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The Purpose of and Need for This Report

INTRODUCTION

The vast national federal facilities portfolio of land holdings, buildings, and structures speaks to belief that architecture influences an organization’s productivity in achieving its mission. This wisdom can be applied to investment strategies for this architecture, or more broadly, to renewal strategies for federal facilities.

This report introduces a bold, new perspective on how federal agencies can use facility asset management to support mission achievement more efficiently and effectively. This perspective is implemented through clarification of an agency’s fiduciary responsibility to manage its facility portfolio. This report presents a how for responding to this responsibility through disciplined asset management.

Asset management, as defined through the International Organization for Standardization (ISO) 55000 series, includes how risk, money, and performance are related in resource-and-investment decision making. ISO 55000 standards fully support federal facility operating requirements and provide a universal, systematic approach to improving performance while lowering cost and risk. When applied to federal facility management, the ISO 55000 standards would simplify how facilities are managed to maximize productivity in achieving agency mission objectives.

ORIGIN AND STATEMENT OF TASK

This report results from a request of the Federal Facilities Council (FFC) for further study of federal facilities, in order to build on a series of authoritative reports dating back to 1990 from the National Academies of Sciences, Engineering, and Medicine. The FFC is a cooperative association of more than 20 federal agencies with responsibility for the design, construction, operation, maintenance, and evaluation of federal facilities. Established in 1952, the FFC is an ongoing program activity of the Board on Infrastructure and the Constructed Environment in the Division on Engineering and Physical Sciences of the National Academies. Of interest to the FFC is how facility managers can secure the capital funds necessary to fulfill major facility renewal projects.

The FFC requested that this committee be formed to identify broad-based, practical, and compelling strategies for securing continuing investment in the renewal of federal real properties and portfolios. The following statement of task was provided to the committee:

As part of its task, the committee may address the following questions:

• What are the benefits of federal infrastructural renewal and repurposing? What are the key performance indicators (KPIs) for the benefits?
• What are all the costs and what should be used to determine accurate full life cycle costs?
• How can savings in life cycle costs justify near term investment in renewal?
• What are the interdependencies of the various factors and how do they influence each other?
• What are alternatives to renewal of federally owned infrastructure? What is the risk and cost of a no investment option?
• What are the risks of having connected infrastructure of varying ages or stages of life cycle?
• How should risks that deteriorating facilities, deteriorating building systems (e.g., mechanical, electrical), or components (e.g., roofs, foundations) pose to the achievement of a federal agency’s mission or to other organizational outcomes (e.g., physical security, operating costs, worker recruitment and retention, healthcare costs) be measured and managed?
• How can the practices for delivering and sustaining facilities that meet mission requirements be implemented in the most cost effective, energy efficient, safe, adaptable, and sustainable way?

COMMITTEE’S APPROACH

This report does not focus on classical facility planning and management activities, which most agencies perform well. Instead, it presents a simple and complementary new asset management approach for a chronic asset management problem. This asset management approach is different from the classical facility management solution that seeks more money to fix an ever-increasing list of facility problems, sometimes referred to as a “deferred maintenance backlog.” Instead, the report defines a new strategy on how to renew federal facilities that is dependent on a disciplined asset management system.

This approach will require a new approach the report calls “management system thinking,” which views inputs as objectives, strategies, plans, standards, processes, and resources; views outputs as efficient and effective assets; and views outcomes as the agency benefits, capabilities, and value realized from the assets. Generally, outputs are defined in terms of asset performance, and outcomes are realized in terms of products, services, and assurances generated by the agency fulfilling its mission. This approach will also require federal agencies to develop new competencies in asset management. When combined, this approach and new competencies will change how risk is managed and how resource-and-investment decisions are made. The report’s overarching objective is to share industry advancements in asset management system thinking that will influence new policies, practices, and behaviors critical to improving facility portfolios and, thus, agency mission achievement. The report’s simple objective is to help each federal agency ensure and assure that every facility dollar spent supports and improves agency mission achievement effectively and efficiently.

The committee focused its work on the how—not the what—for adapting, repurposing, restoring, recapitalizing, and replacing real property assets. The individual facility assets (buildings and structures) are part of facility portfolios that are designed to support federal agency missions today and into the future. The committee considered multiple stakeholder perspectives, critical requirements, and expectations to provide long-term, cost-effective stewardship of the federal real property portfolio.

Within an ISO 55000–based asset management system, a facility portfolio is the generating source for value. Connecting the dots is the asset management system that coordinates management activities defined in terms of policies, doctrine, objectives, organizational structure, information technologies, and processes. Facility asset management is a means to fulfill an agency’s fiduciary

responsibility to renew its facility portfolio efficiently and effectively. This relationship is shown in Figure 1-1.

This approach applies management system thinking to focus on how to make good resource-and-investment decisions. Management system thinking is used to implement an asset management system for generating an agency’s facility renewal strategy. This strategy in turn coordinates resource-and-investment decisions related to managing facility assets. Finally, in managing the organization, the ultimate determinant of asset management success is a well-functioning facility portfolio that generates value in the form of mission support that helps an agency achieve its mission objectives efficiently and effectively. This approach elevates federal facility renewal strategies into an overarching policy that guides resource-and-investment decision making across the agency’s whole facility portfolio, whole facility life cycles, and whole mission sets.

This report offers recommendations for requirements identification; fiscal risk management planning; practices for measuring the actual (as opposed to projected) outcomes of mission-driven investments; and strategies for communicating with critical stakeholder groups that support the renewal of federal facilities portfolios. The committee’s recommendations promote a broad and disciplined view of asset management. This view covers the creation of various budget structures and analyses to better aggregate and allocate funding for capital investment, finance new investment, privatize or partner with the public–private sector for the provision of services to the public, dispose of unneeded and underutilized properties, and lease when ownership is not a realistic option given budget scoring rules and funding constraints. The committee also presents a recommendation for a new capital planning process for securing facility renewal funds. The

committee believes that the strategies for renewal defined in this report will be useful for reshaping how federal agencies approach facility budget development and execution.

DEFINING RENEWAL

The committee’s first task was to define renewal for the federal real property portfolio: specifically, how the costs of ongoing annual maintenance, repair, and operations relate systematically to long-term capital reinvestment, which is the renewal of the portfolio. Following advice from the FFC, the committee defines facility renewal as “sustaining an asset’s current functionality and extending functionality beyond its expected service life through significant renovation, replacement, or repurposing.” All assets eventually require reinvestment to adapt to changing times, missions, and operational requirements. Given fiscal constraints, federal agencies typically focus on sustainment funding to keep infrastructure running, rather than optimizing investments for continued mission achievement. This definition is extended through the concept of federal facility renewal strategies that systematically apply and integrate this approach for every asset to whole facility portfolios.

Few agencies have systematically renewed their real property portfolios over time. As a result, the real property portfolios of many federal agencies are in increasing need of major rehabilitations, retirement, or replacement. In 2020, the Federal Real Property Council (FRPC) estimated that the aggregate average age of the assets in the federally owned facility portfolio is 47 years (White House 2019). While older buildings can be marginally acceptable to meet a federal agency’s needs in the present, their location and configuration may not meet future demands.

The committee’s definition of a federal facility renewal strategy is a policy, not simply a vision, that embraces a plan of action for an agency’s real property portfolio, with actionable procedures and processes for achieving its mission objectives and obligations. Executive branch policies and legislative statutes control the federal agencies’ real property management resources for renewal. This report identifies constraints that are embedded in policies or statutes or that result from a lack of information. The purpose of federal facility renewal strategies is to ensure and assure that federal facilities are being used to achieve the agency’s mission efficiently and effectively. This will be accomplished only when an agency’s fiduciary responsibility to renew federal facilities is made clear in statute and policy. Achieving this vision will require changes to how policy is developed and how federal agencies make facility resource-and-investment decisions.

THE FEDERALLY OWNED BUILDING PORTFOLIO

The FRPC publishes a public list of the federal government’s owned and leased facilities (OGP 2016). This list is aggregated into a series of data tables

included in the federal budget. The fiscal year (FY) 2016 data tables are the last year for which consolidated data for both defense and non-defense agencies are publicly available.

Table 1-1 is a snapshot of the federal government’s real property portfolio located in the United States and U.S. territories as of September 2016. The building asset class includes offices, laboratories, hospitals, schools, museums, data centers, and warehouses; the structures class includes such assets as airfield pavements, harbors and ports, parking structures, and utility systems. Combined, these asset classes are also known as “facilities.” One common way to describe the varied portfolio is by the cost of operating and leasing facilities. For FY2016, the federal agencies estimated a total annual operating cost of approximately $26 billion. This estimate represents only a portion of a facility portfolio’s annual funding requirements. Annual operating costs include recurring maintenance and repair; utilities services; facility cleaning and/or janitorial services; grounds maintenance; landscaping; and snow and ice removal on roads, piers, and airfields of federally owned facilities. For those facilities leased by federal agencies, these annual operating costs include the lease annual rent to lessor and the lease annual operating and maintenance costs. Besides the cost of operations, as noted later in this chapter, federal investment costs are also required to renew federal facilities in order to meet current and future agency needs.

Most of the $26 billion in annual expenditures is executed by a single federal department, the Department of Defense, which operates more than 60 percent of the federal footprint—determined on a building square-foot basis. Not reported in the FY2016 federal facility open data set is the cost of investment in facilities—capital construction and rehabilitation or renewal—of the federal facility real property inventory. The federal government’s plans for capital investments in facilities should be cost effective and coordinated with annual operating costs to meet existing or new mission needs most efficiently and effectively.

Table 1-2 shows the federal direct investment in capital construction and rehabilitation in support of each federal agency’s building, structure, and physical infrastructure needs, with some exceptions, including the omission of investments for water resources projects (dams, locks, etc.). This information is a subset of the data presented in the FY2020 and FY2021 Analytical Perspectives of the U.S. Federal Budget (see White House 2019, 2020).

These budget authority data show that total construction and rehabilitation costs for federal facilities averaged $38 billion annually, a third of which was dedicated to defense and Department of Energy atomic energy facility renewal needs. Taken together, the estimated federal facility portfolio’s operating costs and investments exceed $60 billion per year.

TABLE 1-1 Total Number of and Total Annual Operating Costs for Facilities in the United States and U.S. Territories in Fiscal Year (FY) 2016^a

^a All real property data from the Chief Financial Officers Act; agencies are required to submit data to the Federal Real Property Portfolio (FRPP). This table excludes real property data for the intelligence community and military family housing inventories. Current year data not publicly available.

^b “Otherwise Managed” includes facilities that are state-government owned, foreign-government owned, museum trust, and withdrawn land.

^c Does not include public-domain land.

^d AOC = annual operating costs.

NOTE: This report focuses on FRPP data for assets in the United States and U.S. territories and does not reflect significant inventory reconciliation of real property data as a result of the Department of Defense’s Financial Audit initiative.

SOURCE: Office of Government-Wide Policy, 2016, “FY 2016 Federal Real Property Profile (FRPP) Open Data Set,” General Services Administration, https://www.gsa.gov/cdnstatic/FY_2016_Open_Data_Set.xlsx.

TABLE 1-2 Major Public Physical Direct Investment (Budget Authority)

^a GSA = General Services Administration.

NOTE: Non-defense totals exclude budget authority information for water resource projects.

SOURCE: Office of Government-Wide Policy, 2016, “FY 2016 Federal Real Property Profile (FRPP) Open Data Set,” General Services Administration, https://www.gsa.gov/cdnstatic/FY_2016_Open_Data_Set.xlsx.

ORGANIZATION OF THIS REPORT

This report is organized into seven key chapters. Chapter 2 sets the stage by reviewing federal statutes, management, and guidance issued by the Office of Management and Budget and salient audit reports by the Government Accountability Office. Chapter 3 further identifies leading industry and international standards for advancing asset management systems and principles and establishing clear agency fiduciary responsibilities to manage federal facilities efficiently and effectively. Chapter 4 describes the state of facility inventory and

asset management decision-support tools for assessing facility condition and estimating facility maintenance, repair, and major construction and rehabilitation needs. Chapter 5 addresses the subject of values, benefits, and risk management. Chapter 6 identifies innovative funding strategies that can be applied to support an agency’s renewal strategy. Finally, Chapter 7 presents the committee’s conclusions and recommendations. The report also includes seven appendixes that offer additional support and substantiation for the committee’s recommendations.