds to do so. NASA has a program to demolish
buildings that has been funded at $10 million annually, but officials
said that this is just "a drop in the bucket" when compared to the
buildings it would like to demolish. According to DOE officials, it has
eliminated 15 million square feet of space since fiscal year 2002.
Officials at multiple agencies also told us that, when they determine
it is appropriate to dispose of a building, their primary motivation is
not always to reduce their backlog, but this can be an added benefit.
Agencies can also reduce their backlogs through "replacement by
construction." Using this strategy, an agency can decide that while it
still needs the space it is more cost-effective to dispose of a
building and build a new one than to repair the existing building. For
example, NASA plans to demolish seven older buildings and replace them
with a new multi-use office building at one of its Centers. When this
work is done, the repair and maintenance backlogs at the seven
buildings will be eliminated. GSA officials also said that they are
using this tool at ports of entry to replace border stations. These
officials noted that GSA and other agencies are often limited in their
ability to use this tool because of its impact on the federal budget,
since federal budget scorekeeping rules require the full cost of
construction to be recorded up-front in the budget.
Despite these strategies, agency officials told us that they generally
expect their repair and maintenance backlogs to increase. Specifically,
officials at five of the six agencies we reviewed told us that needs
increase as buildings age and a good portion of their current portfolio
is more than 30 years old. As a result, these assets will require more
money for operations and maintenance and building systems are reaching
the point where they are expected to be replaced. For example,
officials at one site told us that given current conditions, they
estimate that their backlog may grow from $75 million in fiscal year
2008 to $107 million in fiscal year 2012, mainly because a large number
of assets are nearing the end of their useful lives and will need
replacing over the next 5 years. Agency officials also told us that, as
facility inspections and real property information continue to improve,
agencies could discover greater repair and maintenance needs. For
example, while park staff have conducted annual condition assessments
of the Golden Gate National Park's fortifications and other unique
assets, they expect the backlog associated with the assets to increase
significantly once a contractor performs a comprehensive condition
assessment. Finally, as construction costs increase, as they have done
over the last several years, the cost of repair and maintenance work
may increase contributing to a rise in agencies' backlogs.
Officials at the six agencies we reviewed told us that there is a
relationship between the level of repair and maintenance funding and
agencies backlogs. DOD officials told us that they have invested in
restoring, modernizing, and replacing some assets and they expect their
backlog associated with these assets to decrease in the next 4 years.
As mentioned earlier in this report, DOD has developed a model to
determine the cost of sustaining its facilities.[Footnote 17] In
theory, if repair and maintenance work is funded to sustain facilities,
backlogs will not occur. According to a DOE official, DOE is committed
to funding maintenance at industry standard levels. The Department's
maintenance expenditure grew by about 64 percent from fiscal year 2003
through fiscal year 2007 and reported backlog decreased by 3 percent.
In contrast, the maintenance budget at one NASA Center went down by
about 40 percent from fiscal year 2005 (when the maintenance budget was
$14.5 million) to fiscal year 2006 (when the maintenance budget was
$10.4 million). The maintenance budget has since remained fairly
constant through fiscal year 2008. According to officials at this
Center, this funding history has directly contributed to the growth of
the center's repair and maintenance backlog, and they expect their
backlog will continue to increase.
Impact of Backlogs Has Been Limited at Sites We Visited:
At the six agencies we reviewed, officials have managed their facility
repairs and maintenance to minimize the impact of their backlogs on the
agencies. Officials said that their repair and maintenance backlogs
have generally not affected the ability of their agencies to accomplish
their missions, but the backlogs have led to higher operating and
maintenance costs and short-term inconveniences. Also, some officials
cautioned that their backlogs create a real potential for an
unanticipated incident to occur that could adversely affect an agency's
mission.
At some sites, agency officials told us that a key responsibility of
the maintenance staff is to keep the facilities up and running, and
they praised their staff for creating work-arounds that allow agency
staff, despite problems, to continue to work to accomplish the agency's
mission. At some of the sites we visited, the costs included in the
backlog estimate were to replace basic systems--such as electrical,
heating, and air-conditioning systems and roofs--that have exceeded
their expected useful lives. The staff said that they spend a lot of
time, effort, and money to patch these systems and keep them going,
which allows the agency to continue to operate but it is not efficient.
In addition, the failure of one of these systems at a critical location
could adversely affect an agency's mission.
At the sites we visited, we did not identify or hear of any instances
in which an agency's mission had been significantly hampered as a
result of a repair and maintenance backlog. Most of the examples cited
affected operations and maintenance costs and staff's quality of life
or raised concerns about the potential for a failure that would
adversely affect/hinder an agency's mission. Agency officials at some
of the sites told us that the effect of their repair and maintenance
backlog is difficult to see, because the maintenance staff have
prioritized projects that directly affect the mission and have done an
excellent job of keeping the facility operating while facing increased
repair needs. For example, officials at one site told us that repair
and maintenance are often deferred on facilities that do not directly
affect the site's mission. As shown in figure 1, a maintenance shed has
been allowed to deteriorate and now has rotting wood and missing
shingles on the roof. According to officials, the shed has not been
repaired because funding has been spent on more mission-critical
facilities.
Figure 1: Dilapidated Maintenance Shed (Photograph):
[See PDF for image]
Source: GAO.
[End of figure]
Repair and maintenance backlogs can lead to higher costs because
affected assets are generally not operating as efficiently as possible.
At some sites, officials showed us building systems that are 30 or more
years old that they are trying to keep operational. Newer systems, such
as heating and air-conditioning systems, could operate more
efficiently, provide more reliable service to the tenants, and reduce
operating costs. In addition, overall maintenance costs increase when a
roof that is due for replacement is repeatedly patched rather than
replaced. At one site we visited, leaking steam pipes are creating a
hazard as hot steam is released. The leaks are also increasing
operating costs for energy, water, and maintenance chemicals because
additional cold water must be heated to make new steam and must also be
chemically treated. Officials said that repairing the steam
distribution system is not critical to the site's mission and the
leaking steam pipes mostly just increase operating costs. A project to
repair the steam system has been proposed for about 10 years and would
cost about $7 million.
Figure 2: Steam Escaping from Pipes (Photograph):
[See PDF for image]
Source: GAO.
[End of figure]
We found that maintenance staff sometimes devise creative solutions,
such as the system that the maintenance staff at one site we visited
set up to funnel water from a roof leak into a water bottle that then
directs the water to a drain. This solution stopped the water from
further damaging the building and leaking into areas occupied by staff
while deferring the cost of correcting the problem.
Figure 3: Roof Leak Drainage System (Photograph):
[See PDF for image]
Source: GAO.
[End of figure]
We saw one building that had been flooded, from which some offices had
to be evacuated due to the water and subsequent mold growth.
Maintenance staff at one site we visited had to move staff from a
building where the floor was beginning to rot into another building
with little available space, which they described as "squeezing in" the
staff.
Repair and maintenance backlogs can interrupt agencies' work. Officials
at one site told us that the age of the fire alarm systems contributed
to an increase in false fire alarms. The fire alarm systems are old and
beyond their useful life expectancy and part of the agency's identified
backlog. In addition, some alarms were triggered when air conditioning
systems were restarted causing changes in air pressure and velocity and
dust blown into the air stream. During each alarm, staff had to stop
working and leave the building. As a result, the site lost labor time
and concerns arose about staff becoming complacent and not taking the
fire alarms seriously. Replacement of the fire alarm system in each
building on the site is underway. The fire alarm system replacement is
scheduled to be completed in all buildings in 2011.
We heard from several officials that while they prioritize their work
based on the expected impact an incident might have on the agency's
mission, they cannot necessarily predict when or where an incident
might occur. At one agency, officials told us that it is standard
operating procedure to cover sensitive equipment during off hours to
protect it from dust, debris, moisture, humidity, and unexpected
incidents. Covering equipment is one way to mitigate the risk of damage
to equipment from repair and maintenance backlogs. At one site we
visited, officials said that a cooling coil from an old heating,
ventilation, and air-conditioning system that is part of their backlog
leaked water into a clean room that contained multimillion dollar
equipment. Fortunately, the equipment was covered with a tarp and the
leak was down the perimeter wall, not on the equipment. However, had
the equipment gotten wet, it could have been severely damaged and
directly affected the agency's ability to carry out its mission.
Conclusions:
Many believe that the overall condition of the federal government's
real property assets continues to deteriorate, and it is difficult to
predict when or where an incident might occur that would severely
impact an agency's mission. However, governmentwide information on the
estimated costs to repair and maintain agencies' real property assets
that are important to their missions is not currently available. The
tens of billions of dollars that agencies have reported to us in
backlogs or in their financial statements as deferred maintenance
associated with their real property does not capture the federal
government's true fiscal exposure. The flexibility that agencies were
given to facilitate their reporting of repair costs in FRPP and
deferred maintenance in their financial statements has resulted in
estimates that include different items. Trying to use current estimates
to understand the government's fiscal exposure related to real
properties backlogs in some cases would understate and in other cases
overstate the exposure. For example, agencies may understate the
government's exposure if they have estimated only the cost of
correcting assets in the poorest condition or if they have incomplete
information about the condition of their assets. Conversely, they may
overstate the government's exposure if they include costs associated
with repair and maintenance projects they do not plan to do or include
the costs of those projects that would not impact the agency's mission
even if completed.
In addition, the requirement to report on all assets has resulted in
agencies reporting estimated repair and maintenance costs associated
with projects they do not plan to undertake because, for example, they
intend to demolish the asset or expect there to always be projects with
a higher priority. With information that reflects the government's
fiscal exposure from repairing and maintaining its real property that
is important to its mission, decisionmakers are better positioned to
address future costs.
Recommendation for Executive Action:
To provide a realistic estimate of the government's fiscal exposure
resulting from repair and maintenance backlogs and minimize the
potential for duplicative reporting requirements, we recommend that the
Deputy Director for Management, Office of Management and Budget, in
conjunction with FRPC and in consultation with FASAB, explore the
potential for developing a uniform reporting requirement in the FRPP
that would capture the government's fiscal exposure related to real
property repair and maintenance. Such a reporting requirement should
include a standardized definition of repair and maintenance costs
related to all assets that agencies determine to be important to their
mission and therefore capture the government's fiscal exposure related
to its real property assets.
Agency Comments and Our Evaluation:
We provided a draft of this report to OMB, DOD, DOE, DOI, GSA, NASA,
and VA for review and comment. OMB generally concurred with the report
and agreed with our recommendation. OMB's letter is contained in
appendix II. DOD, DOE, DOI, GSA, NASA, and VA provided technical
clarifications, which we incorporated where appropriate.
In addition to its technical comments, DOD also raised some concerns
about our recommendation to OMB. DOD was concerned that we recommended
OMB develop a new uniform federal reporting requirement, based in part
on an inaccurate and misleading characterization of DOD's condition
rating process. We recommend that OMB, in conjunction with FRPC and in
consultation with FASAB, explore the potential for developing a uniform
reporting requirement in the FRPP that would capture the government's
fiscal exposure related to real property repair and maintenance. Our
recommendation is based on the lack of governmentwide information
specifically related to the costs to repair and maintain those real
property assets that are important to the agencies missions. We believe
it is important for OMB to explore the potential of capturing such
information to quantify the government's fiscal exposure in this area.
Through the incorporation of DOD's technical comments, we have
clarified our discussion of DOD's condition rating process and DOD
informed us that we have accurately described its process. DOD's letter
is contained in appendix III.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the Director and Deputy Director of OMB, the Secretaries of Defense,
Energy, the Interior, and Veterans Affairs, and the Administrators of
GSA and NASA. Additional copies will be sent to interested
congressional committees. We also will make copies available to others
upon request, and 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 at 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 key contributions to this
report are listed in appendix IV.
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Scope and Methodology:
Our objectives were to (1) describe how agencies estimate their repair
and maintenance backlogs, (2) determine how agencies manage their
backlogs and the expected future changes in maintenance and repair
backlogs, and (3) identify how backlogs have affected some facilities.
To accomplish our objectives, we reviewed the six agencies that each
told us in 2007 that they had over $1 billion in repair and maintenance
backlogs associated with their held assets: the Departments of Defense,
Energy, the Interior, and Veterans Affairs, the General Services
Administration, and the National Aeronautics and Space Administration.
For each agency, we interviewed headquarters officials, reviewed agency
documents, obtained data on repair and maintenance backlogs for the
agency's held assets, and visited two agency sites to determine how the
sites estimate and manage their backlogs as well as the extent to which
the sites' missions have been affected by their backlog. In selecting
sites to visit, working with our Applied Research and Methods team, we
reviewed agency inventory and performance measurement data from the
Federal Real Property Profile (FRPP), including information on the
condition of each real property asset, issued by the Federal Real
Property Council as well as data on deferred maintenance and repair
needs from the agencies. We performed our site visits in two geographic
areas of the country--the Washington, D.C./Virginia/Maryland area and
the San Francisco Bay area in California--because each agency had
significant sites in these areas. Within the geographic locations,
using FRPP data, we determined the average condition for each agency's
assets and then selected sites that (1) were at or near the average
condition of the agency's assets, and (2) reported a high repair and
maintenance backlog compared to other sites in average or near-average
condition. Our criteria for selecting each agency included asset types
and uses--focusing on core assets, geographic location, quantitative
indicators (such as asset value, condition index, and amounts of
backlog), and the mission dependency ranking for assets. The
information from our site visits is illustrative and cannot be
generalized to sites agencywide.
We also interviewed officials from the Office of Management and Budget
(OMB) because it oversees the implementation of Executive Order 13327,
which addresses federal real property management. We reviewed guidance
documents related to this order and obtained relevant agency data from
OMB implementing the order. Additionally, we interviewed officials from
the Federal Accounting Standards Advisory Board (FASAB) to obtain
information on FASAB's accounting standards for required governmentwide
reporting of deferred maintenance by agencies in their annual financial
statements. We reviewed these FASAB standards, examined agencies'
current reporting of their deferred maintenance to meet the standards,
and consulted with our Financial Management and Assurance team about
the standards. We also reviewed relevant GAO reports--especially those
related to our designation, in 2003, of federal real property as a high-
risk area because of long-standing problems--problems that included
alarming backlogs of repair and maintenance in federal facilities.
While the definition of real property includes land, our review focused
on buildings and structures and excluded land because backlogs are
generally associated with buildings (such as offices and hospitals) or
structures (such as airfields or ports).
We conducted this performance audit from September 2007 through October
2008 in accordance with generally accepted audit 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 the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. We determined the data were
sufficiently reliable for the purposes of this report.
[End of section]
Appendix II: Comments from the Office of Management and Budget:
Executive Office Of The President:
Office Of Management And Budget:
Office Of Federal Financial Management:
Washington, D.C. 20503:
September 26, 2008:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure Issues:
U.S. General Accounting Office:
Washington, DC 20548:
Dear Mr. Goldstein:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO's) draft report entitled "Federal Real
Property: Government's Fiscal Exposure from Repair and Maintenance
Backlogs is Unclear" GAO-09-010. The Office of Management and Budget
(OMB) agrees with your recommendation to explore the potential for
adding a uniform reporting requirement to the Federal Real Property
Profile (FRPP) that would capture government's fiscal exposure related
to real property repair and maintenance. We further agree that a
standard measure for repair and maintenance costs will help drive
better asset management decisions at both the agency and government-
wide level.
In evaluating this (or any) change to the FRPP, we examine the costs of
such a change against the expected value. Further, we must evaluate the
extent to which changes to the FRPP have the potential to degrade the
usefulness of the existing data. These issues will need to be carefully
considered. As your report recommends, we will coordinate our efforts
with the Federal Accounting Standards Advisory Board (FASAB) as well as
the Inventory Committee of the Federal Real Property Council (FRPC).
Again, we want to thank GAO for the opportunity to comment on this
draft report. We look forward to our continuing work in the area of
improving Federal Real Property Asset Management.
Sincerely,
Signed by:
Danny Werfel:
Deputy Controller:
[End of section]
Appendix III: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
October 8, 2008:
Mr. Mark L. Goldstein
Director, Physical Infrastructure Issues:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Goldstein:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-09-010, "Federal Real Property: Government's Fiscal
Exposure From Repair and Maintenance Backlogs Is Unclear," dated
September 5, 2008 (GAO Code 544143).
The Department does not concur with the recommendation to OMB to
develop a new uniform Federal reporting requirement for real property
repair and maintenance. It appears this recommendation is based, at
least in part, upon an inaccurate and misleading characterization of
the Department's condition rating process and terminology. This faulty
assessment overstates differences between the Department and the other
surveyed Federal agencies and would institute processes already in
place through the Federal-wide implementation of a facilities condition
index. The enclosed technical annex provides additional explanation and
clarification.
Thank you for the opportunity to comment on this report.
Sincerely,
Signed by:
Alex A. Buhler, for:
Wayne Arny:
Deputy Under Secretary of Defense:
(Installations and Environment):
Enclosure: As stated:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark Goldstein (202) 512-2834 or goldsteinm@gao.gov:
Staff Acknowledgments:
In addition to the contact person named above, Nancy Boardman, Maria
Edelstein, Elizabeth Eisenstadt, Carol Henn, Yumiko Jolly, and John W.
Shumann also made key contributions to this report.
[End of section]
Footnotes:
[1] In 1997, we designated the Department of Defense's management of
its support infrastructure as a high-risk area because infrastructure
costs have affected the Department's ability to devote funds to other
more critical programs and needs. High-risk areas are those that either
have greater vulnerabilities to waste, fraud, abuse, and mismanagement
or major challenges associated with their economy, efficiency, or
effectiveness.
[2] GAO, Federal Real Property: Strategy Needed to Address Agencies'
Long-standing Reliance on Costly Leasing, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-197] (Washington, D.C.: Jan.
24, 2008).
[3] GAO, High-Risk Series: Federal Real Property, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-03-122] (Washington, D.C.:
January 2003).
[4] FRPP categorizes real property into three types: buildings,
structures, or land. In this report, when we refer to real property, we
are referring to assets identified in FRPP as buildings or structures.
[5] For fiscal year 2007 reporting, FRPP included 24 data elements.
[6] GAO, Smithsonian Institution: Funding Challenges Affect Facilities'
Conditions and Security, Endangering Safety, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1127](Washington, D.C.: Sept.
28, 2007).
[7] According to FRPP, "repair needs" is the amount necessary to
restore an asset to its originally intended and designed capacity.
[8] GAO, Fiscal Exposures: Improving the Budgetary Focus on Long-Term
Costs and Uncertainties. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-213] (Washington, D.C.: Jan. 24, 2003).
[9] The terms "repair and maintenance backlog" and "deferred
maintenance" are sometimes used interchangeably. Deferred maintenance
is defined governmentwide for reporting in agencies' financial
statements, and as discussed later in this report, some agencies report
the same estimates for backlogs and deferred maintenance while others
report different estimates.
[10] DOE defines optimal period as that time in the life cycle of an
asset when maintenance actions should be accomplished to preserve and
maximize the useful life of the asset. Facility managers have some
flexibility to revise the optimum period.
[11] The assessment process described here refers mainly to VA's
Veterans Health Administration, which holds the majority of VA's real
property assets. Other VA administrations have recently adopted similar
assessment processes.
[12] According to DOD officials, DOD has focused on the cost of
sustaining its facilities, rather than its backlog. DOD has developed a
model to determine the cost of sustaining its facilities in good
working order, and is developing a model to determine the cost of
recapitalizing its facilities, which includes restoring and modernizing
DOD facilities. DOD has set a goal for services to fund restoration and
capital annually so that DOD can replace a facility every 67 years. See
GAO, Defense Infrastructure: Continued Management Attention Is Needed
to Support Installation Facilities and Operations, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-502] (Washington, D.C.: April
2008), for further discussion of DOD's models.
[13] NASA officials said that adjustments were made to the process in
the first couple of years; therefore, they do not use this data in
their trend analyses.
[14] Federal Accounting Standards Advisory Board Standard Number 6, as
amended, Accounting for Property, Plant, and Equipment, June 1996, GPO
#041-001-00462-9.
[15] Numbers in FRPP and financial statements may differ, however, due
to timing. Numbers are a snapshot at one point in time.
[16] In April 2008, we reported that DOD had approximately $58 billion
in restoration and modernization needs (see [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-502]). However, that estimate
only included needs that were not funded in fiscal years 2005- 2007. In
contrast, DOD's deferred maintenance estimate is based on the
cumulative deferred amount of all restoration and modernization
requirements, including restoration and modernization needs identified
prior to fiscal year 2005.
[17] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-502].
[End of section]
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