The General Services Administration must form partnerships with industry to rehabilitate deteriorating federal buildings, GSA Administrator Stephen A. Perry told a congressional panel Monday. Perry and other witnesses from government and industry pushed for the legislative authority to allow GSA, which acts as the government's landlord, to team up with private companies that would lease federal buildings and provide the money to repair or redevelop the property. The government and industry would share any revenue generated by such ventures. "There are no other alternative solutions on the horizon" for repairing aging federal facilities, Perry said during a hearing before the House Government Reform Subcommittee on Technology and Procurement Policy. The federal government owns more than 400,000 Defense Department and civilian buildings and more than one-half billion acres of land; GSA manages approximately 1,700 federal buildings. According to Perry, there are more than 100 federal buildings that are in "egregious" physical condition, but still partly occupied by federal employees. GSA estimated that it needs about $5 billion to upgrade the federal buildings it oversees. In July, Rep. Pete Sessions, R- Texas, introduced the "Federal Asset Management Improvement Act of 2001" (H.R. 2710), which would authorize public-private partnerships to rehabilitate federal property. Similar bills were introduced in the last two congressional sessions. "If GSA's properties continue to deteriorate, federal customers will explore their options," Sessions said. "A scenario will be created in which more federal customers will be driven to pay rent to private landlords." Congress has already authorized public-private partnerships at the Defense and Veterans Affairs departments and at the Postal Service. According to Anatolij Kushnir, director of VA's office of asset enterprise management, the VA recently opened its first privately financed and operated energy plant to serve the Mountain Home VA Medical Center in Johnson City, Tenn. The venture will result in a 25 percent drop in energy consumption at the medical center and save the VA more than $35 million, he said. Kushnir said the VA will use the savings and a projected revenue of more than $5 million to improve the access of veterans to primary care and community-based outpatient clinics. Bernard L. Ungar, director of physical infrastructure issues at the General Accounting Office, recommended that GSA start a pilot program to gauge the actual benefits of public-private partnerships. In a July report, GAO assessed the potential benefit to the federal government of circumventing the federal budget process and allowing private companies to give GSA money to renovate and rehabilitate buildings. GAO developed hypothetical partnerships using GSA properties across the country, concluding that the government would benefit from lower operating costs and increased revenue with no up-front investment. Ungar said GSA would need a good business plan and the proper criteria to decide which federal facilities would be eligible for public-private partnerships. Federal properties in strong rental markets and attractive locations make good candidates for public-private partnerships, according to Ungar. Sherwood Johnston III, president of the Building Owners and Managers Association International, and Perry agreed that GSA needs flexibility in crafting these types of arrangements, and that 'one size does not fit all.' "Every building is different, every real estate market is different, and every real estate transaction is different," Johnston said. "GSA and private sector partners must have the ability to enter into arrangements that are mutually beneficial." The National Law Center on Poverty and Homelessness, which last year opposed similar legislation, was not present at the hearing. The group says that public-private partnerships, agencies would be less likely to make property available to programs for the homeless, which have first refusal in the disposal of surplus federal property under the 1987 McKinney Act.
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