Strategies to Renew Federal Facilities (2023)

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Prepublication Copy – Subject to Further Editorial Correction Strategies to Renew Federal Facilities Committee on a Strategy to Renew Federal Facilities Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences National Academies of Sciences, Engineering, and Medicine National Academies Press Washington, DC Consensus Study Report PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 

NATIONAL ACADEMIES PRESS 500 Fifth Street, NW Washington, DC 20001 This report was supported by a series of contracts between the National Academy of Sciences and the sponsor agencies of the Federal Facilities Council. Any opinions, findings, conclusions, or recommendations expressed in this publication do not necessarily reflect the views of any organization or agency that provided support for the project. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof. International Standard Book Number-13: 978-0-309-XXXXX-X International Standard Book Number-10: 0-309-XXXXX-X Digital Object Identifier: https://doi.org/10.17226/26806 This publication is available from the National Academies Press, 500 Fifth Street, NW, Keck 360, Washington, DC 20001; (800) 624-6242 or (202) 334-3313; http://www.nap.edu. Copyright 2023 by the National Academy of Sciences. National Academies of Sciences, Engineering, and Medicine and National Academies Press and the graphical logos for each are all trademarks of the National Academy of Sciences. All rights reserved. Printed in the United States of America. Suggested citation: National Academies of Sciences, Engineering, and Medicine. 2023. Strategies to Renew Federal Facilities. Washington, DC: The National Academies Press. https://doi.org/10.17226/26806. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 

The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, nongovernmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. John L. Anderson is president. The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The National Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.nationalacademies.org. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 

Consensus Study Reports published by the National Academies of Sciences, Engineering, and Medicine document the evidence-based consensus on the study’s statement of task by an authoring committee of experts. Reports typically include findings, conclusions, and recommendations based on information gathered by the committee and the committee’s deliberations. Each report has been subjected to a rigorous and independent peer-review process and it represents the position of the National Academies on the statement of task. Proceedings published by the National Academies of Sciences, Engineering, and Medicine chronicle the presentations and discussions at a workshop, symposium, or other event convened by the National Academies. The statements and opinions contained in proceedings are those of the participants and are not endorsed by other participants, the planning committee, or the National Academies. Rapid Expert Consultations published by the National Academies of Sciences, Engineering, and Medicine are authored by subject-matter experts on narrowly focused topics that can be supported by a body of evidence. The discussions contained in rapid expert consultations are considered those of the authors and do not contain policy recommendations. Rapid expert consultations are reviewed by the institution before release. For information about other products and activities of the National Academies, please visit www.nationalacademies.org/about/whatwedo. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 

COMMITTEE ON A STRATEGY TO RENEW FEDERAL FACILITIES MICHAEL A. AIMONE, Energy Management & Analytics, LLC, Chair JAMES “JACK” DEMPSEY, Asset Management Partnership, LLC, Vice Chair HON. MAHLON (SANDY) APGAR IV, Center for Strategic and International Studies BILAL M. AYYUB, University of Maryland, College Park BARBARA M. FRAUMENI, University of Southern Maine (Emerita) DAVID J. HAUN, Haun Consulting Inc. BRIAN J. LEPORE, Government Accountability Office (Retired) PETER LUFKIN, Pomar Lane, LLC DAVID J. NASH (NAE), Sustainable Biofuels Solutions JANICE L. TUCHMAN, Engineering News-Record Staff CAMERON OSKVIG, Director, Board on Infrastructure and the Constructed Environment JOSEPH PALMER, Senior Program Assistant PEYTON GIBSON, Associate Program Officer JAYDA WADE, Research Associate RADAKA LIGHTFOOT, Finance Business Partner PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION v 

BOARD ON INFRASTRUCTURE AND THE CONSTRUCTED ENVIRONMENT THOMAS BOSTICK (NAE), RIDGE-LANE LP, Chair HON. STEPHEN AYERS, The Ayers Group, LLC JAMES “JACK” DEMPSEY, Asset Management Partnership, LLC SANJIV GOKHALE, Vanderbilt University DAVID GOODYEAR (NAE), Independent Consultant, Olympia, Washington DAVID HAUN, Haun Consulting Inc. ANDREW PERSILY, National Institute of Standards and Technology CHRIS POLAND (NAE), Chris D. Poland Consulting Engineer, Canyon Lake, California JAMES RISPOLI, Project Time and Cost, Inc. DOROTHY ROBYN, Boston University SHARON L. WOOD (NAE), The University of Texas at Austin Staff CAMERON OSKVIG, Director JAMES C. MYSKA, Senior Program Officer BRITTANY SEGUNDO, Program Officer JOSEPH PALMER, SR., Senior Program Assistant JAYDA WADE, Research Associate RADAKA LIGHTFOOT, Finance Business Partner PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION vi 

Reviewers This Consensus Study Report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise. The purpose of this independent review is to provide candid and critical comments that will assist the National Academies of Sciences, Engineering, and Medicine in making each published report as sound as possible and to ensure that it meets the institutional standards for quality, objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We thank the following individuals for their review of this report: BAABAK ASHURI, Georgia Institute of Technology ROBERT COFFMAN, Coffman Consultants, LLC MAUREEN EHRENBERG, Blue Skyre IBE CHARLES RANSOM (RANDY) GALLISTEL (NAS), Rutgers University JOHN (JACK) KELLY, Office of Management and Budget PATRICIA KUHL (NAS), University of Washington MICHAEL C. LOULAKIS, ESQ., Capital Project Strategies, LLC KATHY ROPER, International Facility Management Association THOMAS SMITH, University of Wisconsin–Madison LEE VINSEL, Virginia Polytechnic Institute and State University Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations of this report nor did they see the final draft before its release. The review of this report was overseen by Peter Marshall, Independent Consultant, and Chris D. Poland (NAE), Chris D Poland Consulting Engineer. They were responsible for making certain that an independent examination of this report was carried out in accordance with the standards of the National Academies and that all review comments were carefully considered. Responsibility for the final content rests entirely with the authoring committee and the National Academies. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION vii 

Acknowledgments The committee acknowledges the substantial contributions of members of the Federal Facilities Council and Jim Rispoli and the federal agency senior real property officers. The committee also thanks the following, who willingly and enthusiastically volunteered their time and ideas: Get Moy, Amelia Shachoy, Michael Armes, Diana Maurer, Gina Hoffman, Jennifer Bastin, Mike McAndrew, Michael Karau, Lance Marrano, Hon. John Henderson, Marc Vandeveer, Dan Mathews, Kim Toufectis, Victoria Collin, Hon. John Conger, Jeffrey DeWitt, Ryen Tarbet, Al Diaz, Derrek Niec-Williams, Yalda Saadat, Cliff Shang, Boudewijn Neijens, Tim Hutchens, Steve Berrang, Mildred Chua, Shawn Lenahan, Paul Demit, and Justin Rice. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION viii 

Contents SUMMARY 1 1 THE PURPOSE AND NEED FOR THIS REPORT 8 Introduction, 8 Origin And Statement of Task, 8 Defining Renewal, 11 The Federally Owned Building Portfolio, 11 Organization of This Report, 13 2 THE OPERATING CONTEXT FOR FEDERAL FACILITY RENEWAL STRATEGIES 14 The Basis for Federal Facility Renewal Strategies, 14 Foundations for Federal Facility Renewal Strategies, 15 Oversight of the Federal Real Property Portfolio by the Government Acountability Office, 17 The Operating Context for Federal Facility Renewal Strategies, 22 Conclusion, 26 3 FEDERAL FACILITY ASSET MANAGEMENT SYSTEMS 27 Management System Thinking, 27 Facility Asset Management System Frameworks, 31 Practical Examples and Empirical Evidence of Facility Asset Management Systems in Use, 36 Facility Asset Management Principles, 40 Conclusion, 42 4 IMPROVING ESTIMATES OF RENEWAL COSTS 43 Introduction, 43 Earlier Studies, 43 The Evolution of Facility Cost Models, 44 Two Approaches to Estimating Renewal Costs, 47 Using Builder to Estimate Renewal Costs, 47 Estimating Renewal Costs with an Economic Depreciation Model, 49 The Need for Better Service Life and Depreciation Data, 52 Conclusion, 53 5 STRATEGIC PLANNING PROCESS 54 Introduction, 54 Value, Benefits, and Risks, 54 Value in the Context of Federal Facilities, 55 Risk Management and Mission Alignment, 57 Economic Models for Analyzing Investment Options, 58 Enterprise Risk Management Frameworks, 59 Conclusion, 60 PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION ix 

6 BUDGETING: IMPACTFUL RESOURCE DECISION MAKING 61 Introduction, 61 Capital Budgets versus Operating Budgets, 61 Federal Capital Investment, 62 Budgetary Structures for Increasing Capital Investment and Transparency, 65 Actions to Address the Problem, 67 Capital Acquisition Funds, 68 Privatization, 68 Public–Private Partnerships, 69 Disposal, 71 Leasing, 72 Conclusion, 73 7 CONCLUSIONS AND RECOMMENDATIONS 74 Introduction, 74 Impetus for Transformational Change, 74 Defining the Elements of a Federal Facilities Renewal Strategy, 75 Recommendations, 76 Conclusion, 80 REFERENCES 81 APPENDIXES A Biosketches of Committee Members 90 B Committee Interviews and Briefings 94 C Communicating the Message Effectively 96 D Doing Due Diligence: Government Accountability Office Reports on Renewal of Federal Facilities 108 E The Operating Context for Federal Facility Renewal Strategies 122 F Facility Asset Management Principles 132 G Value, Benefits, and Risks 156 H Findings and Recommendations 163 PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION x