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PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.






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MARCH 5, AND APRIL 1, 1998

Printed for the use of the

Committee on Transportation and Infrastructure





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MARCH 5, AND APRIL 1, 1998
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Printed for the use of the

Committee on Transportation and Infrastructure


BUD SHUSTER, Pennsylvania, Chairman

THOMAS E. PETRI, Wisconsin
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
JOHN L. MICA, Florida
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SUE W. KELLY, New York
RAY LaHOOD, Illinois
FRANK RIGGS, California
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
ROY BLUNT, Missouri
JOSEPH R. PITTS, Pennsylvania
JOHN R. THUNE, South Dakota
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma

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NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
ROBERT E. WISE, Jr., West Virginia
BOB CLEMENT, Tennessee
ELEANOR HOLMES NORTON, District of Columbia
PAT DANNER, Missouri
JAMES E. CLYBURN, South Carolina
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
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BILL PASCRELL, Jr., New Jersey
JAY W. JOHNSON, Wisconsin
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania

Subcommittee on Public Buildings and Economic Development

JAY KIM, California, Chairman
JOHN COOKSEY, Louisiana, Vice Chairman
JOHN J. DUNCAN, Jr., Tennessee
BUD SHUSTER, Pennsylvania
  (Ex Officio)

ELEANOR HOLMES NORTON, District of Columbia
TIM HOLDEN, Pennsylvania
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  (Ex Officio)



Proceedings of:

March 5, 1998
April 1, 1998

MARCH 5, 1998

    Basso, Peter J., Acting Assistant Secretary for Budget and Programs, U.S. Department of Transportation

    Lew, Jacob J., Deputy Director, Office of Management and Budget

    Peck, Robert A., Commissioner, Public Buildings Service, U.S. General Services Administration

    Plosser, G. Gray, Jr., FAIA, Principal, KPS Group, Inc., on behalf of the American Institute of Architects
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    Quinlan, J. Michael, C.E.O., Corrections Corporation of America, Prison Realty Trust

    Scott, Charles, President, National Federation of Federal Employees, General Services Administration Council of Locals

    Stahl, Hon. Judge Norman H., Chairman, Security and Facilities Committee, Judicial Conference of the United States

    Ungar, Bernard L., Director, Government Business Operations Issues, General Government Division, U.S. General Accounting Office, accompanied by Thomas G. Keightley, Senior Evaluator, Federal Buildings Fund


    Brown, Hon. Corrine, of Florida


    Basso, Peter J

    Lew, Jacob J

    Peck, Robert A
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    Plosser, G. Gray, Jr

    Quinlan, Michael

    Scott, Charlie

    Stahl, Hon. Judge Normal H

    Ungar, Bernard L


Franks, Hon. Bob, a Representative in Congress from New Jersey, letter, Township of Hillsborough, New Jersey, John D. Middleton, Township Administrator, March 3, 1998

Lew, Jacob J., Deputy Director, Office of Management and Budget:

Response to question from Rep. Traficant concerning changes to the scoring rules

Response to question from Rep. Norton concerning the funding history of the Department of Transportation Headquarters

Responses to questions from Rep. Holden concerning retention of proceeds at 252 Seventh Ave., New York City, New York
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Responses to additional questions



Peck, Robert A., Commissioner, Public Buildings Service, U.S. General Services Administration:

Response to Rep. Franks concerning the Belle Mead property in Hillsborough Township, New Jersey, June 17, 1998

Responses to additional questions from Rep. Kim

Responses to additional questions from Rep. Traficant

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Responses to additional questions from Rep. Duncan

    Stahl,, Hon. Judge Norman H., Chairman, Security and Facilities Committee, Judicial Conference of the United States, responses to questions from Rep. Traficant


    Berne, Dr. Bernard H., MD, Ph.D., Medical Officer, Food and Drug Administration, statement and with supplemental material

APRIL 1, 1998

    Chistolini, Paul, Deputy Commissioner, Public Buildings Service, General Services Administration

    Frost, Hon. Martin, a Representative in Congress from Texas

    Granger, Hon. Kay, a Representative in Congress from Texas, accompanied by City Council Member, Fort Worth, TX, Mike Groomer, Assistant City Manager, Fort Worth, TX

    Myrick, Hon. Sue, a Representative in Congress from North Carolina, accompanied by Benjamin Rook, Chairman and CEO, Odell Associates, Charlotte, NC, and John Harris, President, the Harris Group, Charlotte, NC

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    Granger, Hon. Kay, of Texas

    Frost, Hon. Martin, of Texas

    Myrick, Hon. Sue, of North Carolina


    Chistolini, Paul

    Groomer, Mike

    Harris, John

    Rook, Benjamin

    Wentworth, Jeff


    Chistolini, Paul, Deputy Commissioner, Public Buildings Service, General Services Administration, responses to questions from Rep. Kim

    Myrick, Hon. Sue, a Representative in Congress from North Carolina, talking points prepared by Frank G. Johns, Clerk of Court, U.S. District Court, Western District of North Carolina
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    Groomer, Mike, Assistant City Manager, Fort Worth, TX, response to question from Rep. Cooksey, concerning 300 acres Federal Depot I–20 and 35 in South Fort Worth






U.S. House of Representatives,

Subcommittee on Public Buildings and Economic Development,

Committee on Transportation and Infrastructure

Washington, DC.

    The subcommittee met at 10:00 a.m. in Room 2253 of the Rayburn House Office Building, the Honorable Jay Kim, (chairman of the subcommittee), presiding.
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    Mr. KIM. Good morning. I wish to welcome all of you and all the Members to this hearing this morning.

    Before we begin, I ask unanimous consent that Congressman Franks and Congresswoman Brown, who both have an interest in the subject of our hearing today, be permitted to participate.

    Is there no objection?

    [No response.]

    Mr. KIM. Hearing no objection, so ordered.

    This rescheduled hearing on the GSA Fiscal Year 1999 Budget will combine two hearings together that were previously scheduled for last Wednesday and Thursday.

    At the original meeting last Wednesday morning, disappointment was expressed by a number of Members, including myself, on the time and manner for which we received Agency testimony for hearings.

    By unanimous consent, we agreed to adjourn and reschedule the hearing in order to have sufficient time to properly view the testimony.

    Having postponed the hearing for 7 days at the request of the Ranking Member, Mr. Traficant, we are now prepared to address GSA public building matters.
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    However, before I begin, I would like to once again emphasize that the goal of this hearing, the current trend of housing the Federal office workplace in leased facilities, affording no equity position for the Federal Government, which is inefficient and costly pursuit by GSA.

    The Federal Government must balance the ratio of leased-to-owned office facilities within its real estate portfolio in order to effectively maintain economically balanced real estate program.

    Towards this end, we need to explore all alternatives and opportunities to support a thriving construction and renovation program to house the Federal office workplace and workforce in federally owned facilities.

    This morning we plan to receive testimony on the proposed budget request submitted by GSA to Congress, and to receive an update on several pending matters with the Agency.

    Also, we will be considering the current fiscal times and continuing struggle to fund an adequate construction program or receive testimony on the impact of the GSA's decision to defer construction programs and Administration's Fiscal 1999 budget.

    This afternoon, we'll continue to receive testimony on the impact of the GSA Fiscal Year 1999 request, and also receive testimony on public/private funding arrangements being used to fund construction of Federal facilities.
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    In addition, we will hold another hearing to continue this dialogue at a later date. I would also like to mention that our colleague, Mr. Duncan, regret that he's unable to attend this meeting this morning, due to a meeting taking place at the same time of the Aviation Subcommittee which he chairs.

    However, he has submitted written questions to be responded to by witness in writing and included in the record. I shall honor this request, as well as any other questions submitted by Subcommittee Members.

    I wish to thank all of the witnesses for their appearances this morning. At this time, I'd like to recognize Mr. Traficant, who would like to make opening remarks.

    Mr. TRAFICANT. Thank you, Mr. Chairman, and welcome to all who are here. I notice that there are some that are not here yet, and I hope that they would get here in a timely manner.

    As you know, I think there is a need to reform the Federal Protective Service. I think that's one of the things we've worked on for some time.

    I believe that service should be fully manned with flexible management policies and practices to meet the security needs, as evidenced from past actions out in Oklahoma and other areas.

    There will be legislation to be brought forward that will address those goals.
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    But I, again, want to just cite the fact that GSA is often criticized, much of it now because there's no Federal construction program, but I want it clearly understood that this Subcommittee, at least this Member, does not hold GSA accountable for that. We hold the Office of Management and Budget accountable for that.

    In fact, we think GSA and the Administrative Office of the Courts and Public Building Service have done a good job in spite of some crazy laws around here, and a relationship that has taken us away from the goals of this Subcommittee.

    The Subcommittee members can recall that the Administration, not once, but twice, requested a long-term lease to meet the needs of the Department of Transportation. This Subcommittee requested an enhanced 11[b] report to provide financial information to support an operating lease.

    Through much deliberation, the Subcommittee, faced with limited options, went ahead and authorized that request for a long-term lease. The Senate also authorized a long-term lease.

    Now, after another year's delay, the Office of Management and Budget now wants us to authorize a Federal construction program with no guarantee of Federal construction dollars in the Year 2000 fiscal budget.

    I'm trying to figure out what's going on here. We've been delayed a little bit too long, and I don't believe we can really pursue a program and offer any oversight.
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    I'm getting concerned that rental landlords are getting fat on dollars that could be saved and used more wisely, for sure.

    GSA has been authorized to lease the DOT headquarters, and I expect that the Agency will move expeditiously on that process.

    The only thing that I'd like to say is that unless this Subcommittee makes some changes, we'll continue to go through this every year, and we will rubber-stamp the programs of the Office of Management and Budget who, in fact, in my opinion, oversees and has jurisdiction over GSA that cannot, like a puppet on a string, really do anything without them.

    I think that's wrong. I think that must be addressed legislatively, and to allow this to happen is tantamount to holding our taxpayers up.

    I'm glad to work with you, Mr. Chairman, and I thank you for the hearings and for working with me to delay the hearing so that we can get more facts.

    I yield back my time.

    Mr. KIM. Thank you, Mr. Traficant. Do any Members wish to make a statement?

    Ms. NORTON. Mr. Chairman, I want only to say that I appreciate the way in which you have handled the matter involving the GSA.
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    I do want to say, as someone who has sat on this Committee since 1991, that GSA and OMB simply have not been doing their jobs when it comes to making sure that government-owned space is fully utilized.

    I want to say that as I have sat here reviewing GSA budgets, ever since coming to Congress, I have also sat looking at a vacant, huge parcel of land called the Southeast Federal Center.

    Although the GSA has the power and the authority to see to it that government agencies begin to build on this land, this Committee has authorized billions of dollars in grants because GSA has not moved to see to it that agencies that are desperate for space, in fact, use this space.

    Mr. Chairman, this Committee sat by before you or I came to Congress and allowed the space where the Ronald Reagan Trade Building now stands, to be perhaps the most valuable piece of land in the Nation's Capital, a stone's throw from the White House, to go unused or used as a parking lot, and we just let it happen.

    Meanwhile, we continue to pay rents throughout the District of Columbia, Maryland, and Virginia. Finally, in the mid-80s, because of the great energy of Terry Goldin, and in virtual defiance of the usual way government does business, that land was freed up and now we have Federal agencies beginning to move into that building.

    But the fault lay first with the GSA, and then for Congress to allow it to happen. Now we are repeating the same series of—the same scenario with the Southeast Federal Center.
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    If the Ronald Reagan—the land occupied by the Ronald Reagan Center was the most valuable piece of land, probably, in the country, then surely the Southeast Federal Center is the most valuable piece of land on the East Coast that's going unused.

    Yet GSA has continued to allow ATF to demand space in the District of Columbia with a setback and not go to the Southeast Federal Center. The GSA has continued to allow the Transportation Department, who yearns for space, not to go to the Southeast Federal Center.

    They are playing with the taxpayers's dollars. They have the authority. If they continue not to use the authority, Mr. Chairman, I believe that stronger legislation that allows the Congress itself to require action should be taken.

    I hold OMB responsible, the guardian of the dollars, and I hold GSA responsible. It is time to call the question on this, particularly as you come before this Committee and ask for money.

    Mr. KIM. Thank you for that fine testimony.

    I'd like to welcome our first witness this morning, Mr. Jacob Lew, the Deputy Director of OMB. Welcome, Mr. Lew. I look forward to your testimony.


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    Mr. LEW. Good morning, Mr. Chairman and Members of the Committee. Thank you. I appreciate the opportunity to appear before you this morning again.

    I'd like to, if I could, begin with just a few summary comments about the GSA budget. I will try to devote the bulk of my testimony to the questions that you pose. I know that Bob Peck is here from the GSA who can address, in more detail, some of the issues regarding the specifics of the GSA budget.

    The President's 1999 budget requests a total program level of $5.1 billion for GSA's Federal Buildings Fund, which is a 2.5 percent increase over the 1998 level.

    Some of the highlights of our budget include: rent rates have been increased in 1999 by the Metropolitan CPI, which is approximately three percent, and the impact of prior year shortfalls, which in the past we've had discussions about, will be eliminated by the end of FY 1998.

    A request of $668 million is included for repair and alteration of existing facilities, which underscores our commitment to be responsible stewards of the real property held by the Federal Government.

    There is $44 million included for the design and construction of new facilities, including the construction of a border station and design of a new Department of Transportation headquarters and the U.S. Mission to the United Nations.

    If I could, I'll shift quickly to the issues that I know the Committee is most concerned with. First, the Department of Transportation headquarters:
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    The President's budget includes $14 million for the design of the new Department of Transportation headquarters. This reflects our view that ownership would be the most cost-effective solution to addressing DOT's need for a new headquarters.

    In addition to Bob Peck, Jack Basso is here, and he will be able to address, in more detail, the needs for a new building, or for improved facilities, of which I know the Committee is aware.

    The budget is consistent with the Committee's July 1997 resolution for the DOT headquarters, which authorized construction of a new DOT headquarters and authorized leasing only if funding was not available for construction.

    We don't want to repeat the mistake that was made 30 years ago and enter into another costly, long-term operating lease for the DOT headquarters. We know that an operating lease in the long term is not a cost-effective, long-term solution.

    There are two facts in particular which indicate that it will be more cost-effective to construct and to own acquire a new headquarters, rather than lease it under the terms and conditions of a 20-year lease, as authorized.

    First, the 30-year present value cost of constructing and operating a new DOT headquarters is approximately $200 million less than leasing a facility.

    Second, the net present value of the lease payments that the Federal Government would pay over the term of the lease is more than 120 percent of the estimated fair market value of the facility.
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    As this Committee knows, there is a long history regarding the construction and acquisition of a new DOT headquarters. The Administration has made several proposals in the past for construction, which were not acted upon by the Congress.

    There was a lease proposal that was submitted at one point when the construction plans were not approved. We think that this is the time to review the bidding on the DOT building and make a decision which is the most cost-effective decision for the American people, which we believe would be to build a new building.

    That's why we put the $14 million request in the budget, and why we hope it's acted upon by the Congress.

    The Administration is committed to funding the construction of a new DOT headquarters in the outyears. Obviously, the precise design of a building will depend on the outcome of the $14 million study that we've requested.

    As Congresswoman Norton has noted, there is considerable thought being given to construction on the Southeast Federal Center site in the District of Columbia. We think that's a very worthy option which we are very encouraged by in terms of the completion of the environmental work and the transportation resources available and servicing the site.

    We won't be able to go forward until we complete the study, which is why it is so urgent that the study be done at this point.

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    If I could move on to the question of courthouse construction, I know this has been a controversial feature of the President's budget that this Committee and that the Judicial Branch has spoken to.

    You know, we have not requested construction for any new courthouse projects in this budget. That shouldn't be confused to be a policy statement that we should never build new courthouses. That is not the policy statement made by the budget.

    What we have said is: we should step back, as the Treasury/Postal Appropriation Bill suggested, review the requirements for courthouses, work with the Judicial Branch to assess the needs, and then move forward based on an understanding of several factors, including the most efficient way to build and to expand courthouse facilities, and the most efficient way to use courthouse facilities.

    When I was here last week, a note was made, quite appropriately, that we have made progress in terms of not having the kinds of gold—Taj Mahal, was the word used—construction that we've had in the past.

    There is still have more progress that needs to be made, and we would hope that that could be done in a collegial way between the Administration, the Congress, and the Judicial Branch.

    We may not always agree. I noted yesterday as I reviewed the comments from the Administrative Office, that there was a desire to have one view. There are three separate branches of government, we have to have the ability to work together, but ultimately we may disagree on some requirements.
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    We could continue that discussion in a professional and collegial manner where it isn't a question of the Executive Branch against the Judicial Branch or the Congress against the Executive or the Judicial Branch.

    The question of courthouse utilization and how to expand on facilities is one that involves a great deal of resources, and it's one that really requires that we step back and do a great deal of analysis, which we are prepared to do and we're now beginning to get additional information that permits us to do that.

    Finally, I'd like to address the question of the U.S. Mint lease acquisition which the Committee asked about in its letter inviting me to testify. I understand that the Committee has some concerns with the 20-year lease agreement that the Mint recently signed for a new headquarters in Washington.

    In fact, that was a lease that was signed pursuant to provisions that were enacted in the Treasury/Postal Appropriation Bill which we did not support, and I don't believe this Committee supported, which bypassed the normal process.

    We are only now evaluating that lease, since it did bypass the normal process, and we think, based on our preliminary review, that there are questions. It is on the border between a capital and operating lease.

    We haven't completed our analysis. We don't think it's an ideal transaction under any circumstances, but it is one that we would be happy to continue to work with you to analyze.
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    I think it underscores the need to have Federal real property decisions go through a coordinated process.

    In conclusion, GSA's 1999 real property program emphasizes the need to maintain our existing building inventory, as well as to construct and acquire facilities when it is most cost-effective. We believe that that is the policy that is reflected in our budget, and we look forward to working with you, both to understand and to go forward and reach an agreement on how to proceed in this very important area.

    I'd be happy to answer any questions the committee has.

    Mr. KIM. I'd like to ask a couple of questions, Mr. Lew.

    Before I do, I'd like to make a sort of review, to make sure I understand correctly, just slightly different than the way you made a statement this morning.

    Now, the—you're asking—actually, you're asking total $13.8 billion for the operation, execution of this program in the 1999 budget.

    Now, you are asking an additional $143 million to be approved for Fiscal Year 1999. If my statement is wrong, please correct me.

    Now, you, GSA, made a mistake creating net deficit of $643. This crated by three reasons. One is Federal Government downsizing, second is reduction in rental—I'm not quite sure on that one—third one is mistake on rent estimating.
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    Because of this $643 million rent shortfall, you ask us to set up a moratorium on any kind of new construction program last year, and promised to us just the 1-year moratorium.

    Looking at your budget, you're only allocating $44 million for the construction program, extending the moratorium to another year.

    Now, that bothers me. I wish you'd tell us the truth up front. Look, this $643 million mistake may last 2, 3 years; don't tell us that only 1 year we're going to freeze up all the construction and then we're going to go back to full program. That's not the way it is, the way you submit it.

    The second question I have is, that you keep saying that leased space inventory has been shrinking. We asking additional $300 million, which represents about an 11 percent increase over Fiscal Year 1998, another double talk. That's why we got frustrated.

    The second question now, DOT, the new building you're talking about, $14 million for the design, this has never been discussed before. I don't know where this come from.

    We freeze up all the courthouse construction, yet you want to build your own DOT buildings and some other United Nations, whatever, Mission buildings, et cetera.

    But you're not spending penny on courthouses for next year. Now, this DOT, the way I understand, existing building you have, you have leased, which originally cost about $56 million, and over 30 years, we paid $450 million to the landlord, which have nothing to show.
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    Now, what kind of deal is this? You don't own the building in the 30 years. You pay eight times more than the building is worth, and nothing to show, and now you want to spend another $100 million a year—which I don't know how much we talk about together, to building another one.

    Where this money is coming from? You got some secret bag out there someplace? You keep saying that we got to downsizing. We have $643 million short, yet you want to spend more money on DOT, which has never been discussed with this Congress.

    So, I am deeply concerned on those issues, and can you answer those?

    Mr. LEW. Sure, I'd be happy to, Mr. Chairman.

    First of all, with regard to the shortfall, when I testified before this Committee last year, I had hoped that we'd be able to eliminate the shortfall. We're projecting that we're in the process of eliminating the shortfall.

    To some extent, we're waiting to complete the task that was described here, and we are completing it as we had hoped. So, we're optimistic that when we come before you next year, we'll be able to say that there is no shortfall any longer.

    Progress has been made; progress is continuing to be made. We're not quite there yet, but we're predicting we will be there. But, until we've accomplished the total elimination of the shortfall, the issue is still one that we have to keep an eye on.
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    Second of all, with regard to the budget, there is considerable investment in this budget in maintenance and repair of existing buildings. We've got an enormous inventory of needs.

    I think that this Committee shares our concern that over the years we haven't had the resources to proceed as aggressively with some of the maintenance as we would have liked.

    This budget invests quite heavily. There is a reduction in overall needs because of downsizing. That is something that is accommodated in our projections.

    At the same time there is an increase in rent rates, as I noted in my statement. So the cost of servicing existing space goes up when the rents go up as well.

    On the question of the courthouse, I think in all fairness, the need for the courthouse, the need for the Department of Transportation building, and the debate over the Department of Transportation building is not new. It is something that this Committee had deliberated, and it's something that resolutions have been passed on. We've had three budget proposals addressing it.

    With all due respect, I think the need for the courthouse is, if anything, old business, not new business, which we are very anxious to attend to as quickly as possible.

    We don't think that the continued rental of the Nassif building has been in the best interest. I agree with your characterization of the lease. It has been a very expensive lease.
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    That is precisely why we would propose at this time that we should not make the mistakes that we have made in the past; we should take a careful stock of the needs, we should design a building, perhaps in the D.C. site that Congresswoman Norton described. We think that's a very viable option, one that we want to pursue very aggressively.

    We're not certain whether the best plan is one large building or several smaller buildings. The reason we proposed the $14 million study was to be able to proceed as expeditiously as possible to design and then construct a facility.

    Mr. KIM. I want to ask just one more question before I defer to my Ranking Member.

    The way the construction program is set up right now is whatever revenue GSA has generated, keep leasing, there will be no revenue.

    GSA must own the building so they can generate revenue which can be spent on capital improvement programs. You keep leasing it without having any option to own. How can they possibly generate revenues so they can spend the money on the renovation program?

    Now, because of scoring system which you have set up, if GSA wants to build a building, you're going to score entire amount up front, so they have no choice but leasing.

    I don't understand this at all, why you've been doing this such a long time, choking GSA so that they have no money to expand a capital improvement program.
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    Mr. LEW. Mr. Chairman, with regard to the scoring rules, I can't take credit for having made them up. They predated me, and they're not OMB rules; they're OMB, Congressional, and CBO rules.

    Ms. NORTON. They support them a thousand percent.

    Mr. LEW. They support them. I'm not trying to create any distance between us and the rules. But what I am trying to suggest is that the rules reflect the consensus judgment of the Congressional budget experts and the OMB budget experts of what is the cost associated with capital leases.

    I mean, in the most simple form, our view is that it is expensive to build and to operate and to use real property. We think that those costs must be faced at the front end, and if an operating lease was cheaper in the longer term than building a building, we would sit here and say that's the preferable way to go.

    That's not what our analysis suggests. Our analysis suggests that an operating lease in the long term is not cheaper; that after 18 years, it's clearly cheaper to build than to lease; that for the purposes of a 30-year lease analysis, there is virtually no circumstance where renting will be cheaper than buying.

    That's why we want to plan to purchase and to build. With regard to the current situation in the Department of Transportation, we're in a situation where year-by-year we continue to rent.
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    That's the worst circumstance. You don't get the benefits of any long-term lease, you don't get the benefits of owning.

    To the extent that we have an issue between us on capital leases, it is unfortunate the technical financial analysis and budget scoring has to get in the middle of policy debates, but it unfortunately does.

    Our analysis of capital leases and CBO's analysis of capital leases is that they are more expensive. That doesn't mean that Congress couldn't go ahead and do it anyway, but if it does, it is undertaking a course that is more expensive than buying or building a property.

    We think that the debate should center on what is the most cost-effective way of proceeding.

    Mr. KIM. I would like to call on at this time, the Ranking Member, Mr. Traficant.

    Mr. TRAFICANT. Mr. Chairman, I'd like to welcome, from what I understand, are all the public building service regional real estate managers that are here with Mr. Peck. I would like them, if they would, to stand, please, and let us take a look at some of the people that work with us around here.

    Thank you for the good job you do. Thank you for being in attendance.
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    Now, I have been on this Committee for awhile, and I have looked at this Committee, a very small Subcommittee, two new Members that are here.

    We're proud to have you here, to all the Members here. What you may not realize is that there is a lot of money goes through this little Subcommittee.

    There's a lot of money that has been wasted going through this Subcommittee. I've seen and I've heard of some real testimony coming from OMB that now really makes me laugh.

    You sent up here two leases for DOT; did you not?

    Mr. LEW. We——

    Mr. TRAFICANT. Yes, or no, did OMB send up two leases?

    Yes, or no?

    Mr. LEW. In the past, we have sent up leases.

    Mr. TRAFICANT. I don't really want to belabor this. I want to have some questions and I want to get some answers here without a long, belabored answer.

    Did you send up two leases to us, prolonged leases for DOT?
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    Mr. LEW. Congressman, a yes or no answer is not going to fully address the question.

    Mr. TRAFICANT. Did you send up two leases?

    Mr. LEW. Yes, they were leases.

    Mr. TRAFICANT. Fine.

    Did OMB sign off on the lease in Atlanta, 30 years, $25 million a year, no equity, yes, or no?

    Mr. LEW. I testified on that matter last year at great length.

    Mr. TRAFICANT. I believe that Dallas Riflin testified to that effect, too, while telling us how they want to save money.

    Now, you made a statement that both the Congress and their budget hierarchy and OMB have come to some understanding on scoring rules, because it's so good for the country, and evidently it's also the Congress that is doing this.

    The truth is, both groups are trying to deceive the American people by letting them think that their deficit situation is a little bit better by the machinations of this up-front scoring.
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    Mr. LEW. I don't agree with that.

    Mr. TRAFICANT. That's the way it is.

    Mr. LEW. I'd be happy to respond, but——

    Mr. TRAFICANT. Now, you said you put $14 million in construction for DOT. Who gave you the approval to do that?

    Mr. LEW. The President's budget is approved by the President. Every year the President sends a budget.

    Mr. TRAFICANT. Did you ask for or did you confer with anybody relative to the change in venue?

    Mr. LEW. I'm sorry, I did not understand your question.

    Mr. TRAFICANT. Did you confer with anybody in the Congress that you would give a courtesy to the legislative government? Did you talk with GSA?

    Did you ask GSA?

    Mr. LEW. The President's budget is put together——

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    Mr. TRAFICANT. Yes, or no, Mr. Lew?

    Mr. LEW. Well, Congressman, I can't tell you exactly who spoke with whom.

    Mr. TRAFICANT. If you don't know, say you don't know. I want to know is you asked GSA about that?

    Mr. LEW. I'd like to defer and check, because the way a budget is put together, the Director and the Deputy Director don't consult on each of the items. The decisions are made in consultation with the affected Departments.

    I would be delighted to check with my staff and get back to you.
    [The infomation received follows:]

    [The DOT Headquarters project was discussed with GSA and DOT during the formulation of the President's 1999 budget.]

    Mr. LEW. I'd also be delighted to respond to the initial remarks you made.

    Mr. TRAFICANT. I'd like to have some yeas or nays from you. You could submit and amplify in writing, and I'm going to ask that you do that.

    Now, you said the Administration is showing its commitment to funding the construction of the DOT building. I have some concerns why all of a sudden, we have seen this different type of philosophy.
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    You know that movie, Jerry McGuire, ''show me the money?'' Where's the money, Mr. Lew?

    Mr. LEW. The President's budget includes the money for Fiscal Year 1999. In the outyears, we will work to provide funding for the construction that the study determines is necessary.

    We did not know at the time we put the 1999 budget together, what the result of that study would be.

    Mr. TRAFICANT. Well, you understand that if there is no practical commitment, we're delayed another 2 years on these machinations?

    Mr. LEW. I don't believe that there's a delay. If the study is authorized, if it is undertaken in next year's budget, our intention would be to address the follow-on construction plans, so I'm sitting here today telling you that our hope is that the study is authorized.

    The delay would come if the study is not authorized, and that's a Congressional judgment that we hope is made positively.

    Mr. TRAFICANT. I would want for this Committee, Mr. Chairman—I have a number of other questions that I will submit in writing. I want the answers in writing, but I want one other thing.
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    I want OMB's analysis in writing to this Subcommittee, on the scoring rules change bill that we reported out to the full Committee, and I want their analysis and position on it in writing.

    Mr. LEW. We'd be delighted to.
    [The infomation received follows:]

    [Insert here.]

    Mr. KIM. Are there any other members who wish to ask questions at this time?


    Ms. NORTON. Yes, Mr. Chairman, I would.

    As you can see, the Committee is very concerned. It's really feels like it's been jerked around on the DOT lease.

    Mr. LEW. I understand that.

    Ms. NORTON. That's why you're getting such tough questioning. We gave very tough questioning when they came up here yet again with an operating lease, and so to see another flip-flop is very disconcerting, and, frankly, reduces our confidence in OMB.
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    Our whole point was that you're supposed to be the watchdog. You're supposed to keep consistency, and it looks like you are either promoting the instability or at least allowing it to happen.

    Now, let me tell you what really reflects on the credibility of OMB here. When you come before this Committee and ask for $14 million for a design study and no construction funds, do you think anybody up here believes you?

    Let me tell you so that I will be clear. We don't believe you. We believe that what you are doing is—this is a gimmick.

    You don't want to put the money up, you put forward a design study which has no credibility without construction funds. We're not in the design study business.

    You've come here before with two leases and the Committee has gone along with it. And in order to keep from moving forward on something we didn't think you should do in the first place, you—somebody stood together and said, what can we do now? We've got to go up before this Committee and we're going to get it.

    And they said, well, look, let's just ask for some design funds, and maybe we can cover our butts that way. I mean, that is how it looks to Members of this Committee. You are losing your credibility with this Committee.

    If you think we believe that what is needed here is a design study—this Committee had done everything that OMB and GSA has asked it to do on environmental funds down at—you mentioned that in your testimony—on environmental cleanup.
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    We have appropriate the money for environmental cleanup. We have gotten out of the way and facilitated you in every way.

    And now you come up and say, guess what, we need to do another study.

    Mr. LEW. Mrs. Norton, if I could, I'd really appreciate an opportunity to respond.

    Ms. NORTON. Excuse me. Just so you will know—and you know that the Senate has indicated that it is not going to approve construction funds, and you know that that has already occurred, and we know it.

    And knowing that, and without saying anything to this Committee about that, you have come forward to act as though, to pretend as if you really are about to get into a massive construction project for DOT.

    Well, let me tell you, Mr. Lew, because I don't want you to think—and I don't think that I should be anything but frank with you—I don't believe you, and I don't think any of us believes you.

    This proposal has seriously hurt your credibility here today. If you all can't figure out what to do with DOT, then you should not come here with half-assed proposals.

    You should figure it out, explain yourselves when you flip-flop.
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    Mr. LEW. I'd be delighted to explain myself.

    Ms. NORTON. But when you explain yourself for having a $14 million dollar proposal, you ought to know that the only thing I think you can do with this proposal is withdraw it.

    Mr. LEW. Can I respond?

    Mr. KIM. Yes, respond.

    Mr. LEW. The history of this proposal could be told in many different ways. The Administration has had proposals before this Congress over the last 4 years which were very clear and very much designed to result in the construction of a building.

    Our commitment to constructing a DOT building in the District of Columbia is not new. Congress did not approve the first proposal, nor did it approve subsequent proposals.

    The lease proposals, the long-term lease proposals which we did submit, as Congressman Traficant noted, were not the 20-year lease provisions that were approved in the resolutions of the Committee; they were shorter term than that.

    We were not consulted on what was the maximum length that would be cheaper. A 20-year lease is more expensive than buying or constructing a building.

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    So, this works two ways. I'm very sorry if our credibility is challenged, but I think there's been no deviation, no flip-flop at all in our commitment on building a new DOT building.

    The fact that we sent up a lease proposal when a building proposal was rejected, merely reflects the fact that we at that moment did not seem to have a clear path towards getting approval for construction.

    If you tell me that the decision has been made that you're going to reject our proposal to do a design study, frankly, I think that cuts against the argument for building the D.C. building that I know you so strongly support.

    I think the Administration's efforts on behalf of the District of Columbia, frankly, should give us a little bit more cushion in terms of credibility. We are committed to construction, and we are committed to a DOT building in the District of Columbia.

    If Congress tells us—and that would be the House and the Senate—in the forums that Congress and the Administration communicate, that they're rejecting our proposal, we'll talk. We'll work together to come up with an alternate plan.

    But our plan is clear. The fact that Congress doesn't want to enact it, does not mean that that's not our plan.

    Ms. NORTON. Mr. Lew, when was the last time that OMB recommended construction funds for the GSA budget?
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    Mr. LEW. Fiscal 1996.

    Ms. NORTON. In the GSA budget, I'm talking about.

    Mr. LEW. In the President's budget 1991.

    Ms. NORTON. When was it? How much money have you recommended for GSA to do construction since this President has been in office?

    Let me give you an example of why I say you have no credibility. GSA testified last year that in Fiscal Year '99, they contemplated a new construction program totalling $500 million, a modernization program with modernization totalling $700 million.

    And what have you come forward with today? Is it $40 million?

    That's what they contemplated. They go through, GSA goes through OMB for clearance before it comes here.

    We doubt your will to construct. That is serious because with respect to courthouses, it means they simply stay where they are.

    With respect to other government agencies, it means we pay rent money because you won't save taxpayers' money by constructing in government-owned space. That's the long and short of it.
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    Mr. LEW. Mrs. Norton, I will get back to you on the precise details, but our proposals for construction of the DOT building have been before this Congress.

    The year in which money is put in does not necessarily reflect the decision to go forward with construction. We typically do design before we do construction.

    Ms. NORTON. You do design and construction at the same time. How can you design a building when you have no notion that you are—that there are funds to construct the building? And why do it in that kind of piecemeal fashion? Is that a professional way to go about construction?
    [The infomation received follows:]

    [Insert here.]

    Mr. LEW. I would actually put the question the opposite way. Sitting here today, I can't tell you whether the ideal structure would be one building that is built on one site, or two or three buildings that are built on another site.

    There will be different budgetary implications, depending on the decision that's made in terms of the design.

    What I'm sitting here telling you is that we want to get that design done, and then we want to work to make room for it in the budget. I can't make room for an unknown.

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    Ms. NORTON. I'll tell you what, Mr. Lew, in the times that the Department of Transportation and GSA have come before this Committee, the notion of two or three buildings has never come forward. They want a headquarters building, and this notion that we could have two or three buildings leaves——

    Mr. TRAFICANT. Will the gentlewoman yield?

    Ms. NORTON. I'll yield to the Ranking Member.

    Mr. TRAFICANT. Would you agree, Mr. Lew, that if we're going to expend taxpayers' dollars for design, that construction shall follow?

    Mr. LEW. I can't sit here today and tell you that I know the outcome of a design project.

    Mr. TRAFICANT. I'm not asking you that. I want your opinion—and a yes or no is good for me—would you agree that on a serious proposal of expending taxpayer dollars, where land has been acquired and design funds have already been expended, and a particular building is already set to go for bid, that the following pursued construction process shall be instituted?

    Mr. LEW. Well, I can't sit here and tell you what a fiscal year 2000 budget decision will be. In general, let me answer the question.

    When an Administration states its intent to build a building or its desire for funds to design a building, than it is perfectly reasonable, and I'm sitting here telling you that it's reasonable to assume that construction funds will follow.
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    Mr. TRAFICANT. Let me ask it another way. Do you believe, after we bought a site, we've hired architects, we've designed a building, we own the land, that we should sit on it and consider construction?

    Mr. LEW. I'm saying we should build the building.

    Mr. TRAFICANT. Fine. That's what I asked you.

    Let me say one other thing. I want to ask you this question. Do you agree and do you believe, in front of this Congress, that on real estate matters, the way we are scoring these projects ties the hands of the General Service Administration, and they are prohibited from making the best deal for our government?

    Mr. LEW. I disagree with that.

    Mr. TRAFICANT. You disagree with that? In what way?

    Mr. LEW. I think that under the current rules, the analysis that goes into analyzing capital leases versus construction, accurately reflects the economic value of different courses. I think there are disagreements between us as to whether that analysis is correct, but we——

    Mr. TRAFICANT. Will you continue to yield?

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    Ms. NORTON. I will continue to yield.

    Mr. TRAFICANT. Would you agree then that there are certain projects that are falling through the safety net such as Atlanta, long-term commitments without equity, that OMB has recommended to us, and it is the position of OMB to maintain the analysis that you've just given to allow the scoring rules to be maintained the way they are, that would allow a 30-year lease at $25 million a year, three-quarters of a billion dollars without a penny of equity, in a project that ultimately, after embarrassment, was built for—could you please tell me what the amount of the Atlanta building was?

    Mr. LEW. I'd have to look up the numbers.

    Mr. TRAFICANT. It was just named for Senator Nunn.

    Mr. LEW. Congressman, I just testified——

    Mr. TRAFICANT. Do you know?

    Mr. LEW. I'd have to look up the numbers.

    Mr. TRAFICANT. I want you to give me the exact penny. I'm going to yield back, and I want to thank you.

    I want the exact pennies that were spent, to this Committee, on that Atlanta project.
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    [The information received follows:]

Atlanta Building
    It is our understanding that the construction cost associated with the Atlanta, Georgia building was $220 million.

    Mr. LEW. If I could just respond, briefly, Congressman. I testified at great length last year on the Atlanta building.

    I did not sit before this Committee and say we would recommend that the Atlanta building is the rule to be followed. There were—there are technical reasons that it was—that it satisfied the rules.

    But, frankly, it is more proof that we need to stick to the rules, than it is to change the rules. That's what I testified to last year.

    We think there obviously was a lot of support for the Atlanta building. There was bipartisan support.

    It is a project that was perhaps not the best decision, and it is not, I think, a fair decision rule to say you take a case that reflects what is the least attractive application of a rule and say that should become the general rule.

    Ms. NORTON. Well, that may be the least attractive application of the rule from your point of view, but the fact is that applying these rules to real estate is the least attractive application of the rules, and the Government of the United States is the only establishment in the world that scores real estate up front.
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    And so all the other drummers are out of step but you, and you're going to have a hard—the fact is that this Committee has, year-after-year, raised this point and it's really running out of patience.

    Mr. LEW. I understand the impatience of the Committee.

    Ms. NORTON. And let me suggest one way to approach it. Given the impatience of the Committee, it seems to me that one way to go at it would be to at least look closely at the rules and see if there is any relief from the present scoring rules, even if you do not wish to open them to all real estate.

    That would seem reasonable, given the billions of dollars of waste that you yourself admit, which is not the way that the Government wants to do business. So even if——

    To break this logjam, it seems to me, grown up, honest people, looking at, engaged in problem-solving, would say, well, maybe we don't want to go as far as the Committee wants to go, but we certainly seem some room for saving some money in the way in which we deal in real estate.

    Mr. LEW. I think it's a very fair suggestion that we should be working together. I regret that the tone of our conversations tends to get so quickly combative.

    Our desire is to work together. We may disagree on these rules. And that's okay. CBO and OMB have rules and they are the rules that the Congress and the Administration use.
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    But we should be able to have a debate about what our needs are in terms of real estate.

    Ms. NORTON. We're not interested in debates; we're interested in solving the problem.

    For example, you said in your testimony—we've heard your view and our view. Now, let's see if we can find the way to break through this.

    Mr. LEW. I understand.

    Ms. NORTON. You said your goal in the scoring rules was to show the full costs. Now, all right, don't think that we don't understand that there is something there.

    We're not saying that OMB was crazy. Each side has to say, well, what was the other side getting at? Well, if the point is to show full costs, why not capitalize leases?

    Mr. LEW. Well, the difference between operating and capital leases, there are many aspects to it. There are a lot of situations where operating leases are the most appropriate form.

    Where there are changes in the government's needs, where there is downsizing, where there——
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    Ms. NORTON. I didn't say all operating leases. Why not capitalize——

    Mr. LEW. I was actually going to get to that.

    Ms. NORTON. Long term leases.

    Mr. LEW. The economic analysis in view of the net present value of long-term leases indicates that, after 18 years, leases are more expensive than buying in terms of what the costs would be for purchasing.

    Ms. NORTON. Mr. Lew, by not capitalizing a long-term lease, this is what happens. You hide the costs to the taxpayers. Over time this costs lots of dollars, and we get no equity at the end, so far from showing costs, as you say is your goal, you have the opposite effect by not capitalizing leases.

    You have no equity and you hide the fact that—hide what the government is, in fact, spending. So if you want to show costs, then why not capitalize leases the way you say you do with respect to scoring, generally?

    Mr. LEW. I think that that is, in a sense, what we do with the way we do our scoring. To the extent that you're looking at a series of lease payments where there is no equity at the end, it is not a better deal for the government.

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    I'd have to go and do the analysis on——

    Ms. NORTON. Of course it's not.

    Mr. LEW. ——capitalizing the lease, but the cost over the period of the lease would look like less if you just capitalized the lease payments. But if you compared the value to the government compared to comparable payments towards purchase and ownership, that's where the value of ownership——

    Ms. NORTON. You want to show the full cost, you're not capitalizing leases.

    Mr. LEW. So you're left with nothing, as you just argued, in terms of the lease. If, after 18 years of lease payments, you don't own the building, then it costs the government more.

    Mr. KIM. Let me move on for other members to ask some questions.

    I did ask you questions about the DOT building we're talking about. The original building costs $56 million. After 30 years, we're paying $418 million on the monthly lease and have nothing to show, and now we're going to spend another millions and millions to design a new location.

    Can you answer that question; is that the right way to do it?
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    Mr. LEW. I did try to answer that.

    Mr. KIM. Why we don't have any option to purchase?

    Mr. LEW. Well, we are not disagreeing that the government should own the building. I think what we're disagreeing on is whether we should have lease-purchases versus purchases outright. And a lease-purchase is more costly to the government than purchasing.

    I understand, for budget reasons, that it makes the short-term impact on the budget easier to accommodate.

    I know the dilemma, as well as anyone in this City, in terms of accommodating things in the near-term. The reason for the scoring rules grew out of the desire of this Congress, and a series of Administrations, to bring our fiscal house into order, and to account, up-front, for the costs we incur.

    I think the benefits of our fiscal policy are clear to everybody. The fact that we've got a balanced budget now, the fact that our economy is doing better than any other economy in the world is all connected.

    I mean, the scoring rules flowed out of a policy judgment that is borne out to be correct. The fact that it makes some of the decisions that we make more difficult is the price we pay for having a fiscal policy that is really working beyond anyone's highest expectations.
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    Mr. KIM. Thank you. I want to move on to any other members who wish to ask questions.

    Mr. HOLDEN. Mr. Chairman?

    Mr. KIM. Mr. Holden?

    Mr. HOLDEN. Thank you, Mr. Chairman.

    Mr. Lew, I'm reviewing some testimony that you gave before this Committee in June of last year before I served on this Subcommittee.

    In your testimony you stated that you supported allowing GSA to retain the proceeds of disposal sales. As you are aware, GSA recently sold a building in New York City on 7th Avenue.

    I assume that's a rather high-priced neighborhood. However, OMB has opposed allowing GSA to retain the proceeds of that sale. I'm just wondering why?

    Mr. LEW. I apologize that my recollection is not a hundred percent on this. My recollection is that the proposal to retain the proceeds did not come in a timely manner. In principal, we're not opposed to the idea of retention; however, there are procedures that are to be followed in terms of allowing agencies to retain the proceeds, and, in this case, it was more a question of timing and presentation than just substance.
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    I'd have to go back and review the substance of it to respond, and I'd be happy to do that.
    [The infomation received follows:]

    [Insert here.]

    Mr. HOLDEN. I'd appreciate that.

    Did GSA request approval language to be included in FY99 appropriations bill that would allow them to retain proceeds?

    Mr. LEW. Of this property?

    Mr. HOLDEN. No, in general.

    Mr. LEW. I'm not certain, Congressman. I'd have to check.

    Mr. HOLDEN. Could you check that, too?

    Mr. LEW. I'll check, yes.

    Mr. HOLDEN. I understand OMB might have disagreed with that.

    Mr. LEW. I'd have to check, but I would be happy to do so.
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    [The infomation received follows:]

    [Insert here.]

    Mr. HOLDEN. Thank you.

    Mr. KIM. The Chair wishes to recognizes Mrs. Brown from Florida.

    Ms. BROWN. Thank you, Mr. Chairman, and Ranking Member, for allowing me to sit in on this hearing.

    I have a statement that I would like to submit for the record.

    [The prepared statement of Ms. Brown follows:]

    [Insert here.]

    Ms. BROWN. Mr. Lew, in keeping with the President's State of the Union remarks regarding the importance of keeping the judicial a viable branch of government, why haven't the Administration budget for new U.S. Courthouses construction, in particular, the one in Jacksonville, Florida—and a lot of people question how government works.

    This is an example of a perfect partnership. Local government donated the property. We have done the design, the cleanup. We are ready for the construction.
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    The local government moved the city courthouse downtown to make a complex. So it's a win/win for everybody, but we have not come forth with the construction portion of those dollars.

    Mr. LEW. Congresswoman, my recollection of the Jacksonville project is that it was fairly high on the list of priorities last year.

    So, I'd like to begin by saying that our policy was not meant to prejudice that courthouse project, and, in fact, were there courthouse projects—as I recall, it was fairly high on the list of priorities.

    Ms. BROWN. One or two or three from the top.

    Mr. LEW. I don't remember the exact number, but it was fairly high. Our policy on courthouses this year was one that I hope you realize was given very careful consideration.

    After the discussions last year in the context of the Treasury/Postal appropriation, it was our view that given the resources available this year and given the desire on the part of the Congress and the Administration to have more information, in general, about courthouse requirements and design, that the preferable policy this year was to not include new construction funds.

    Clearly, I wouldn't sit here today and say total resource limitations were not a factor. We had a budget agreement last year which we are very proud of and it has done very good things for the economy. But it imposed constraints on us, so we didn't have unlimited resources.
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    If we had unlimited resources, there are serious questions in terms of the design and building of courthouses that we would like to sort through this year. That doesn't mean we'll never approve a courthouse or request a courthouse, and we would like to get on with the discussions that were contemplated last year, and get to the point where we can pick and choose projects based on a better understanding of the needs and the efficiencies of the construction.

    Mr. TRAFICANT. Will the gentlewoman yield?

    Ms. BROWN. Yes, I will yield to Mr. Traficant.

    Mr. TRAFICANT. The land is in place, the architect and design is in place in Jacksonville?

    Ms. BROWN. That's correct.

    Mr. TRAFICANT. And the election is over. I'm going to tell it like it is and put the fertilizer right on the seed corn here.


    Mr. TRAFICANT. And there's too much of this. Just like the politics of Atlanta, we wanted that new facility for our judiciary in Atlanta, but we didn't want to blow a half a billion dollars.

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    I'm going to say this to this Subcommittee. I think it would behoove us that when sites or purchases are donated that have a company commitment of taxpayer dollars for designs, that construction commencement shall ensue or no other projects get authorized.

    I am going to recommend that as a bill, Mr. Chairman, and I think it's time to get good fences here. Good fences make good neighbors, and I think we have to clarify our jurisdiction with a law, because we're just not cutting it.

    I yield back.

    Ms. BROWN. I'm still confused. I don't understand what you said. I want to know, where is my money.


    Mr. LEW. Obviously, we have no new courthouse construction funds. There is no money in the President's budget for that or any other courthouse.

    I'm trying to distinguish between the policy in the budget, which is very clear, courthouse are not in the budget, and the policy on the Jacksonville courthouse, which is not a rejection of that facility in the long term.

    We appreciate the work that was done. We understand the work that was done, and, in fact, was done properly in terms of local authorities being part of the process and the land being available.
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    We have some serious decisions to make in terms of how we build courthouses. I reviewed last evening, the testimony that you are about to receive from the Courts. There are disagreements in terms of what is the right design, and what is the right way to evaluate efficiencies.

    We don't pretend to be the sole arbiters of this. Congress has independent judgment that it exercises regularly in this area. The Judicial Branch makes its views known.

    We really need to have a period of time where we work together to try and come to some better understanding of how to proceed.

    We know we can't afford all the courthouses. We know that in a period of budgetary constraints, the billions of dollars that would be required to do everything that is desired in the Judicial Branch, we can't afford.

    We would like to get to the projects that really and truly are meritorious. I suspect Jacksonville would be one, but I can't sit here today and say what next year's policy is going to be.

    Ms. BROWN. I know Jacksonville is one, because we went through the procedure, whatever procedure in place, and we came up with the partnerships. I mean, this is a procedure that is gone through your procedure, it's gone through the House procedure, and we have a partnership with local government that have made financial expenditures, have made a commitment to make this partnership work between the local and the Federal Government.
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    It's like we're not keeping our word.

    Mr. LEW. I think, in fairness, in a year when there's a balanced-budget agreement with very tight caps on spending, when there are competing demands, the desire on our part to do repair and maintenance as an emphasized priority in this year's budget and not to have new construction, does not represent a long-term position, and is not any breach of any kind of an approach.

    Ms. BROWN. So that means that the money will be forthcoming?

    Mr. LEW. Well, I can't sit here today and on any matter say what's going to be in next year's budget. We have a lot of——

    Ms. BROWN. No, no. I mean, I want my money this year.

    Mr. LEW. Well, it's in Congress's hands now in terms of what goes on. We've made our budget proposals. We understand Congress will act on them, and may or may not concur with them.

    Ms. BROWN. You're right. In closing, the Congress does set the policy and the Administration carries them out?

    Mr. LEW. We do that, yes.

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    Mr. KIM. Thank you, thank. At this time, the Chair wishes to recognize the gentleman from Louisiana, Mr. Cooksey.

    Mr. COOKSEY. Mr. Lew, welcome to the Subcommittee on Public Buildings.

    Mr. LEW. Thank you, it's a pleasure to be here.


    Mr. COOKSEY. Very briefly, how urgent is the need to build this DOT building, and why?

    Mr. LEW. I would defer to Jack Basso, who will appear later, to give a detailed explanation of the needs.

    My understanding of the needs are that they're substantial, that the building has considerable problems, that were we to remain in the NASSIF building, it would require a great deal of work to meet current standards.

    I can't address with great specificity, the problems in the building, or the cost of improvements that would be necessary.

    Whether it's a today or tomorrow issue, it is certainly a near-term issue that we need to address. That's why we proposed the study for a new building.
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    Mr. COOKSEY. If you were to make a wild guesstimate, when would you expect this building would be started and completed?

    Mr. LEW. I could turn it around and ask whether you can make a wild guess as to whether or $14 million will be approved and in effect on October 1.

    Seriously, if we get the study, we will proceed expeditiously with the study and would proceed, in the course of preparing next year's budget, to begin to consider the funding implications.

    Mr. COOKSEY. Do you think it could be done in 5 years?

    Mr. LEW. I actually can't address that. I'd be happy to get back to you. I don't know what the construction schedule for a building of that sort would be. That sounds a little long to me, but I wouldn't want to answer that without checking.
    [Information received follows:]

Construction Schedule for the Department of Transportation Headquarters
    The DOT construction prospectus, submitted to the Committee on March 17, 1998, estimates that construction will begin in FY 2001 and occupancy will be completed in FY 2004.

    Mr. COOKSEY. How much assurance can you give me that OMB is really making good and proper business decisions and is no longer vulnerable to political pressures as obviously occurred in the Atlanta building?
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    The Atlanta building really had some problems and there were some transgressions that occurred from what I have learned as a freshman—an old freshman, but still a freshman.

    And that was unjust for the taxpayers. It was unjust for the people that should have been served by this building.

    But how much assurance can you give me that that's not going to be occurring in the future? I know this not a very political city, but what about your department?

    Mr. LEW. If I were carrying policies that were politically popular, this would be a lot easier hearing. We're not taking the politically popular position on leases.

    I can hear quite clearly that the Members of this Committee would prefer a different approach to property acquisition. I think we are taking a policy that reflects our best judgment of the analysis of the financial implications of Federal real property acquisition and operation.

    It's billions of dollars; it's not a small book of business.

    You know, when I testified last year on the Atlanta building, I tried to be very frank with the Committee. I didn't see any reason to make it a difficult discussion.

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    I would disagree with your characterization. I don't think there were infractions.

    I think that the problem with the Atlanta building is that it shows that one can find technical ways to use the rules when there's a desire, mutually, to do so, without breaking the rules, to do something that may not be the most optimal financial transaction.

    To the extent that we are redoubling our efforts to use the rules to keep transactions well within the bounds of the best financial analysis, it is greeted with some opposition.

    So the desire on the part of the Committee to push us in the direction of transactions that we think are financially less advantageous to the American people, comes into direct conflict with our desire to try and do it in the way that I think reflects the intent of your question, which is that we should manage the way a private venture would, to do it in a way that's most cost-effective.

    Mr. COOKSEY. You're telling me that you don't think that any rules or laws were broken in the Atlanta building?

    Mr. LEW. When I reviewed it, that is a conclusion that I came to, yes. I testified before this Committee at great length on it, and would stand by the testimony I gave.

    Mr. COOKSEY. I realized it occurred many years before you were there.
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    Mr. LEW. It was before I was there. I, in fact, became familiar with it in preparation for my testimony last year at this hearing.

    Mr. COOKSEY. Thank you, Mr. Chairman, thank you, Mr. Lew.

    Mr. KIM. Thank you. Are there any other members wishing to be recognized?

    Ms. NORTON. Mr. Chairman, could I make a request?

    Mr. KIM. Could you make it brief, please?

    Ms. NORTON. Could I make a request of the Chairman and of this witness, while he is here?

    Mr. Chairman, I don't enjoy beating up on witnesses and hearing the same, literally the same litany each time.

    Could I suggest one approach? With respect to scoring—and Mr. Lew has indicated that he'd be open to looking more closely at our disagreement, and rather than have us state our position and he state his each time, I wonder if Mr. Lew would agree and the Chairman would agree to a working group consisting of staff from this Committee, who could look to see if we could carve out some room for discussion of how to move forward, if at all?

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    For example, I don't know that there might be some room in scoring with respect to long-term leases, some room that we might begin to work together to find some place where some agreement could be found. That would be one.

    And, two, whether that group, consisting of staff and Mr. Lew's staff—of course, GSA would have to be included as well—could work to develop a policy to deal with agencies who drag their feet at great cost to the taxpayer in moving into government-owned space such as Southeast Federal Center.

    Again, if we could all—if we could come together and decide what to do—the present policy is just to let the agency rule the day. If we could come together and work together, we might be able to break through these two problems.

    Mr. LEW. I think it's a very good idea.

    Mr. KIM. The Chair wishes to recognize Mr. Traficant.

    Mr. TRAFICANT. Mr. Chairman, to accommodate that request, I ask unanimous consent that our Committee be prepared to meet with GSA staff, our Committee staff, and OMB staff, for those who are willing to participate, to notify of their willingness to participate, and for that process to begin.

    Mr. KIM. Without objection.

    Mr. TRAFICANT. I would also like to close out and say something.
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    Mr. Lew, I hope you're not offended.

    Mr. LEW. I'm not offended.

    Mr. TRAFICANT. I want to tell you something and I really mean this. You are very bright and very competent, and we all have to get on the same page.

    But I think that when it comes to scoring, the situation here is very, very costly. There are certain areas where I think we can find this common ground.

    We may not have an ideal marriage with this business, but we should at least fashion out a shotgun wedding and get something done here.

    We want that done. We know the abilities that you have, and we've got to do this. We need flexibility for GSA and that's the goal of this Agency.

    Mr. LEW. We're certainly ready to have conversations with you and your staff. We'd like the CBO to be part of the conversations, if that's possible.

    Ms. NORTON. Very good.

    Mr. LEW. And without committing to a process that has formal bounds, we're always prepared to engage in those discussions. We prefer to do that than to have hearings where we just repeat the same things. It's not more satisfying from our side of the table than it is from your side of the dais.
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    If we could come to some understanding, it would be wonderful. There are big differences and that's why people have to keep talking.

    Mr. KIM. Thank you, Mr, Lew, thank you very much.

    Now, we will hear from our second distinguished witness, Mr. Robert Peck, the Commissioner of Public Building Service.

    Mr. Peck, good morning.


    Mr. PECK. Mr. Chairman and Members of the Subcommittee, it's a pleasure to be here.

    I have a formal statement which I would like to submit for the record, and, of course, this time it was here a week early because you made us get it on time this time.

    I would like to thank Mr. Traficant for recognizing our Assistant Regional Administrators for Public Buildings who are here. Eight of our 11 ARAs, as we call them, are sitting here.

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    They are the career people from around the country who get the real work of GSA done on a day-to-day basis, and they lead a very dedicated group of Federal employees.

    I will briefly summarize my statement, but I want to note first of all that I want to report that the Fiscal 1999 budget, which I am here to talk about, of course, reflects our successful resolution in just 1 year's time—or year and a half—of the revenue problem that accumulated in Fiscal Years 1996 and 1997.

    We began reducing expenditures in 1997, rather—and by adhering to a stringent fiscal regime through this entire Fiscal 1998 Year, we will have made good the fiscal imbalance that resulted from the seven-percent gap in revenues that happened to us in Fiscal 1996 and 1997.

    I want to tell you that we have followed through on the reform measures that I talked about last year. We have overhauled our estimating procedures, we have tightened up our collections, so that by the close of the Fiscal Year 1997, we were within three-tenths of one percent of the 1997 revenue estimate we provided a little over a year ago.

    In fact, we collected $72 million more revenue than we had anticipated. We've cracked down, we've become sort of tough landlords as we should be.

    I would note that I always say that we are fortunate in the Public Buildings Service, more fortunate than some other government agencies, in that we have all the instrumentalities in place to behave in a businesslike manner, at least in as businesslike a way as government can be.
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    We get revenues from our tenants. We have expenses going out. That means there's a bottom line that we can measure.

    Most years—and this year is one of them—we fund the preponderance of our budget from the rent payments we receive from Federal agencies. That's why, of course, it is so important that we collect all of our revenue.

    We have a net income which, of course, is net of fixed expenses, building operations, leasing and installment paid-in costs, and what is left, the net income, is what we have to spend, is what is available to us to spend on major repairs and alterations, the capital investment that we need to make to keep our building inventory up to standard.

    We maintain on behalf of the American people, a building inventory with a value of approximately $30 billion. It is crucial that every year we have an amount of money we can count on to do repairs and modernizations, and the basic maintenance that is necessary to keep a building inventory like that valuable in economic terms, and productive for the Federal employees who occupy it.

    I would just note, as Mr. Lew did, that we asked for new obligational authority of $5.1 billion. I will review very briefly, the basis on which we made that.

    The revenues do reflect, for the first time in several years, a three-percent increase in rental rates. In part, Mr. Chairman, this responds to your suggestion last year that we ought to take a look at whether our rents were actually reflecting the market.
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    We discovered that in most major markets, with the recovery that has happened in the real estate market, our rents our, in fact, now below—the rents we charge Federal agencies are below what the private sector charges for comparable rents, at least in many metropolitan areas.

    We are streamlining our rent-pricing policies. In line with reinventing government, we have reduced the number of classifications in our system from 16 to four.

    We are now signing occupancy agreements with Federal agencies so we have an understanding of what they owe and what services we are going to give.

    And we will give them some clearer bills. We are reducing the kind of prescriptive rules we used to have.

    The budget itself includes $1.6 billion for building operations; $2.6 billion for rental of space lease payments. That means about half of our budget now is leasing.

    There is $668 million for repairs and alterations, both major and minor; $216 million for installment acquisition payments. These are the payments we make under lease-purchase and financing programs that were authorized by the Congress in two separate actions, one about 20 years ago, and another about 10 years ago.

    And as we've noted, there is $44 million for construction and acquisition, and all of that money comes out of the Federal Building Fund. I just always like to note that 90 percent of all of that money is paid out to the private sector for engineering services, maintenance, security, utilities, lease payments, and the like.
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    The budget for building operations is about what it was in Fiscal Year 1997. In 1998, we took a serious reduction in that, and I would just urge you, as I will urge everyone in Congress, to leave that $1.6 billion where it is.

    It is very hard to operate. We create these kinds of budgets on benchmarks that tell us how much you need to spend per square foot to operate a building, in fact.

    We've done some sophisticated surveys against the private sector, and, per-square-foot, in government-owned space, we operate buildings cheaper than does the private sector for commensurate space. We have a particularly good record in paying and buying utilities.

    As I have noted, our repair and alteration budget, $324 million is for major repairs and alterations for ten prospectus level repair and alteration projects; nine prospectus level R&A designs, and for the ongoing chlorofluorocarbon or CFC reduction and energy saving programs.

    I will note, too, just that we are trying to take a look at the way we evaluate repair and alteration projects to make sure we get the most bang for the buck. We are applying private sector return on investment criteria to our repair projects, and we also use a benchmark that private sector people who have inventories somewhat like us use, and we pay our basic R&A program at about two percent of the value of inventory per year.

    On our capital program, I certainly won't go over the proposed DOT building again, although I'm happy to answer questions about it. I will just note that we also have proposals in there for some border stations.
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    I will note, too, that we are reassessing the 1992 Master Plan for the Southeast Federal Center because—which Ms. Norton has spoken about. The Department of the Navy is moving about 5,000 employees into the Washington Navy Yard next door, and we think there are some opportunities for synergy there for us to do some development on our site that will help them, and vice versa.

    I note, importantly, that we have in our budget, a request for remediation funds for the Southeast Federal Center of $10 million.

    It is true that we propose no new obligational authority for courthouses in 1999, but continue work on 46 courthouse projects previously funded in whole or in part, meaning they were either funded for design or for design and construction.

    In 1998, we will deliver nine new courthouses, and an additional 11 in Fiscal Year 1999.

    Again, I would note that in most years when we have a construction program of the magnitude of the courthouse construction program, that funding has not come out of the Federal Building Fund rent collections, but rather from appropriated funds.

    I would note to you that appropriations to the Building Fund for new construction between Fiscal 1990 and 1997 amounted to over $2.8 billion.

    Finally, I will just note that in an attempt to be the business type organization that we can be, and to be all that we can be, we have instituted a series of 13 performance measures which include measures of space occupancy, our leasing costs versus those that the private sector has, the number of our projects that are on-budget and on-schedule, costs of our protection versus the private sector.
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    I think we have a number of performance successes to relate, which I have included in my testimony, including particularly our success in bringing down the time it takes us to carry out leases.

    In the security area, I will note that through the end of calendar 1997, we were approaching completion of some 8,000 security countermeasures that were identified after the Oklahoma City bombing, and are very close to completion on Level IV buildings. Those are the larger buildings that we have categorized as being most at risk for one reason or another, and we are achieving a great rate of success in completing the countermeasures on Levels I-III buildings.

    I will also note, particularly, Mr. Traficant, since you noted it, that as of December 1997, we had 641 uniform Federal Protective Service officers onboard. That's up from 389 in 1995.

    We are continuing to work towards our target which was defined in a workload study by the Booze Allen Hamilton firm of 724 full-time officers. And we expect to achieve that soon. I would just say that I hope to work with you on talking about some of the problems that you identified in our Federal Protective Service.

    Finally, I would just note that we are doing all of this with a smaller crew. We have about—we are 27 percent fewer Federal employees in the Public Building Service than we were in January of 1993.

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    That means our people are working better, and we think they are also working smarter.

    Finally, I will just note that we are doing a number of things with information technology to make sure that we behave like a businesslike organization.

    We've learned the lesson that a lot of the rest of government has learned, that rather than trying to create our own brand new, unique computer systems, we have licensed from AT&T, a real estate inventory tracking system that they had used successfully for years.

    We think we managed to license it at a price much cheaper than we would have gotten from trying to do it ourselves. We've rolled it out, our people are now using it. I June, it will connect with our financial systems, and we will be able to provide much better and more timely information to the Committee, just as my managers will be able to provide more timely and accurate information to me.

    That concludes my statement. Of course, I'm happy to answer any questions.

    Mr. KIM. Thank you, Mr. Peck.

    I do have just a couple of simple questions, and then we'll move on to other Members' questions.

    Going back to this DOT building, I'm not against it. I understand the existing building is not suitable.
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    This $14 million to design, as I understand it, you did not request it. Who requested this funding anyway? Is it OMB that did it?

    I know you didn't. Who did?

    Mr. PECK. Well, Mr. Chairman, I'll say two things. One is, it is, of course, true, as Mr. Lew testified, and most everyone agrees, that in the long-run, the best solution, particularly for Departmental headquarters buildings, is for the government to build it and own it.

    But without discussing our request to OMB, which, as you know, we traditionally don't do, I will just note what you all have already noted, which is that last year, both the House and Senate approved prospectuses.

    This Committee approved one that said we could either lease or construct. The Senate approved one on November 6th that suggested that we lease.

    So, it would be fair to assume that at least for some part of last year, that's what we were assuming we would do on the DOT building.

    Mr. KIM. Does GSA propose to use the Southeast Federal Center as a future DOT headquarters?

    Mr. PECK. Well, certainly because it is a site that the government owns, as Ms. Norton has noted, it is a site which we have discussed extensively with the Department of Transportation, as we have with other agencies.
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    It is certainly with respect to a government-owned building, the first and foremost site that we are going to look at.

    Mr. KIM. You're also requesting $15.1 million, another design of a facility, for United Nations Mission.

    This, I understand, is going to cost roughly $50 million altogether. How are we going to fund this project, while the courthouse construction is halted?

    And then is that still including residential quarters, too?

    Mr. PECK. Hold on a second, Mr. Chairman.

    For the Ambassador to the United Nations, it does include residential facilities. Again, while this is for design—we obviously have not anticipated where in future budgets—the actual construction would be funded.

    Mr. KIM. You had a mistake in creating shortfall. I don't want to go back and pounding this because we had enough of that.

    I want to make sure that you don't make the same mistakes again next year.

    Mr. PECK. I can tell you that we have corrected several things that turned up in our review of the shortfall.
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    We are now using two different methods to estimate our revenues so that we have a check on ourselves. We are going down to the grassroots to try to find out, building-by-building, where we think our revenues are coming from.

    And we are tracking our collections on a quarterly basis. So we are fairly confident, for example, this year, that we are on track.

    Finally I will say that we'd have to be stupid not to, but we are taking the most conservative estimates we can of our revenues projections, and I can assure you that there are no rosy scenarios embedded in our revenue estimates.

    Mr. KIM. The last question I have is, you mentioned last year that GSA's leasing budget would be declining. And then this year, you're asking for an 11-percent increase. Why is that?

    Mr. PECK. Well, although the space that we are going to lease—the leased inventory, remains—will stay flat in Fiscal 1999, we believe, the amount of money we will spend to lease will go up. There are several reasons for that:

    One is that as anybody who is a tenant in a private sector building, we have to pay real property tax and utility escalations that landlords pass on to us. Moreover, about one-sixth of our inventory turns over every year, and as we sign new leases in real estate markets that all over the country are experiencing lower vacancy rates and higher lease costs, that gets reflected in what we pay.
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    So, although the inventory remains about the same, the cost to us of leasing that space continues to go up.

    One other note that I would just make is that we are—in some cases where agencies give back leased space to us, it would be in the best interests of the government if we could buy out the remaining terms of some of those leases.

    Unfortunately, that requires some up-front funding, and we frankly just don't have room for that in our budget.

    Mr. KIM. This time, the Chair wishes to recognize our Ranking Member.

    Mr. TRAFICANT. Mr. Peck, you can tell by the way you've been treated that this Subcommittee has a lot more faith in you than OMB.

    You see what we've had. What we've had is, GSA needs flexibility, but they wear a little bit of two hats because they don't want to get the President mad and OMB mad, so they try and get us to do for them what they sometimes don't have the testosterone to do for themselves.


    Mr. TRAFICANT. I want to tell you something, being on this Committee for a long time, I want to commend GSA for being the model for smaller government. Much of it was done without pain.
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    It was an intelligent downsizing. I want to commend your management people in the field who took a look at the human factor, tried to save the lives of people without throwing them out on the street.

    I want to also commend here, belatedly, a former Director, Mr. Roger Johnson, who took great heat for a lot of political statement that were made. He helped to do that.

    I commend you for having done that. We had a lot of confidence in your ability to do a good job.

    You're the biggest real estate operation in the world. Your task and your responsibilities are actually awesome, and they are rather not made very public and sensational because of the nature of your duties that are basically businesslike and systematic.

    We want to give you more flexibility. You're going to have to step up to the plate a little bit, and you're going to have to start leaning on the White House. You're going to have to start putting your political apparatus in order.

    The OMB are very smart people. And the OMB and the Executive Branch has been painting a rosy scenario by machinating numbers for years.

    We want to have an honest reflection of our budget numbers. Not every deal may be a good deal, but when it is, we want you to be able to make it.
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    I have a number of questions here, and I'm going to submit them in writing, and I want you to respond to them in writing.

    This Subcommittee is taking the lead from the Oklahoma Senate which passed a law yesterday, Mr. Chairman, yet to be approved, that for rape and sexual offenders, they will now allow castration. This Committee is going to get down to business.


    Mr. TRAFICANT. In closing, we like the way you work with the Administrative Office of the Court. We want to work with you, but we want to say one thing. When our taxpayer dollars are used to buy property and design buildings, we want those buildings put up.

    We're not getting that type of response, and we think there's some politics at play. We are going to have to address that issue on some outstanding projects which include Mrs. Brown's and others' that are currently being funded, properties acquired, design is affected, and we are sitting here holding our prospectuses.

    So with that, I yield back my time.

    Mr. KIM. You got me confused for awhile. At this time the Chair would like to recognize the gentleman from New Jersey, Mr. Franks.

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    Mr. FRANKS. Mr. Chairman, thank you very much for your gracious willingness to allow me to sit in today as a member of the subcommittee. Being a member of the Full Committee, I wanted to come this morning—Mr. Peck, good morning——

    Mr. PECK. Good morning.

    Mr. FRANKS. ——to talk about the most significant property that's owned by the Federal Government in my District in New Jersey.

    Last December I wrote to the Administrator of the GSA requesting information on the status of any plans to dispose of property located at the Belle Mead Depo which is located in Hillsborough and Somerset County.

    Since then, I have received information from the Regional Administrator in Boston. I have also received a letter from the Region III Administrator regarding the status of the Department of Defense stockpiled at Belle Mead Depo, and I thanked the GSA for those responses.

    I would also today like to submit for the record a letter from the Township of Hillsborough that expresses a sincere local desire in acquiring this property.

    However, I recognize that in order to do that significant remediation work may be required before a transfer of the property could occur.

    I am still concerned—and I am looking for some reassurance today—that the central office of the GSA has an adequate sensitivity to the issues surrounding the Belle Mead Depot.
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    For example, despite the fact that the property has essentially laid fallow for a significant number of years, I am at least at this juncture unaware of any environmental assessment of the property which would describe what the GSA would need to do in order to remediate the site and convert it to a productive use.

    Let me emphasize that the population around the Belle Mead Depot is growing dramatically. Much of the site that is controlled currently by GSA and the Federal Government is under-utilized.

    While I do not want to get into a discussion this morning about the particular use to which the property could best be put, I hope that the Federal Government can be a good neighbor by making this underutilized property available to the community.

    I would ask the GSA to work with me in achieving that goal. Generally I would like to know if in your capacity you will take an active interest in this Belle Mead Depot and report back to this Committee within a reasonable period of time bout GSA plans for disposal of excess property at the Depot which would, recognizing the need to coordinate with the Department of Defense concerning its plans to dispose of the materials still stockpiled there—specifically I am also interested in knowing GSA's plans for any remedial environmental work of the government- controlled area, including any time frame for the clean-up work.

    Also, if you would, provide the Committee with this information so we can coordinate efforts to remediate the property as quickly as possible.

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    [Letter from the Township of Hillsborough follows:]
    [Insert here.]

    Mr. PECK. Yes, sir.

    Well, Congressman, I have to say that although I was born in New Jersey, I had not known about the Belle Mead Depot—but I do now.

    I will tell you that we have spent about $3.1 million on some short-term remediation, although I will note—and I hope it does not sound like a government Catch-22—that the rules are that the agency that has controlled the site for most of its time is responsible for remediation, which probably indicates the Department of Defense.

    Preliminary estimates of what it could cost to remediate are rather high. So we need to talk to DoD about that. I will just note that we have a short-term plan which I believe has been discussed with Hillsborough Township officials to issue a solicitation to lease out part of the property by the end of this month and, depending on the response of private sector offerors, we could have a solicitation out in June or July.

    I believe that, if I recall correctly—let me check my notes—that is for a part of the property which we have identified as it can already be used, and possibly be used without remediation. It is a part that is not the stockpile area.

    I will be happy to respond to your questions in writing for the record.

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    [Information received follows:]

    [Insert here.]

    Mr. FRANKS. Mr. Peck, thank you very much.

    Mr. Chairman, thank you. It has been both enlightening and frightening.

    Thank you.


    Mr. KIM. Mrs. Norton?

    Ms. NORTON. Thank you, Mr. Chairman.

    First let me say, Mr. Peck, that in the District we appreciate the work that GSA has done with the District at a number of different levels, from our schools to the Police Department have been very helpful in allowing use of your procurement, and generally have been helpful to the District.

    As long as consultation with me, when appropriate, is done, I would like to encourage that—and I think we are on the same page on that.

    Mr. PECK. I think so. I thank you. And our National Capital Region has done a lot of very good work, and I appreciate you saying that.
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    Ms. NORTON. It has.

    In your testimony at page 8 you indicate that you are reassessing the 1992 Master Plan for the Southeast Federal Center, and imply that its present focus—which is a single focus—to house Federal agencies is one that you are evaluating for a different kind of tenant mix, including ''private sector participation and mixed use.''

    Could you elaborate on that part of your testimony?

    Mr. PECK. Yes. Lest my testimony mislead anyone, it is clearly still in our plans that this be a site for Federal agencies. And as I noted for DOT, we are going to be having serious discussions with respect to the government's own plan of the Southeast Center as a site.

    As I have indicated before, we have discussed this as a site for other Federal agencies. There is hardly a Federal agency relocation in the District that comes up that we do not suggest this site.

    What we meant to indicate was that, in discussions with the Navy Department which seems to be one of the best-kept secrets in Washington, that there is this huge economic impetus happening over there courtesy of the Federal Government with 5000 employees moving into the District.

    They have suggested an immediate need for some activities which they think could be located on our site which would result in development either of facilities associated with what they need—for example, a hotel, and possibly other space that they need for Navy functions on the site.
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    Ms. NORTON. But that is not the Southeast Federal Center site? Or it is?

    Mr. PECK. Yes, ma'am. The possibility is that some of the functions—they are just really crammed full in the Navy Yard now, and they might be able to use some of the Southeast Federal Center site.

    That is one possibility.

    The other is that there is some potential, because of the Navy move, for some other private-sector interest in the site.

    However, one of the things we have to look at is—if we consider those—obviously impacts on the community. We want to make sure we have enough space left. Obviously our first priority is still Federal tenancy on the site.

    And finally, there may be some possibility for private sector participation in some forms of development, including Navy-type facilities because they have some authorities which allow long-term leases to the private sector for facilities that are used by the Navy that are within the scoring rules that do result in some development on government-owned land.

    Ms. NORTON. I would like to encourage something to jumpstart this site, even if it meant that you do some perhaps not extensive but some important work there, because the whole point of the Southeast Federal Center site was to get a Federal agency there.
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    GSA was thinking about going there at one point so that everybody would know there was nothing to fear but fear itself. We are talking about a site that is 5 minutes from the Nation's Capitol.

    I have to tell you, it is a disgrace essentially who is deciding the use, who is holding this up, are agencies who know that they need to build and do not want to move out of the District and play games with you all, and you play games back.

    Meanwhile, you see what you have got. You have got no money.

    Mr. PECK. Right.

    Ms. NORTON. OMB is doing nothing for you. We have not been able to make the move off of scoring. Meanwhile, you are not using your power and your authority given to you by this Congress to make something happen at the Southeast Federal Center.

    Mr. PECK. I agree.

    One of the things that we are looking at in the plan is that, rather than wait until we have everything in place—I mean, the way you develop sites like this, because it is perceived as an out-of-the-way site; although as you note, it is not. It is on a direct line down New Jersey Avenue from the Capitol, and not very far.

    What you need to do is get something going so that we change the image of the site and get people used to going there, and do the sorts of things they did in the Inner Harbor in Baltimore before that ever got developed.
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    Just start getting something on there. That did not start with all of it being developed all at once.

    Ms. NORTON. What we have got is zero development here, and that is what concerns the Committee.

    We have got zero development. When you talk about the possibility of a small hotel or something, I would encourage that.

    In the meantime, I have got to ask you about ATF. They desperately need a building. It needs a big setback. It desperately does not want to leave the District of Columbia. It went through a lot of changes back and forth between the Senate and we got those straightened out, and still nothing has happened.

    What can you tell us about the time frame for moving the ATF either to the Southeast Federal Center or to some other site in Washington?

    Mr. PECK. If you would give me a moment...

    [Mr. Peck and his staff confer.]

    As I think you know, that is going toward a long-term lease and we are preparing the solicitation, which I am told will be ready shortly, for a headquarters building for AFT.
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    We are indicating in the solicitation a clear preference for the District.

    Because that is a——

    Ms. NORTON. ''Preference'' for the District? I do not understand anything but ''a District of Columbia.''

    Are you indicating that there was a possibility that the ATF could be placed some place else?

    Mr. PECK. I am not.

    Ms. NORTON. We went over these things——

    Mr. PECK. I am not.

    Ms. NORTON. ——with what this language would say, and now you are coming back——

    Mr. PECK. No, ma'am. I am saying the lease solicitation is going to reflect the language that was agreed to with this subcommittee——

    Ms. NORTON. The Secretary, with the Secretary of the Treasury——
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    Mr. PECK. Yes, ma'am, and in consultation with this Committee and the Senate Committee, which indicates AFT will remain in the District.

    With respect to the Southeast Federal Center, however, because a lease of a building on government-owned land scores as a capital lease, the AFT under a lease prospectus would not be able—we would not be able to locate it on the Southeast Federal Center with the lease prospectus.

    Ms. NORTON. Of course I was not insisting upon any particular site for the AFT. The fact is this Committee has appropriated I think—you need $30 million; we have appropriated $20 million to do environmental cleanup. You are asking for another $10 million. You are probably going to get that $10 million.

    We continue to do what you ask us to do, and you continue to do nothing, frankly. We do not have one single agency in 8 years—actually, it is longer than that—that you have been able to get to the Southeast Federal Center.

    If it is not the AFT, I am asking you whether or not your next move is going to be to get some Department of Navy construction there, such as a hotel or something else, or whether you are going to, to quote my Ranking Member, get up enough testosterone to use your authority to finally save the taxpayers some dollars by getting someone on that site to break that site open so others feel they can go there.

    Mr. PECK. I can assure you that someone else would have to determine my testosterone level, but——
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    Mr. PECK. ——I can tell you, I has pushed as hard as I can in several meetings with a number of Federal agencies to talk about the Southeast Federal Center as a site, and to try to get them to go there.

    I am still confident we will find tenants for the Southeast Federal Center.

    Ms. NORTON. You have to use your authority. You have authority. You have left this out here, and you are spending money all across the region. You have left this out here unfilled.

    Are you willing to use your authority, if you cannot break this logjam, to say what you can do. which is to say, you will build here on the Southeast Federal Center? Are you willing to do that?

    Mr. PECK. You are right that we have the authority to assign Federal agencies to locations. Let me say it this way. When we find the right fit between the agency and the site and get full approval within the Administration, we would of course be willing to use our authority to direct someone to the Southeast Federal Center.

    Ms. NORTON. Mr. Peck, would you be willing to participate—that of course is exactly the conundrum we have now. I understand that you are constrained by the Administration and the rest—would you be willing to participate in the working group that I spoke of with Mr. Lew to sit and try to find a way to bring the Administration and the Committee together so that taxpayers' money does finally get saved and we are able to move somebody into the Southeast Federal Center after a decade or more of not being able to move?
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    Mr. PECK. Of course.

    And I should say, too, we have had some discussions with OMB about alternative financing arrangements, and it could possibly work even within the scoring rules. So I would be happy to—although I do not know that we can find a successful way to do that—but we would be happy to participate in that kind of a working group.

    Ms. NORTON. I just think we have got to break through this. GSA is of course caught between a rock and a hard place, but at some point somebody has to engage in the kind of leadership and problem-solving that begins to move people into a massive amount of government-owned space that is lying fallow.

    Mr. Peck, recently the FCC and the GSA have received bad publicity about the handling of that building because, for 10 years now, despite a court order, and despite the fact that GAO has found that the space is cheaper than any space that could be found in Washington, that procurement was a regular procurement, was unlawfully aborted by your predecessors, despite that we are paying rent on the FCC building, and dispute after dispute continues to develop between the FCC and GSA.

    There are some at FCC—not the Chairman, I believe, I am pleased to say—but there are some still at FCC who would do anything they could to keep from moving to the space where we are now paying rent; where now the television cameras have begun to go; the newspapers have begun to go; and they have begun to publicize the fact that GSA and FCC have not been able to get their act together.
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    The latest dispute has involved security. I do not know why that would have been a dispute at all since GSA has been working on security matters involving government agencies since Oklahoma City, but I would like to know the status of the security dispute at FCC.

    Mr. PECK. I believe it is almost resolved. The remaining point on security has been about whether people entering the cafeteria of the building, which is under the control of the lessor, have to sign in and show identification so that we can secure the entire building.

    Or, alternatively, whether we can prevent people who are just using the cafeteria from getting into the FCC part of the building through some other mechanism that requires somebody going into a cafeteria to sign in and show an ID.

    It is that level of detail we are down to. I believe that that is easily resolved. We have had a number of meetings about it, and I think that will be resolved.

    Ms. NORTON. Is there going to be any delay in the time frame for FCC to move—in the existing time frame, for the FCC to move into the building?

    Mr. PECK. Not due to the security.

    Ms. NORTON. What, then?

    Mr. PECK. One thing that is still hanging out there, one of the unusual aspects of this procurement is that normally in a relocation like this the agency pays for the actual build-out of the space to its specification.
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    In other words, for the furniture, and telecommunications equipment, and the cost of actually moving the moving vans and those sorts of things.

    One reason for the delay which is way too much on this product, has been that the FCC, although the Administration and the FCC have requested funding for the FCC to pay those costs, the FCC's Appropriations Subcommittee in Congress in approving it have never given them the money.

    So as you may know, some years ago we said that GSA would advance those funds with the understanding that the FCC would pay them back, to the extent that they got appropriations.

    Mr. KIM. I need to move on to the next——

    Mr. PECK. I can finish briefly.

    There has been some confusion back and forth because this is not the normal way we transfer funds on this.

    And finally, there is a, we believe, because of this there has been some confusion over who is responsible for doing the final space design, and we now believe that is resolved.

    We still believe that the FCC can begin moving in May or June of this year, which is the schedule we have been talking about for quite some time.
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    Ms. NORTON. Thank you, Mr. Chairman.

    Mr. KIM. Thank you.

    Mr. COOKSEY. Mr. Peck, it is good to have you back.

    Mr. PECK. Thank you, sir.

    Mr. COOKSEY. I am reassured to see that you have got your house in a little bit better financial order. It is better than last year, and I think your department should be complimented for doing that because there were some major problems last year.

    Mr. PECK. I feel better, too. And you are right.

    Mr. COOKSEY. I think the space classification simplification certainly is a step in the right direction and probably contributed to this because there were some problems—and I know that you inherited those, because you were new this time last year.

    I want to assure you that if you should ever decide to move some of these buildings from the District of Columbia to some Congressional Districts, you would make a lot of Members of Congress happy. You would be treated very nice.


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    Mr. COOKSEY. And it would spread the revenue around. We have got some cotton fields that are available in my District.

    Mr. PECK. I should say that 75 percent of our inventory is outside the Washington area. So we are already pretty much around the country.

    Mr. PECK. Well, good. Well thank you very much.

    Thank you, Mr. Chairman.

    Mr. KIM. Mr. Traficant would like to make a brief statement.

    Mr. TRAFICANT. Good morning.

    One quick question. Many of the workers and unions are concerned about contracting out activities. In that regard, I would like to know.

    What is the projected level of plans to contract out, if any? And what is your current employment level?

    Mr. PECK. We are at about 7,400 as of December 31st last year when we had a number of people take the buy-outs. That is about the right number.

    I can get you the exact number.

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    We do not have plans to contract out any major parts of our activities. Last year, we did put in place a real estate broker contract on which we will probably spend about $2.4 million this year, if the current rate of spending holds up, to fill in gaps and to handle uneven workload in our various regions.

    And of course we do, as most government agencies do, have various contractors doing other things. For example, in Information Technology we have contractors and we do get economic consulting services and those sorts of things.

    Mr. TRAFICANT. Thank you.

    Mr. KIM. Thank you.

    As you noted, I was pretty upset last year. But you notice the tone has been changed greatly since we find out it is OMB that is the bad guy.


    Mr. KIM. So we have a warm relationship today.

    Mr. PECK. Well I am glad we got that straight.


    Mr. KIM. Thank you very much, Mr. Peck.
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    Before I invite the next witness, the subcommittee will recess about 15 minutes. We will reconvene at five after—oh, yes.

    I am sorry. Is Judge Stahl here?

    Oh, let us invite Judge Stahl first, and then we will take a break. Judge Stahl is Chairman of the Judicial Conference's Security and Facilities Committee.

    I would like to welcome you, Judge Stahl. We appreciate your participation today. I did not see you there.


    Judge STAHL. Thank you, Mr. Chairman, and Members of the Committee.

    For the record, my name is Norman Stahl. I am a Judge on the Court of Appeals for the First Circuit located in Boston, and I currently serve as Chairman of the Security and Facilities Committee of the Judicial Conference of the United States.

    I am going to briefly summarize my written testimony which I have already submitted to the subcommittee.
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    Over the past 10 to 15 years there has been an enormous increase in the workload of the Federal Judiciary resulting in a similar increase in our personnel and in the number of judges needed to handle that increased caseload.

    This expansion in our workload results primarily from the legislative efforts of both past and present Congresses and Presidents to wage a Federal war on crime and the illegal drug trade.

    The criminal caseload in the Federal courts has increased both in numbers and in complexity at the same time as the Federal judiciary's civil jurisdiction has expanded also in number and complexity.

    The bankruptcy caseload has also risen sharply.

    Most of our existing court facilities were built over 50 years ago, although some were built during the late 1960s. Of those built 50 years ago and the ones built in the 1960s, most of them are seriously obsolete.

    Your Subcommittee staff has visited many of these facilities, and it is clear that deplorable working conditions exist at many locations.

    It is usually impossible to modify these facilities to provide the additional space needed for the increasing numbers of judges and staff.

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    In those cases where we have historic buildings which lend themselves to re-use, we have done so I think very well and I think staff has seen some of those facilities and perhaps Members of the Committee.

    Many of the antiquated buildings we now use pose serious security risks for jurors, witnesses, court employees, and judges. Often these individuals use the same corridors, and ride in the same elevators as the individuals charged or convicted of serious crimes.

    Finally, many of these old buildings cannot be equipped with the technology now necessary for the functioning of a modern-day court.

    The Security and Facilities Committee and its staff have worked closely with the Transportation and Infrastructure Committee, and in partnership with the General Services Administration over the last several years to ensure that appropriate, adequate, and secure work space is provided so that we would have an efficient Judiciary.

    Because the projected facilities are clearly needed, we were deeply concerned when there was no funding to continue the courthouse construction program in fiscal 1998 as a result of the shortfall in the Federal Building Fund.

    We had every expectation, however, that the GSA would be able to resume the program in fiscal year 1999. We now find ourselves in the intolerable situation of a projected second year with no funding for courthouse construction.

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    We understand—and I am sorry that people from OMB are not still here—that the decision was not entirely related to the Federal Buildings Fund, but was rather made by the Office of Management and Budget as a matter of policy.

    In looking at the courthouses which were ready to go this year, several of them—I believe seven—had previously received site and design funds, and are ready to go this year.

    I will take one. For instance, Brooklyn, New York, and if the Subcommittee is interested I have pictures of the situation at the Bankruptcy Court in Brooklyn.

    It is a leased space. The lease is up. The space is totally inadequate, and we are going to restore an old building which will both be good for the community and give a decent work place to work.

    Now we are not going to be able to do that.

    In Biloxi, Mississippi, we have a leased building. The lease is due to run out I believe in 2002. It is a building we probably paid for four or five times. There is no residual value to the Federal Government. It is in deplorable condition. And that project will not go forward if there is no funding.

    And we can go down the list:

    Jacksonville, Florida.
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    Wheeling, West Virginia.

    We had two site acquisitions, one in San Diego, California, and one in San Jose, California. Those sites are available now. They may not be available in the future. It is the only place we can go. The costs will go up. They will not go down, as a result of this delay.

    Because of some of the comments which were made at the beginning of this hearing, I would like to summarize a number of the initiatives which have been approved by the Judicial Conference of the United States as part of our effort to improve management and control costs of the Courthouse program.

    Over the past 2 years, the Federal Judiciary has conducted a comprehensive and complete review of the United States Court Design Guide.

    First published by the Judiciary in 1991, the Guide contains the information about the special requirements for Federal courthouses needed by GSA, private-sector designers, and builders, and members of the Judiciary needed to make the Federal courthouses functional and secure quality public buildings with lasting value.

    While the comments from users indicated that the Guide was accomplishing its purpose, the Judiciary also received a number of excellent suggestions for improvements.

    Recommendations for changes to the Guide were approved by the Judicial Conference at its March 1997 meeting. A summary of the changes was previously provided to the Subcommittee staff. I am pleased to say that today I have copies of the revised Design Guide here which I will leave with the Subcommittee and with the staff, and more copies will be forthcoming. We could only carry three this morning.
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    In March of 1997, the Judicial Conference adopted a policy on courtroom sharing to guide planning for the number of courtrooms to be constructed in new or renovated facilities.

    Incorporated into the Guide, the policy requires a courtroom for each active District Judge. Providing each active District Judge with a courtroom allows judges to set firm trial dates because courtroom availability is guaranteed.

    Firm trial dates encourage settlements in civil cases, and pleas in criminal cases, reducing the need for and the cost of trials.

    This ensures that the cases that do go to trial are disposed of expeditiously consistent with the Speedy Trial Act of 1974, and the Civil Justice Reform Act of 1990.

    The practice of providing a courtroom for each active District Judge also permits timely handling of emergency matters such as requests for injunctions, Grand Jury problems, contempt hearings, detention, and bail appeals.

    This practice also accommodates unscheduled opportunities to settle large multi-party cases, opportunities that may be lost without immediate access to a courtroom.

    I can speak from personal experience. When I became a District Judge, the District of New Hampshire had a Federal office building with two courtrooms in it. There were three of us, and I shared a courtroom.
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    I can tell you that it was inefficient. It affected my ability to handle cases expeditiously. I had a 2-week interval when I was assigned a courtroom. If my case went over that 2-week window, the next judge had to either postpone or cancel.

    It was expensive for the litigants and expensive for the system.

    Interestingly, since we moved to the new building in Concord our number of trials has gone up one-third. That is, the number of cases we are handling with the same number of judges.

    We are not entirely sure why this is so, frankly. We think it is so that lawyers now know that when a judge says you are on for March 15th, they know they are on for March 15th. There will be a courtroom available, and there will be a judge sitting there. It does make a difference.

    The policy that the Judicial Conference adopted provides for guidelines for courts and Circuit Judicial Councils to use when determining the appropriate number of courtrooms to be constructed in new facilities for our senior and visiting judges.

    Finally, the Conference encouraged each Judicial Council to develop a policy on courtroom sharing by senior and visiting judges who do not draw caseloads requiring a substantial use or full-time use of a courtroom.

    The Circuit Judicial Councils currently are in the process of developing these policies, and we should have them by the middle of this year.
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    The policy on courtroom sharing was adopted only after several Conference Committees thoroughly reviewed the possibilities and the ramifications of trying to develop a courtroom sharing arrangement.

    An approach to courtroom planning that calls for courtroom time measurement studies as suggested by the OMB is neither feasible nor desirable.

    Simply put, Members of the Committee, I could probably postulate that a courtroom could be used 24 hours a day and I could get jurors who would work the 3:00 to 11:00 shift, or the 11:00 to 7:00 shift, if I could get judges who we could program that way, court personnel, and the rest.

    In practical terms, our courtrooms are probably in use anywhere up to 9 hours a day. We find that you cannot keep juries after a certain point in a day because people get too tired and their attention wanders.

    So we think we are making efficient and effective use of the facilities which we are building.

    We hope that the Congress will work with the Judiciary to reprioritize the President's fiscal year 1999 budget submission so that funding can be freed up for courthouse construction.

    We also hope that Congress will recognize the need for flexibility in courtroom design—not a standard building design as espoused by OMB—so that innovations in courthouse technology and design, lessons learned from the construction of new projects, local case management, and other practices can be adapted to meet each court's functional need.
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    I point out that our sites vary from city to city. What may be effective on one site is not effective at another. The courthouse that I am in, that I was intimately involved within its design and construction, has a collegial floor. We have our courts on a separate floor from the judges.

    I cannot tell you that it costs less money than a different design would have cost, but I can tell you that we could not have built a different design on that site. So we need that flexibility, and that is what the Design Guide provides.

    Finally, as I said, we ask that the subcommittee authorize the projects that we have up, the 1999 projects. They have been studied. They have been looked at. They have been massaged.

    The need for them is not going to go away. They are only going to get more expensive. I would be pleased to answer any questions the subcommittee might have.

    Mr. KIM. Thank you very much for your fine testimony.

    Are there any questions from the Members?

    Mr. Traficant?

    Mr. TRAFICANT. Yes.

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    We are glad to have you here, Your Honor.

    Judge STAHL. It is nice to be here.

    Mr. TRAFICANT. And the outstanding job that you have done, and we are very pleased with that activity level.

    I notice in your testimony that you referred to several pieces of legislation. From your testimony, you anticipate that the Conference will support H.R. 623, which is the bill to change scoring?

    Is that correct?

    Judge STAHL. Yes, that is correct. I assume so. That is going to be up next week at our Conference meeting. I can only say that we have recommended it, and it has been recommended. I am reasonably sure that it is going to be approved.

    Mr. TRAFICANT. The second bill that I want to talk to you about is the bill that the Committee has also reported to the Full Committee, H.R. 2118, that would restrict smoking in Federal buildings.

    Do you have a response on that?

    Judge STAHL. Personal?

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    Mr. TRAFICANT. For the Conference.

    Judge STAHL. I have not got one for the Conference. I am not sure whether we have done anything on that. We do support it in principle. I certainly support it individually.

    Mr. TRAFICANT. Yes. Well that is good. Here is the problem I just want to share with you.

    I think it is absolutely absurd for the Congress to allow smoking in our Federal buildings, in lieu of all the information that has come forth, and expose ourself to Workmen's Compensation cases from the debilitation therein that is caused. So it is an issue for us.

    Judge STAHL. I do know that, as to courthouses, Congressman Traficant, that there has been a concern raised that we invite jurors who may not come out of the goodness of their heart but out of their Constitutional duty, and some of them are smokers, and there have been some attempts made at trying to accommodate those people.

    I think it has varied from place to place. My understanding is of the courthouse in Concord. There is no smoking on that floor. Since I am a Court of Appeals Judge, I do not go on the court floor very often, but I think that is what has happened up there.

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    Mr. TRAFICANT. Well what we would like to say to you is. If there are any considerations that have to be made in that, that bill is in process and is going to be very tough, very political, heated, and we will try to accommodate within reason those issues and concerns you legitimately have with jurors who do smoke.

    I cannot speak for everybody. I will make a commitment that we will accommodate what you need.

    Judge STAHL. I do not know where we are going to come out on that. As I say, I think in our courthouse there does not appear to be any smoking at this point. People seem to be out on the front steps.

    Mr. TRAFICANT. Now on the last one, your testimony says you anticipate that you will oppose the provisions of H.R. 2751 in those area that it affects the Judiciary.

    I would like to say that as that reform bill for GSA begins to work its way through, we would want to have your input on those matters that are troubling so that maybe we could come to the common ground that you could then support the restructuring as it would relate to those judiciary matters.

    Judge STAHL. I think it is possible to compromise our concerns, yes.

    Mr. TRAFICANT. Well I just want to thank you. I would thank you, your staff, and the resource people that you have in the Administrative Office of the Court.
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    They work very well with the Congress. They inform the Congress, and their relationship with us is great. We thank you, and we thank your staff, and your administrative people for that.

    Judge STAHL. I would like to say also that I have been most appreciative of your staff—minority and majority—to go out on the road with us and to look at these projects both in the future and currently to get a hands-on view of what we are doing.

    I think that it is very, very important, and I think it has been helpful to all of us when they have been willing to do that, and they certainly have spent time doing that.

    Mr. TRAFICANT. Thank you.

    Any other questions that are informational by nature, I would like to be able to submit them in writing and, within a reasonable time, your response would be put on the minutes.

    Mr. KIM. With no objection.

    [The infomation received follows:]

    [Insert here.]
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    Mr. KIM. Does any other Member have questions?

    [No response.]

    Mr. KIM. Well thank you very much, Honorable Judge. We appreciate very much your participation.

    Judge STAHL. Thank you for allowing me to be here.

    Our next witness is Mr. Jack Basso, the Acting Assistant Secretary for Budget and Programs for the Department of Transportation.

    Welcome, Mr. Basso. We look forward to hearing from you.


    Mr. BASSO. Thank you, Mr. Chairman.

    I appreciate the opportunity to appear before the Subcommittee this morning.

    I must observe that Mr. Traficant has sharpened my attention with one of his comments here, and I will pay particular attention to that. So let me briefly summarize my statement, Mr. Chairman, and I would appreciate it if it could be included in the record.
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    Mr. Chairman, Members of the Committee, I appreciate the opportunity to appear before the Committee today to testify in support of the actions that will provide for future housing of the Department of Transportation's Headquarters' staff.

    Secretary Slater would like to convey his personal thanks to the Committee for addressing this matter of real importance in both November and now, and in considering the future objectives of the Department of Transportation for finding an adequate headquarters.

    As you noted, the Department's Headquarters is now located in the 27-year-old leased structure——

    Mr. KIM. Mr. Basso, just a moment, please. Can I have order here, please? Please close the door.

    Thank you. Please proceed. I am sorry.

    Mr. BASSO. Thank you, Mr. Chairman.

    As you know, the Department of Transportation's Headquarters is located in the 27-year-old facility at 7th and D Southwest.

    While the building has proven to be serviceable, since it was first occupied in 1970, its design problems are increasingly obvious. Although it has been retrofitted over time for such necessary safety improvements as a sprinkler system, the current system of partitions that are movable limits the floor space options for the building compared with comparable modern structures and presents a real drawback to efficient utilization of the space.
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    Absent a major renovation of the building, this building will not meet the Department's current and planned needs. Designed in the 1960s, the facility lacks energy-efficient heating and cooling systems, and as tenants we are unable to take advantage of state-of-the-art operating controls and advanced insulation that would provide sufficient gains in cost control for occupant comfort.

    Also, new communications technology cannot be satisfactorily installed and operated because the current building's systems will not accommodate them.

    Quite apart from the structure's substantial problems, the current building is a leased facility. It has cost the government over $440 million in lease payments since 1970. Even factoring in the effects of inflation, the taxpayers have effectively purchased this building at least three times over, yet we have really basically nothing to show for this investment.

    Facing the issues, we have worked closely with the General Services Adminstration—I must thank Mr. Peck for his support which has been excellent in this regard—to obtain a facility that will adequately meet the long-term needs of the Department.

    As you know, the President's budget contains $14 million for design of a DOT Headquarters facility, and I know that Deputy Director Lew has already testified to matters concerning the formulation of that budget.

    Let me stress that for us the urgent matter is resolving this issue promptly and getting DOT into a facility that will meet the long-term needs of the Department and its employees.
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    We have over 5500 employees in this facility, Mr. Chairman.

    In closing I would add just one other comment. Currently between the NASSIF building and the Coast Guard Headquarters we occupy 1.5 million square feet of space. Our proposals would reduce that total for the two agencies to a singular need of $1.1 million square feet of space, which I think illustrates, apart from everything I have said, the viability and the reality of making a significant change, making it promptly, and doing what is in the best interest of the taxpayers.

    Thank you, Mr. Chairman. I would be happy to answer any questions you may have.

    Mr. KIM. Thank you.

    You mentioned that it has cost the U.S. Government over $440 million in leased payments since 1970, and we could have effectively bought this building three times over. I think that is a mistake. It should be eight times over.

    And yet we have nothing to show for it. That is a very fitting statement. That is the concern that we have. If we owned the building, we could sell it at this point and recapture some of our investment and move on. But we have nothing to show. That is exactly the problem I was just mentioning this morning in my opening statement.

    I understand the building has not been really improved at all. The owner has not spent a penny to improve the building?
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    Is that true?

    Mr. BASSO. Mr. Chairman, just two things have been done concerning improvements.

    There was when the lease was signed, the last of 1990, upgrades as I mentioned on the safety systems. There was here within the last year some basic extraordinarily needed maintenance done to the systems that exist in the building.

    But apart from that, to the best of my knowledge there are no other expenditures that added other improvements such as upgrades of electrical systems or anything of that sort.

    Mr. KIM. The building only cost $56 million and we have ended up paying $440 million in 30 years. Somebody made a lot of money out of this. And we have nothing to show. That is a typical example of what we should not do.

    Where is this building going to be located? I am not sure you mentioned this. Where is it going to be located, and what about ownership? Are you going to be owning it, or another lease?

    Mr. BASSO. Mr. Chairman, we obviously support what the President's budget has put forth, which is ownership.

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    On the question of locations, I would assume the General Services Administration would go through the process that is described for design and construction, if ownership is the final disposition that comes forth from the Congress.

    Let me just observe one other point.

    In the event—and let me state very clearly that we support the ownership options as the cheapest cost option—in the event that did not come about and the Congress chooses for other reasons to propose leasing, we would certainly want to see full and open competition for a facility.

    So let me just make that very clear.

    Mr. KIM. You have no preference where you want to be located?

    Mr. BASSO. We have, I think along with GSA, clearly expressed, and our statute requires for the Department of Transportation, that it be located within the corporate limits of the District of Columbia.

    So the Secretary strongly supports the building being within the corporate limits of the District not only because we are required by statute, but because the Secretary of Transportation is personally committed to the District of Columbia.

    Mr. KIM. I do not have any further questions.

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    Mr. Cooksey, the gentleman from Louisiana.

    Mr. COOKSEY. Mr. Basso, welcome to the Committee.x

    Mr. BASSO. Thank you, Mr. Cooksey.

    Mr. COOKSEY. You know, we are in the information age. We passed the agricultural age, and the industrial age. In this information age when most of the transportation occurs outside of the District of Columbia, why do we have to have a law that mandates that this building is in the District of Columbia?

    Why could it not be in the geographic center of the United States? I realize that the law requires that it be there, but——

    Mr. BASSO. Let me answer directly, Mr. Cooksey.

    I think you have correctly observed that the law requires it be in the corporate limits of the District, as is the case with all Cabinet agencies as I understand it.

    I think it is a perfectly good observation that in the information age things are done very differently. In fact, 70 percent of our work force's own space is outside the District of Columbia for the Department of Transportation.

    So I think I would simply observe that the ultimate decision is left to Congress whether they change the law, or current thinking in the procedure is to follow the law and accomplish what we need to accomplish to get this facility constructed.
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    Mr. COOKSEY. You were probably here earlier when I asked the same question. How urgent is it that you have this building? Are you people using hallways for their offices? Is the sky falling, or are the ceilings falling in hour existing building?

    Mr. BASSO. No, sir. I think we are not squeezed in the offices, outside in the halls, or any of that sort of thing. What we are facing, though, is looking at our total requirements.

    It so happens that the Coast Guard—which occupies a different building——

    Mr. COOKSEY. Your what requirement?

    Mr. BASSO. United States Coast Guard, which is part of our plan. The consolidation currently occupies a different building. That lease will be up I believe—someone will correct me if I am wrong—in 2002.

    Our current lease is up for the year 2000. And we believe, based on the past experiences, that moving immediately and as expeditiously as possible is in the best interests of the Department and the taxpayers to get our long-term housing needs resolved immediately and promptly.

    Mr. COOKSEY. There is no way, though, from the discussion I heard this morning, that a building could be designed and constructed by the year 2000.
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    Mr. BASSO. Yes, sir, I would agree. That is not impossible, by the year 2000, but our observations are that we can really lock in and start the process now, while I don't have an exact date, and Mr. Peck has already testified that he would have to consult with construction schedules, if we do not lock in this year we are certainly extending this dramatically into the future.

    One other observation I would make, Mr. Cooksey, is I actually moved us into the building we are in now in 1968, actually, rather than 1970.

    One of the things that has occurred is, because we have not been able to make the firm decisions to move forward, we have continued to be in a position of having to negotiate further lease extensions that have locked us into a longer-term arrangements that are not beneficial to the taxpayer.

    Mr. COOKSEY. Thank you.

    Thank you, Mr. Chairman.

    Mr. KIM. Thank you.

    I just have one question that I forgot to ask you.

    Mr. BASSO. Yes, sir.

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    Mr. KIM. Have we had any input in this decision-making process in terms of a $14 million design funding request? Is that solely done by OMB?

    Mr. BASSO. We have had input to that process. Like Mr. Peck, I am not at liberty to comment on our internal negotiations, but the ultimate decision was made by the President or OMB representing the President, and the President's budget is out there, and the Secretary has instructed me to assure you that we support the President's proposals.

    Mr. KIM. Are there any questions from counsel?

    Ms. BRITA. On the issue of moving expeditiously, this Committee and the Senate authorized GSA, fully authorized GSA last November to move forward and put together a long-term lease program, I assume in conjunction with DOT.

    What have you done since last November to put this concept together?

    Mr. BASSO. To respond, Ms. Brita, to that is we have not taken any steps, given the fact that the budget decisions were made to concentrate our efforts on ownership and construction to move the leases forward. I believe that is correct.

    Ms. BRITA. Is that opinion going to change since your meeting with the Senate and they told you they were not going to approve construction, or appropriate any construction dollars?

    What is GSA going to do now in conjunction with DOT to keep this project alive?
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    Mr. BASSO. I might ask Mr. Peck to join me for that and we can discuss that together.

    Mr. PECK. Ms. Brita and Mr. Chairman, when we met—we met with Senate staff and when we concluded that meeting we did not come to a conclusion with them at that time, although I expect to hear from them soon and understand I may hear from them today——


    Ms. BRITA. Yes.

    Mr. PECK. I believe that's right. We had not concluded how we were going to proceed. We told them we were sort of in a conundrum; that they had told us to do something; the budget has something else, and we need to clear it up. Because their prospectus in fact had said that we could come back for the construction program if we got approval from the staff.

    Senate Staff said they were disinclined to do that so they said they will send us something back telling us what the Committee's decision is on our request to go forward with construction.

    And we will then have to consult again within the Administration to figure out how we move forward.
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    Mr. KIM. Are there any further questions?

    [No response.]

    Mr. KIM. Thank you very much, Mr. Basso.

    Mr. BASSO. Thank you, Mr. Chairman.

    Mr. KIM. Our last and final distinguished witness is Mr. Bernie Ungar, Director of Government Business Operations Issues of the General Accounting Office.

    I would like to welcome Mr. Ungar, and let's give us just a couple more minutes until we settle down.

    Is that a vote?

    I understand that we have a vote, so why don't we just recess about 10 minutes, and then we will reconvene again.


    Mr. KIM. I do not have a quorum here so let's give it a couple more minutes, please.

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    Mr. Ungar, please go ahead and proceed.


    Mr. UNGAR. Thank you, Mr. Chairman.

    We are pleased to be here today to discuss our review of the overestimation of rental incomes by GSA for the Federal Buildings Fund.

    I am accompanied today by a senior evaluator who has had a long history of work for GAO in the Federal Buildings Fund, Mr. Tom Keightley.

    As I indicated, at your request, we did look at the experience that GSA has recently gone through with the overestimation of rental income.

    As you know, rental income comprises the largest component of the Federal Buildings Fund which GSA uses to operate its buildings program.

    Each year, for a following budget year, 18 months ahead, GSA makes an estimate of the rental income that it expects to receive from the properties of Federal agencies upon which it bases its budget and upon which the Congress relies on to make its appropriations and limitations on appropriations to GSA.
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    Historically, the accuracy of that estimate has not been a problem. That was because, for many years, the actual rental income actually exceeded the estimate or, if it did not exceed the estimate, there was a very small difference between the estimate and the actual. So it really was not a major issue.

    However, starting in fiscal year 1994, for 4 straight years, fiscal year 1994 through 1997, GSA did experience a shortage of revenue.

    In other words, the rental revenue did not match, or come up to, the amount that it estimated.

    For the first two fiscal years, fiscal years 1994 and 1995, that overestimate was over $300 million. For the second two fiscal years, 1996 and 1997, that was over $700 million in terms of the shortfall. And again, there is a relatively small shortfall expected for fiscal year 1998.

    Of course, this problem was recognized by GSA as has been discussed, and at various times during the years, GSA makes various estimates, and updates, and revises its estimate.

    In January 1997, it had made an estimate of the, overestimate for 1996 and 1997 that was around $240 million. In other words, they estimated a shortfall.

    GSA also identified a number of reasons, seven reasons, for the shortfall and associated or linked a dollar amount of the shortfall to each of those reasons. At the Subcommittee's request, we looked at GSA's documentation to see whether it supported the reasons and the amounts of money that it attributed to each of those seven causes.
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    For six of the seven, we indeed did find that GSA did have documentation to support those dollar amounts.
    Basically, the reasons that it identified, although there were seven, boiled down to a relatively small number. In essence, they were mistakes that were made by staff who were actually making the estimates. In a couple of cases, it is not clear who made changes in assumptions that were used, but somebody made changes in assumptions that were used in the estimate that resulted in an upward direction of the estimate. This accounted for part of the overestimate. At one point in time, I think the then-PBS Commissioner accepted the responsibility for that change in assumptions.

    In addition, GSA had been using national averages to estimate rental rates and when spuce would come into GSA's rental stream. The approach using national averages, rather than specific project-by-project data on when the project would come in and how much the rental rate would be contributed to the overestimate.

    In addition to those reasons, we, as well as others who have looked at this found additional problems. I might add that GSA did certainly become concerned about its estimating process and had two contractors come in and look at the situation, asked the IG to look at the situation, and also set up an internal team within PBS to look at the situation. All of us came up with the same conclusions in terms of what some of the real problems and weaknesses were with the estimation process that PBS was using.

    First, the process was not documented, meaning that the steps in the process, the decisions and the policies, were not documented in an orderly way, so that somebody coming in could see what is supposed to be done, how it is supposed to be done, and who is responsible for reviewing the estimates.
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    What happened back in the middle nineties was that, unfortunately, because of downsizing and other reasons, the staff in PBS who were experienced at doing these calculations left that function, either left the agency or were put in other positions, and GSA had asked a few people who were not experienced to go ahead and make these calculations and do the estimates on a part-time basis.

    Of course, they had no cookbook to follow. They had to rely on information that they got from talking to various people, and unfortunately some mistakes did take place during the process.

    Also, we found that there was limited documentation of individual calculations that were made. It was very difficult to find what calculation was made and who made it and sort of what the basis has for it. Although there was some documentation, again it was quite limited.

    Another dilemma that we noted was that it was not clear, in terms of who was responsible or accountable for making these calculations and who was responsible for providing the information the calculations were based on, other than the PBS Commissioner. There had been no real clear delineation of responsibility and accountability.

    And as I mentioned, finally, the use of national averages, as opposed to project by project data also was a factor that contributed toward the overestimation.

    As GSA has indicated, it was aware of this problem. It has taken a number of actions to address it, and these include a forthcoming directive that we understand will be issued by April to fully document the estimation process so that the steps, decisions, and policies will be very clearly laid out.
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    Also GSA has fixed responsibility for the estimation process; it designat a particular office within the Public Buildings Service to be responsible for this estimate.

    It has set up a full-time team, as of the time of our review, that consisted of six people who are to be responsible for making these calculations, as opposed to a part-time function that it had before. It has designated an individual in each of its regions or is about to designate an individual to be responsible in the region for pulling the information together.

    And it has begun using project-specific data in terms of the rental rates and the timing of the properties coming into its rental stream, as opposed to using national averages.

    So when we looked at these, although they are not all fully implemented, it is our view assuming that these are effectively implemented, that future budget estimates should be much better than the last 4 years have been.

    There is one area, however, that we noted GSA had not pursued; it had not actually set what we would call an acceptable margin of error for its estimate.

    In other words, it could set some kind of a tolerance level that it would use as a benchmark, so that if its estimate of rental income was beyond this margin of error, it would pursue a systematic investigation of the reasons and take corrective action.

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    We would certainly expect the estimation process to have some difference between estimated and actual rental income because it is just that, an estimation process.

    We did, in our testimony, make a formal recommendation to PBS to establish a margin of error and a process to investigate it.

    We have talked to PBS officials, who said they agreement with our recommendation, and will go ahead and implement it.

    I would like to conclude my summary, and we would certainly be happy to answer any questions that you might have.

    Mr. KIM. Thank you.

    We have been talked about this last year many occasions but as I understand they made a mistake that totaled $300 million 1994-1995, and then they have not learned anything, and next year it comes up and the mistake was blown to $700 million.

    Now that is very unusual. If it is the private sector, they are going to be gone out of business real quick.

    Once is enough, but how can you make a mistakes again following even twice the magnitude.

    And my second question is, your recommendation is not specific, in my opinion, sort of vague.
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    Do you have any list of specific recommendations so we do not have these kind of mistakes occur again?

    You did mention about this acceptable margin of error. That is one of the recommendations.

    If you have any specific recommendations, I would like to get a copy of that.

    Again, we ask Staff, actually the Commissioner to give us reasons why such mistakes, who is responsible, and the answer back was the Commissioner themselves.

    I doubt it very much they make the daily projection. But that is all right. It is not our intent to penalize anybody.

    I just want to make sure that we do not make this kind of mistakes again and again, which actually create a tremendous impact to construction program.

    I am going, I do have some further questions here.

    Are you quite confident, at this point in time, that what you recommended will take care of the mistakes in the future?

    Mr. UNGAR. Mr. Chairman, I think that the actions that GSA/PBS has initiated should really take care of the problems that we and others have identified. I think it is absolutely essential for GSA to document this process so that not only us but its own folks know what the process is and where the information is supposed to come from and who is responsible for putting the information together, providing it, and reviewing it for accuracy and reasonableness. Apparently there were some slippages here in the period of time that we were talking about.
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    I also think fixing responsibility for this estimate very clearly is also a step in the right direction. I think GSA certainly needs to do that. And had GSA not already begun action, we would have certainly recommended that.

    I think using project-specific data, as opposed to national averages is also a help.

    It would certainly be good if GSA accepted the recommendation that we did make. This was one area where GSA had not taken action.

    Overall, the actions that GSA has taken, if they are effectively implemented, should solve the problem. Only time will only tell, though, whether effective implementation will take place or not.

    Mr. KIM. I want to ask you one more question, just a little bit deviated from this estimating error.

    The other reason why they have such a huge shortfall was the fact of downsizing. The way it is set up right now is that any agency occupying the building can move out with a 6-month notice, or a 20 days' notice, I am sorry, 120 days' notice, and the GSA is stuck with it. The GSA has to pay the remaining lease, the remaining term, which even though it is the same taxpayers money, that is what is hurting GSA. As a result, GSA has no money left to implement any kind of capital improvement program.

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    Any agency who wants to lease the building, they should take some responsibility in that. If they overestimated the space, they should pay for that from their own budget.

    Now, what do you think?

    Mr. UNGAR. Mr. Chairman, I would certainly agree that it would be certainly helpful to the fund if the agencies did bear responsibility, or at least some of the responsibility, for the rental payments.

    What I am not sure about is if there has been any change in these occupancy agreements that Mr. Peck was referring to in terms of agency notification.

    Mr. Keightley, are you familiar with that?

    Mr. KEIGHTLEY. The new pricing policy still includes the 120-day notification. GSA has not moved to drop that requirement.

    As you have pointed out, it would be very advantageous if an agency would give GSA some more notice. Because if GSA is going to backfill or get another tenant, it is not likely that you can do that in 120 days.

    You are going to have to go out, see who is out there, who wants the space and who can move into it.

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    So giving GSA at least some additional time, what would be appropriate, without looking and talking with GSA I am not sure.

    Mr. KIM. Well they just ask for huge amounts of space, then later. Well, we do not need all this space; and they give it back to GSA and GSA ends up paying the rent for the entire lease. I mean, this is ridiculous. I think that agency should take some responsibility.

    And my second concern may not apply to you, but again it is about this option-to-buy business. You heard this morning all these horrible stories about you are paying eight times more rent, and at the end of a 30 years' lease you have nothing to show. I understand GSA is doing it right now.

    Now my question is why they have not done that before? Why has Congress had to point that out again and again? Is there something forcing them to do it? Or you have not seen these mistakes in the past and you should point it out to GSA and OMB that this is not the way it should be done?

    Mr. UNGAR. You are referring to purchasing or lease purchasing versus——

    Mr. KIM. Just an option. That is correct.

    Mr. UNGAR. Actually, sir, we have reported on this on many occasions in the past. Clearly, we have shown that in most cases, as has been discussed, it is much better for the taxpayer for the government to own or at least lease-purchase, rather than just outright lease.
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    And as has been quite well discussed, one of the dilemmas is the budget scoring system. We have said that conceptually, anyway, it would certainly be best to put like decisions on the same basis, and therefore, one would think conceptually that a long term lease would be scored the same way as a purchase.

    However, it is a very difficult dilemma because one thing that this would require is an increase in the budget cap.

    So I do not know that we have the magic bullet, but it certainly is a problem, and the taxpayers do have to pay the costs of these leases.

    Mr. KIM. I do not have any further question.

    Any questions from counsel?

    [No response.]

    Mr. KIM. No questions?

    One question from the minority counsel.

    Ms. BRITA. The statement referencing the renting that was set up by GSA, is that their response to staff? It says each region is going to appoint a revenue manager. Is the manager going to report to the rent team?
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    Mr. KEIGHTLEY. He will, yes. Basically, he will be responsible for providing—whoever the appointed person in the region is—the information needed by the rent team.

    But that will be a part-time job. It will not be in the region solely a full time job, whereas our understanding of the current rent team is that it will not only do the rent revenue estimate, but will also track this revenue on a month by month basis to see what is actually coming in in the hope of spotting a problem early.

    In the past, GSA only looked at it quarterly, and by then you are 3 months into a problem. You hope this will do it, plus you now have the same group assigned to the same organization to do this job on a regular basis. With written policies and procedures, it should be that you can bring new people in and train them to do the job if people leave, whereas before it was done in the Comptroller's office for awhile and in portfolio management for awhile. You had it moving around too much.

    Ms. BRITA. Is this all done with GSA employees?

    Mr. KEIGHTLEY. As of right now, they do. I looked at the 1999 estimate and it was done by GSA employees.

    Now if they got some information from a region or something, we did not track the data to the region. I would not know exactly who provided it there.

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    Mr. KIM. Thank you.

    If there are no further questions, I would like to thank you again for participating this morning.

    And the Subcommittee stands in recess. We will reconvene at 1:00 p.m.

    [Whereupon, at 12:05 o'clock p.m., March 3, 1998, the Subcommittee was recessed to reconvene at 1:00 o'clock p.m., this same day.]


    Mr. KIM. We will reconvene our Subcommittee hearing. I am sorry for being late 5 minutes. We had a vote in the floor.

    I would like to welcome everyone back to the second half of the Subcommittee hearing on GSA Fiscal 1999 Budget.

    This morning, we received testimony from representatives from GSA, OMB, and Judiciary and DOT and GAO.

    We heard that GSA has little hope of supporting the construction program now or in the future.

    It is clear that alternative means of financing a construction program are necessary if GSA is to fulfill its mission of supplying Federal facilities for the Federal work force, we must have some kind of alternative way to financing.
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    This afternoon, we will continue to focus on the impact of GSA's limited capital investment program and alternative ways to support or sustain the construction program for the Federal Government through public/private partnership.

    To begin, we will hear from Mr. Gray Plosser, representing the American Institute of Architects, a group with a vested interest in the future of GSA's construction program.

    And Michael Quinlan, Chief Executive Officer of the Corrections Corporation of America Prison Realty Trust.

    That is more than mouthful.


    Mr. KIM. Welcome gentlemen and appreciate your participation in this afternoon.

    Start with Mr. Plosser.

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    Mr. PLOSSER. Thank you, Mr. Chairman.

    Members of the Committee, I am Gray Plosser. I am a principal in the firm of KPS Group Incorporated in Birmingham, Alabama.

    I am testifying today on behalf of the American Institute of Architects, the professional society which represents the nation's architects.

    I am accompanied this morning by Stuart Binstock and Christine Windelle of the AIA's Federal Affairs Department.

    This is a summary of the testimony that has previously been submitted to the Committee.

    My credentials for being here are a result of having graduated in the half that made the top half possible and spent the next 30 years trying to overcome that.

    Our firm, however, irrespective of my history, has itself a long history of involvement with the General Services Administration, and has worked on many GSA building projects, including four courthouses; Shreveport, Louisiana, Birmingham, Alabama, Covington, Kentucky, Jackson, Tennessee, and the new Federal IRS Center in Memphis, Tennessee.

    We have a 15-year history with the General Services Administration, and are therefore very familiar with their operations and their programs.
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    From the American Institute of Architectis perspective, architects, as key players in the formation of our nation's public buildings and facilities, as you noted, have an important stake in the future direction of the General Services Administration's public buildings program.

    Although there have been examples highlighted in the press and Congress about excesses in GSA projects, the AIA strongly believes that the GSA Public Buildings Program has greatly improved, particularly in the last few years, by providing quality design and construction in a far more cost-effective manner.

    However, in order for GSA to create and maintain our public building infrastructure, and to continue its reforms in cost management, there must be money to build with.

    The AIA supports increased funding of GSA's FY 1999 new construction and repairs and alterations programs. Although the AIA understands the Administration's request for minimal construction funds, the inadequate funding request runs counter to the need for Federal facilities to accommodate a growing judiciary and subsequent response in 1989 by the Congress and the Administration to launch a new construction campaign in response to those needs.

    As you are well aware, Congress, over the last two decades, has widened the Federal jurisdiction to include racketeering, environmental protection, and civil rights.

    In fact, the entire judiciary from secretaries to supreme court justices has jumped 76 percent in the last 12 years.
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    Unfortunately, facilities have not kept pace with this dramatic growth in employment and case load. In fact, priority projects established within the 5-year project priority plan submitted by the Judicial Conference have no chance of being fully developed under the current proposed budget.

    These carefully-weighted recommendations prioritize projected space requirements based, in part, on the number of judges to be housed in the building, a security situation in the current facility, operational problems in the current building, and the year the current facility can no longer accommodate additional space for judges.

    Delays in the development of these facilities leads to a lack of space for those functions and/or threats to security and safety.

    Moreover, delays in funding can result in increased construction costs and therefore either necessitate changes in the original design or prevent the project from staying within the approved budget.

    Accordingly, the AIA requests that Congress carefully consider our concerns and increase GSA's new construction appropriation.

    Establishment of a Federal Capital Budget. Currently, the Federal budget records a dollar of investment spending in exactly the same way as a dollar spent on operating expenses. This method fails to reflect the lasting worth of physical infrastructure.

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    One alternative to this system is to structure the Federal budget to permit borrowing for certain investments, but not for operating expenses. Most businesses, municipalities, and States distinguish in their budgets between capital investments, where borrowing often makes good economic sense, and operating expenses, where it does not.

    The Administration formed a bipartisan Capital Budget Commission in early 1997 to study how best to reflect and encourage public investment, while maintaining strict fiscal discipline in the Federal budget.

    The AIA urges your consideration of this worthy issue.

    GSA Reform Initiatives. Despite the limited infrastructure finance mechanisms and funding available to GSA Public Buildings Program, the AIA commends GSA for working with available resources to initiate cost cutting reforms while promoting the importance of efficient and high quality design and construction.

    Let me comment briefly about a few of those programs.

    I can comment on them with experience because most of them have been visited upon me.

    Design Excellence. After 4 years of experience with GSA's Design Excellence program, the AIA believes that GSA has been successful in attaining its original objectives of stimulating innovative ideas in building design and increasing project quality. The program not only places strong emphasis on design quality but fosters a climate of cooperation allowing the architect to concentrate more on delivering high quality, cost effective designs which meet the needs of their occupants, the public, and make a significant symbolic and economic contribution to the communities in which they are located.
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    Cost Containment Taskforce. In 1997, GSA formed a Construction Cost Containment Task Force to examine managing construction costs and costs attributed to change orders issued during project construction.

    The taskforce, in which the AIA participated, identified more than 50 actions that could be initiated by GSA, including the elimination of project stops and starts caused by erratic or non-existent funding, applying partnering principles in all project phases, and developing a detailed database on contractors, consultants, and project change orders.

    The AIA applauds GSA's efforts to identify the root cause of excessive project costs and to implement changes that rectify institutional deficiencies which contribute to those uncontained costs.

    Courthouse Management Group. Before 1995, courthouse construction was carried out on a project-by-project basis with little nationwide consistency in the program's implementation, certainly from GSA's standpoint. In addition, many projects came under close scrutiny by the media and Congress, and rightfully so.

    GSA's Courthouse Management Group within the Public Building Service was subsequently formed to try to resolve and mitigate some of those concerns and issues.

    The AIA supports the Courthouse Management Group's efforts to improve the management, oversight and delivery of new courthouse projects by developing effective strategies to keep program scopes and budgets in line.
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    I will take just a few moments to comment on areas where we see the need for improvement on the part of GSA.

    Naturally, as one might expect, we are concerned with how architects and engineers are selected by GSA.

    Under GSA's Real Property Division's Integrated Occupancy Contracts, which combine architectural services with other kinds of services, including enhanced prospectus development studies, space planning, lease negotiation, and so forth, architects are not selected through the use of The Brooks A/E Act, or Qualifications-Based Selection (QBS), but on the basis of price.

    In 1972, the Congress enacted the Qualifications-Based Selection law, which requires the Federal Government to select architects and engineers on the basis of professional qualifications and competence.

    The AIA strongly urges GSA to modify their present process under the IOC contracts to conform to the statutory requirements of QBS.

    As you also heard this morning in remarks by Mr. Lew and Mr. Peck, there were some comments regarding potential savings in the courts construction program, alluded to by Mr. Lew, who stated that the Administration believes that cost savings, within the Courthouse Building Program, can be obtained, in part, by using standard building designs.

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    It is the position of the AIA, and my own personal position as well, that GSA facility requirements are best met through design solutions that are responsive to individual projects and site conditions.

    Indeed, not even McDonald's uses the same building everywhere, and that is because the needs are different, the demands are different, the locations are different, the sites are different, and communities are different.

    And to say that one or two prototypical designs are the answer to saving costs in Federal buildings, in particular, judicial buildings, is I believe a bit naive.

    The AIA believes that cost savings can be met in other, more responsible and more integrative ways than using standardized designs. That means using standardized criteria, is you heard from Judge Stahl earlier about the latest revisions to the courts design guidelines, and those represent a very formidable effort, in our view, to ensure not uniformity of design but minimum standards of space and programmatic requirements from courthouse to courthouse, irrespective of their size or location.

    In fact, GSA has already implemented programs such as the Courthouse Management Group and the Construction Cost Containment Task Force, which aim at reducing costs in courthouse construction.

    But I reiterate again, without money to build them, implementing those reforms are impossible.

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    In conclusion, the AIA urges Congress to support increased funding and consider new finance mechanisms for GSA's Federal Building's Program in order to create and maintain public building infrastructure necessary to house our Nation's governmental functions.

    The AIA commends you, Mr. Chairman, and members of the Subcommittee for maintaining careful oversight over GSA, which has led to management reforms and subsequent improvements in the Public Buildings Program and the delivery of those services to its clients.

    The AIA believes that GSA's Public Buildings Service should be commended for instituting these reforms which have greatly improved its entire design and construction program

    Mr. Chairman, I thank you for this opportunity to speak on behalf of the architectural profession. We would be happy to answer any questions you might have.

    Mr. KIM. Mr. Quinlan?

    Mr. QUINLAN. Thank you, Mr. Chairman, and Congressman Traficant.

    I really appreciate the opportunity to testify before this Subcommittee.

    I have, I think, a unique perspective, having served as director of a Federal agency from 1987 to 1992, which had a fairly large construction budget which, at one point, reached about $1.5 billion in fiscal year 1990, and that was driven by the enormous increase in the Federal prison population during the period of the late eighties and continues into this time frame.
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    After leaving the position as Director of the Federal Bureau of Prisons, I, about a year later, became Director of Strategic Planning for a public company that is a private provider of prison services.

    It is a company called Corrections Corporation of America.

    And this particular company, which is relatively new among public companies, it was formed in 1983. It was the first private prison company in America.

    It now has 67 contracts for prison operation in the United States, in the United Kingdom, and in Australia.

    There are over 53,000 people in CCA prisons as we speak, serving their terms under contract with state, local, and Federal Government agencies.

    This industry has now grown to 16 companies. Six of these companies are publicly-traded on public stock exchanges.

    CCA, the company that I have referenced, is now, if it were a state, would be the sixth largest correctional system in the United States.

    Only a few states and the Federal Bureau of Prisons are larger than the Corrections Corporation of America in terms of bed space.

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    As I indicated, the contracts that Corrections Corporation has been able to successfully compete for are with local government, state government, and in many cases with the Federal government.

    In the early days of CCA's development from let's say 1983 through the end of the 1980s, CCA's business was based on operational contracts with state, local, and Federal government.

    But that changed, and was driven primarily by the same factors that drove the tremendous growth in the Federal prison construction program. And that was everyone was facing the same demands on their resources because of increases in drug crime.

    And states and local governments were hard pressed to keep up with the increased population in their prisons and the demands on their resources and turned to Corrections Corporation of America, among other groups that they turned to, to help them solve this problem through a financing mechanism that would be included within the operational contracts that CCA was able to successfully negotiate.

    This gave the government agency a single source to deal with in a design-build-finance environment where CCA could put together the team of qualified architects, engineers, construction people, and bring the forces of its equity ownership as a public company to bear on providing the most cost effective prices for the financing.

    I think the fact that there are companies out there that are public companies brings a new dimension to the financing issue because they bring public scrutiny, they bring the availability of private financing to an issue which is crying out for some kind of a resolution.
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    I think there are many similarities between what you are facing as a Committee, a Subcommittee now, in terms of many of the projects that were discussed here this morning, including courthouses and other Federal construction projects, and what was facing the corrections industry in the mid-eighties and early nineties on trying to increase capital infrastructure without causing any serious delays and providing unsatisfactory solutions to government agencies that were responsible for running the correctional facilities.

    The facilities that are constructed for these type of mechanisms are built to government specifications, we are held to the highest standards not only of the agency that we deal with, because we want to provide high-quality structures, but we are also held to the standards of being analyzed constantly by Wall Street to ensure that we are satisfying the contract, the agencies that we contract with.

    One of the interesting things from a budgetary standpoint in dealing in these kind of design-build-finance projects is that the lease payments do not begin until the occupant is ready to move into the structure, and the contracts always include a guaranteed delivery time and a guaranteed delivery price.

    There are no, as many times has happened in government contracting, from my experience, there are many times delays that were not anticipated, and there are many times that cost increases that were certainly not anticipated drive up the end resulting cost to the government.

    That is a summary, Mr. Chairman, of my prepared remarks. I would certainly be delighted to answer any questions that you might have, or any members of the Committee.
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    And thank you again for the opportunity to be here.

    Mr. KIM. Thank you.

    At this time, I would like to ask Mr. Traficant any questions you have?

    Mr. TRAFICANT. The only thing I would like to say is you have a facility in the City of Youngstown and I believe you had some problems there and it was supposed to be a medium, I believe, security prison, and we are getting some tough people there, and I will talk to you about that after.

    Mr. QUINLAN. Sure.

    Mr. TRAFICANT. I think your record demonstrates, though, your ability with the Bureau of Prisons and we welcome your testimony here.

    And I have some questions, Mr. Chairman, I would like to submit it to this panel in writing and have you respond to me in writing.

    Thanks for being here.

    Mr. QUINLAN. Be delighted, Congressman.

    Mr. KIM. I have several questions.
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    First of all, Mr. Plosser, thank you for your fine testimony this morning—afternoon.

    I was looking for some kind of innovative financing method from your testimony and primarily what you said was sort of cost savings, which is all right.

    One of you mentioned the selection process that has been a long problem in the past. I want you to know that I was a civil engineer myself and had my own company, a giant firm, and got into politics accidentally.

    I was saying to my friends that I used to get all A's in math and physics and I flunked out of political science. But here I am.


    Mr. KIM. So I do know about that process.

    And this selection based upon qualification rather than bidding has been prohibited for some time. And if you have any cases like that, please bring it to our attention.

    Design-build it seems like an ever-increasing practice nowadays, and a lot of professionals object to that because you are going to be lumped together with a contractor.

    You become a sub to contractor and you have got a problem and payment problems, a partial payment problems, and many professionals do not like this design-build concept unless somehow they are contractually separated.
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    I am surprised to find out that you are recommending two-phase design-build selection which is cost savings scheme.

    And finally, let me state some problem we have in terms of scoring.

    GSA simply lease the building, then all GSA has obligated would be that lease amount yearly. If GSA decide to buy the building, then entire amount would be obligated up front. So building worth $100 million up front $100 million will be deducted from their budget.

    That is the problem. That is why they only able to lease without having purchase mechanism.

    Ironically, the only way we can have or save any money for capital investment program would be savings from the lease.

    Now how can GSA save the money by continually leasing?

    The only way they can save money in general revenue would be to own the building so they can collect rent. That rent money would be set aside for the construction.

    So that is what the problem is. That is why the revenue and construction money has been declining each year.

    Now, Mr. Quinlan, I wanted to ask you a question later, about this option to buy. That could have been an excellent idea because we do not have to obligate it the first year until that time comes up, at the end of the lease, and then if the government decides to buy it, then at that time we can obligate it.
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    Anyway, that is another point I want to mention to you.

    So, having said that, going back to this design-build concept which seems to be more and more popular.

    And then second, do you have some idea, other than design-build, I mean option to buy concept, maybe some other way so we can finance these buildings, a more efficient way so we can have more construction programs which we are interested?

    Mr. PLOSSER. Mr. Chairman, I am an architect, and so I was more likely to have flunked economics and calculus. I am not sure that I am qualified to address the economics, but I do know something about buildings.

    I will tell you that I will reaffirm what I am sure you already understand, and that is that the two most important aspects of cost in any capital project are, one, the cost of the money, and, two, the size of the project.

    So in trying to discern how best to control costs, how best to protect the public's interest in the use of public funds to house governmental functions, the two areas where anyone, no matter who you are, is most likely to effect significant changes in cost is not in design-build, it is not in design, it is not in the decoration of the place, it is in how much you build and how it is financed.

    And that is true in the private sector and that is true in the public sector as well.
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    So my own view is rather simplistic and it is that until the government reconstitutes the methodology for accounting for costs for public buildings, it is unlikely to have available to it the funds it needs to do this work.

    And number two, the overall cost of any program, take the Courts Facility Program, is, and while you can manage costs, you can deal with change orders, there are all sorts of things, they fundamentally reflect tinkering around the margins of the fundamental cost which is the need. It is the size of the need that determines the costs in general.

    And the problem is that there is a very large need there. So our firm has been involved in design-build. In fact, we completed the design of the first design-build courthouse that was completed in the country, which was in Shreveport, Louisiana, Mr. Cooksey's state.

    And that project was completed within its budget. I believe it has a very satisfied client. Judge Tom Staig, I believe, has testified here before on issues of GSA and court costs.

    I believe that as a methodology, it has potential to help control costs and the cycle time, the delivery time necessary to occupy a building.

    In the case of Shreveport, there was a lease expiring. So I believe design-build offers real opportunities.

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    You are very correct. Many professionals are very nervous and uncomfortable with that prospect.

    Mr. KIM. I do not want to argue this particular issue, but I think you are contradicting yourself, in my opinion. Forgive me for saying that.

    On the design-build concept, you do not have any contractual agreement with the government. You only have an agreement with the prime contractor.

    Mr. PLOSSER. That is correct. As the architect, I do not. That is correct.

    Mr. KIM. Therefore, we have to go through a bid process to be a subcontractor. You say one way saying that it is unfair going through a bid process, that architects should be selected based upon qualification, yet if you go through a design-build concept, we have no choice but selecting the company based on the bid process.

    So you are sort of——

    Mr. PLOSSER. Mr. Chairman, that is not correct in my experience. The General Services Administration's procedures for design-build are qualifications-based also of which one factor is cost.

    Indeed, the projects that we have been involved in design-build, the job did not go to the low bidder because the qualifications aspects of the criteria counted more than did the low price.
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    So GSA has tried to take design-build and incorporate qualifications-based consideration of the proposer into its evaluation process and, in my view, has done so with some degree of success.

    Mr. KIM. All right.

    Mr. PLOSSER. So it is not purely a low bid process for design build.

    Mr. KIM. This question is to Mr. Quinlan.

    Your presentation has been very interesting to me. I understand CCA has focused solely on facilities' management and operation in the past and now you are expanding and sort of providing a more comprehensive package, such as design, construction, and private financing.

    Now let's talk about this private financing.

    Were you providing a whole package that you are going to do the design; you are going to build it, you are going to have hundred percent financing, everything is done by you as a package deal to the government?

    Then after it is done, then what do you do? Lease it back to the government with an option to purchase?
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    Is there any way the government can participate during this process?

    How do we make this a private/public financing joint partnership concept?

    Mr. QUINLAN. The approach of Corrections Corporation of America, Mr. Chairman, is to meet the needs of government, however those needs might be identified.

    If it is government's interest in owning the structure at the end of a period of time, that is built into the contract.

    If the government would prefer to have an option to purchase, that can also be built in at certain time periods during the course of the contract term.

    The options that are available are numerous. There is no cookie-cutter way to explain how all of the contracts would have been devised in the past, or would be devised in the future.

    The message I think that I underscore and want to, you know, give to the Committee is that there are public companies willing to provide these kind of financing options and I think it is very appropriate for the government, GSA, and others to look to these kind of resources that are available.

    Mr. KIM. You do I guess your contract is flexible in such a way that you can only do a portion of it. If you finance the building and design and construct it, you cannot just walk away without having management contract? It is not mandatory you must manage it, you must build it, you must own, you must—or can you do partially, let's say just financing and that is it?
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    Mr. QUINLAN. Up til this point, Corrections Corporation of America has always included an operating contract for the prisons that they have constructed and financed.

    But there are other options I think that have been considered and if the needs were great and the demand were there, I think that there could be other flexibility built into those kind of arrangements.

    You know, the fact that in the past, government has been looking for, in many jurisdictions, they have been looking to turn their prison operations over to private companies for economic reasons, for reasons of not wanting to manage the political end of, you know, finding additional space and managing that space with sheriffs and state employees and others.

    But there is also the developing interest in companies like CCA in just doing the design-build and the finance part of the structure, and without managing it.

    And so those options are available also.

    Mr. KIM. Can you share with us the idea of private financing. Is that strictly a conventional bank loan? Or some kind of revenue bond? What kind of financing?

    What is the major financing mechanism you are using?

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    Mr. QUINLAN. Mr. Chairman, as I indicated, Corrections Corporation is a public company. It has assets from sale of equities. They will occasionally have in the past used bank loans as a bridge to getting construction completed. But on long-term financing, the mechanisms are generally through a recently-established real estate investment trust or, but through public, the use of moneys from the stock exchange, or from bank lines of credit.

    But there are no bonds issued in conjunction with the current projects that CCA is working on, although they did in the past, when they were getting started on this concept, economic development bonds were used in a couple of the projects that they worked on.

    I have some more questions, but I want to, at this time, recognize Mrs. Norton, then I will come back to you later.

    Mr. QUINLAN. Yes, sir.

    Ms. NORTON. Thank you very much, Mr. Chairman.

    I only have one or two questions.

    And I apologize to these witnesses that I was able to come in only late because of another commitment, but I am familiar with your testimony.

    I would like to ask Mr. Plosser a question about something that I have a very particular interest in. I have, myself, testified before the President's Commission concerning capital budgeting, and it has been an interest of many of us on this Committee for some time.
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    Relates to the issue that the Chairman and other members discussed earlier this morning with those witnesses concerning scoring.

    The Federal government is really all messed up and is all out there by themselves, out of tune with business, out of tune with even state and local governments, as to how you budget for capital matters.

    One of the questions that is always asked, and one of the reasons perhaps that we do not have a capital budget is people are afraid of what we get in it, and we know that that happens in the states and cities, as well. All kinds of operating matters find themselves into the capital budget.

    If we ever do get a capital budget, we are going to have to have safeguards to keep that from happening, or we will not get to first base in this Congress with Democrats or Republicans in power, and we should not get to first base unless we are able to close those kinds of loopholes.

    Could I ask you what types of infrastructure projects do you think should be included when one is considering capital budgeting.

    How would you limit it so that we are dealing with something that the Congress might seriously look at?

    Mr. PLOSSER. Congresswoman Norton that is a good question, and I am not sure I am qualified to answer it, quite frankly.
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    I will only say this. That traditionally, our notions of infrastructure in this country have been primarily focused on large civil projects, no offense, Mr. Chairman.

    Roads and highways and locks and dams and bridges and wastewater treatment plants and so forth.

    I would only submit to you that I believe that our public buildings are infrastructure also. They are deserving of the kind of capital investment that our more traditional notions of infrastructure seem to receive.

    And that in many ways, the investment in those buildings as infrastructure, whether they are schools, there is actually legislation currently in the Congress with respect to providing Federal support for school construction in this country, a very new and novel and perhaps unworkable but nevertheless conceptually I think it fits with the premise that our public buildings are infrastructure, and that they should receive the same kind of care and investment, both in their maintenance and in their expansion and enhancement, that those other things do.

    I am not an expert in infrastructure and so I would not purport to go beyond that. My particular domain is buildings and in particular buildings for people.

    And I believe those are important infrastructure issues, and ought to be included in capital budget program.

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    Ms. NORTON. Well, if we got no further than that, I think at least we probably could get everybody's agreement that at least buildings are infrastructure.

    It perhaps would be helpful to those of us who are interested in capital budgeting on this Committee if the Rebuild America Coalition would be interested in submitting a statement with respect to its support for capital budgeting and how it would contain it so that it would be a realistic proposal.

    One more question.

    And that is if you have any opinion on OMB's recommendation for the standardized design for Federal courthouses?

    Mr. PLOSSER. Yes, ma'am. It offends me.

    Ms. NORTON. As an architect.

    Mr. PLOSSER. As an architect.

    I did not mean to be flippant.

    I believe that is a well-intended but perhaps naive approach to saving money.

    As I said, the big money has to do with the order of magnitude of the need and the cost of the money.
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    Standardized designs, in my view, are not the answer. I do not believe they in the long-run recognize cost savings.

    My experience with them in my own practice as an architect has been the minute you get one, somebody starts changing it because they do not like the way it works.

    In general, most of these facilities are unique in terms of the size, of the need, in terms of their location, in terms of the site, and our experience has been that that is not a way to save much in the way of costs.

    At best, it saves money on design costs and those represent a very small proportion of the overall cost of the project anyway.

    So our view, and the view of the AIA would be that that is not a very valid or workable way to really save any money.

    Ms. NORTON. Thank you very much, Mr. Plosser.

    Mr. PLOSSER. Yes, ma'am.

    Ms. NORTON. Thank you, Mr. Chairman.

    Mr. KIM. I agree with that. I do not want to see courthouses looking the same no matter which state you go to. I think it is uniquely designed to fit it into the local environment that is the American spirit.
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    I want to go back to this private financing again.

    With government, or GSA, there is no way to finance the project except using our money. Now local government, they can sell bonds, they can rely on sales tax money, and we do not have any sales tax.

    In infrastructure, we have a gas tax. In aviation, we have an aviation tax. But in general building, we do not have any. So the revenue is not there.

    The only revenue we are talking about is this rent collection, what the GSA is doing, from the government-owned buildings.

    Now as I said earlier, since we do not own the building anymore, to continue leasing it because of this scoring system means we are going to have less and less revenue, and therefore we will have less and less money to invest in a capital improvement program. That is my concern.

    Now I wonder if the government can go to bank and borrow money, putting ten percent down? If we do that, we can build ten more projects.

    The problem is—it could be an internal problem—if we do that, then the entire amount may be obligated to score up front. It is a commitment, no matter what, you have got to pay back the loan. That is our own problem.

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    But I just kind of want to discuss this with you. Obviously, you have got, as a public company, you have got your own money and so you do not have to borrow money unless it is a huge project. You are in a kind of different situation, a unique situation.

    I just do not know how to finance the government buildings, but not the way we are doing right now, a hundred percent financed by our own money, by using an external financing method which we just, I do not see any except conventional financing with scoring problems.

    Can you?

    Mr. QUINLAN. If I could, Mr. Chairman, I have thought a lot about that issue ever since, well, for a couple of months have been thinking about it, and it was very serendipitous that I was invited to testify to this Committee.

    I think that there are companies out there who are willing to work within the scoring rules and provide private financing for government construction.

    Mr. KIM. What companies are they?

    Mr. QUINLAN. Pardon?

    Mr. KIM. Can you name the companies so I can call them up?

    Mr. QUINLAN. Yes. The company that I am chief executive officer of, for example. I would absolutely be willing to do that.
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    Mr. KIM. Can you give me a couple more names?

    Mr. QUINLAN. I am sure that I can get them for you. I would have to provide them to you, but there are large companies. We are a company that is only relatively new, but are capitalized at over a billion dollars and are willing to take risks.

    When I described to you what CCA did in the early nineties and continues to do, is to take risks that government is unable or does not want to take themselves.

    So it is a partnership. There are no guarantees in any of this. We all know we are subject to annual appropriations and things of that nature.

    But there are public companies that are willing to take risks and work within the scoring rules and help solve this problem.

    Mr. KIM. I was thinking about also the loan guarantee program which will guarantee up to let us say 30 percent or even 50 percent—well, 30 percent, 50 percent may be too much—and by law we only set aside 25 percent of those obligations. By doing so we can attract better financing with a better rate.

    Can you think about that also, a combination of a hundred percent private financing plus or versus a government loan guarantee program, or maybe a combination of both, and see if we can get a better financing method? If you could get back to me?

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    Mr. QUINLAN. Okay.

    Mr. KIM. And also at least one or two more companies besides yours that are willing to finance the government buildings.

    Mr. QUINLAN. Okay.

    Mr. KIM. And you do not have to worry about default. I mean, the Federal government will never default.

    Mr. QUINLAN. Right.

    Mr. KIM. But there has got to be a way to better way of financing than the way we have been doing, which is ridiculous, in my opinion.

    Mr. QUINLAN. I think, Mr. Chairman, that the world that I worked in when I was in the government is, and the world that I now work in in terms of the private sector, have come through real major evolutions, and that there are now solutions out there that 5 years ago, when I was in the government, were not there.

    And so I salute you and the work of this Committee for looking for those kind of alternatives.

    Mr. PLOSSER. Mr. Chairman?

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    Mr. KIM. Yes, sir.

    Mr. PLOSSER. I would, just as sort of an addendum to Mr. Quinlan's remarks, the GSA—and Mr. Peck I am sure would be willing to provide you with that information—the GSA currently has a number of projects, small courthouse projects, that are being designed and built and owned and financed by private sector companies who lease those facilities back to the government.

    That is only being done in relatively small projects but it does represent a number of actual instances where the General Services Administration, even in the Courts Program, is using that methodology of delivery.

    Mr. KIM. I think, Mr. Plosser, you and I are not talking about the same thing. What you are talking about is private company financing it, building it, and leasing it back to us. That is what we are doing.

    What I am saying is that we would like to own the building. We would like to finance it. We would put ten percent down and finance it by 90 percent. That is what I am talking about. Those are two different things.

    Mr. PLOSSER. Right, sir.

    Mr. KIM. Are there any questions from counsel?

    [No response.]
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    Mr. KIM. Well, thank you very much again for participating this afternoon. I appreciate it. And would you please get back to us? We need some innovative ideas.

    Mr. QUINLAN. Yes, sir.

    Mr. KIM. Thank you very much again, gentlemen.

    Our next distinguished guest would be Mr. Charlie Scott, the President of the National Federation of Federal Employees, General Services Administration Council of Locals.

    Mr. Scott, thank you very much for participating with us today.


    Mr. SCOTT. Thank you, Mr. Chairman.

    I would like to first take this opportunity, Mr. Chairman, to thank Congressman Traficant and his Chief of Staff for allowing us to be here today, and the efforts put forth in allowing me to be here.

    Also to you, Mr. Chairman, for the opportunity to sit before you and give testimony on behalf of the Federal Employees under the NFFE bargaining unit associated with GSA.
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    For the record, I would like to submit the Congressional testimony dated February 26th, as the official testimony.

    I know we are all tired. I know you are ready to adjourn, and I will give a brief statement. I will make it as brief as possible.

    But I want you to know that as an employee of GSA, this is from the heart, as close to the heart as I can possibly make it.

    My name is Charlie Scott, I am the President of GSA Council of Locals for the National Federation of Federal Employees.

    My job is in Roanoke, Virginia. I am a custodian. I am a wage grade 2, step 5. I am paid $20,000 a year. I have been with GSA for 12 years.

    I still make less than $10 an hour and yet GSA has picked custodians, mechanics, GS level 12s and below as people or Federal employees that they are replacing with contractors under the Reinvention that Al Gore started in 1992.

    All of this at an outrageous cost to the American taxpayer.

    As recently as 5 years ago, the mechanical staff and the custodial staff were under A–76, as well as various other entities of GSA, on a 3-year basis. Every 3 years, an A–76 was done to allow private sector to bid against us to do the job cheaper.
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    Never in the 12 years that I have been with GSA, has private sector come close to matching Federal employees as far as cost comparance. Hands down, Federal employees were three times cheaper in my region, as well as other regions in the country.

    For the record, the testimony submitted today pinpoints PBS. Let it be known, Federal supply and the Federal telecommunications service are being hit as hard and as often as PBS.

    To address a little of the hiring freeze, until Welfare-To-Work was implemented, no one from GS level 12 to wage grade ones and twos have been hired since 1992.

    In a conference that I attended, as the secretary to the Council, in 1996 in San Diego, it was then that I learned GS 13 to GS 15 had been hired under the hiring freeze that the administrator put in starting I believe in 1992.

    Those level grades had been hired. There were numerous people at that conference that I addressed myself, where they came from, how long they had been with GSA, and what their grade levels were.

    As to date, no one has been hired from GS level 12 down except for Welfare-To-Work.

    My question is, why?

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    How can we compete with the private sector when downsizing and reinventing will only allow GSA to compare apples to oranges?

    Management, in the past 2 years that I have served as Council secretary, and now as the president of the Council, have refused, over and over again, to negotiate anything concerning downsizing, reorganizing, or reinventing.

    We are not stupid and we have ideas of our own on how better business is done and run in GSA.

    We do not have the power, as union people, we have been downsized, our bargaining units have been downsized, the power has been taken away.

    Our power is with you. The only thing we have left is to give our concerns to Congress and pray that Congress remembers the little person.

    If we are concerned, as Federal employees, about the American taxpayer and the money that is wasted, if what GSA is doing was known on a full scale nationwide, what would be their concern?

    As Council president, I would like to invite any or all members of the Committee to the auditorium at either National Capital Region or Central Office, to address all bargaining unit employees as to the Reinventing, the reorganizing, and the downsizing that GSA has done.

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    In closing, thank you, Mr. Chairman, for allowing me to be here.

    I will answer any questions that you may have.

    Mr. KIM. Thank you very much, Mr. Scott. That was an excellent, excellent presentation.

    This issue has never been brought to management's attention? I am talking about GSA management.

    They sort of rejecting you?

    Why do you have this communication gap with the management?

    They are not listening to you, or just why is this happening?

    Mr. SCOTT. As the Council president, I have contacted Administrator Barrum. When Administrator Johnson was in power at GSA, he had an open door policy. We could talk to him at any time, any part of the day.

    Since I have become president in November, my staff as well as myself, have contacted Administrator Barrum countless times.

    Every time I call, the Secretary calls the head of DOL, which is Mr. Edward Denny. At no time in the 3 months that I've been president or in the past year and a half as the Council secretary, have I either met the man or talked to him.
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    But yet they continue to downsize, reorganize over and over and over again.

    Mr. KIM. What is Edward Denny's position?

    Mr. SCOTT. He is the Director for Human Relations Services.

    Mr. KIM. Thank you.

    Ms. Norton, do you have any questions?

    Ms. NORTON. Thank you, Mr. Chairman.

    First of all, Mr. Scott, I want to commend you for excellent testimony, for bringing this to the Committee's attention.

    Mr. SCOTT. Thank you, ma'am.

    Ms. NORTON. And to assure you that I think that it demands and will get follow-up from this Committee.

    First of all, I am going to personally write Mr. Barram and ask him to meet. At the very least, in the Federal workplace, if we are not going to sit down with workers when within the private sector workplace, they are doing employee involvement and all kinds of work between management and employees, if we are not willing to update our practices so that we can even communicate with workers, I do not understand where we are going to go.
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    I would like to undertake to do that to write Mr. Barram.

    Mr. SCOTT. I would like to respond to that too.

    Ms. NORTON. Please do.

    Mr. SCOTT. The implement that President Clinton put in as the partnership in GSA that has been a joke. It has been an implement that has given our bargaining power away because we constantly sit in meetings with management and when it comes time to bargain, they've told us, oh, know, you've sat in these meetings all these times. You know what is going on. Therefore you've lost your right to bargain because of the time factors.

    Over and over again, I go to partnership meetings, we just reestablished partnership on the national level. They want me to sit with the Council president from AFGE along with three or four management people, by myself, so that they corner us up against the wall and get anything they want.

    I asked for three people to sit on that council. Thus far, they've refused. We are getting ready to pull out of that partnership if they do not honor that.

    Ms. NORTON. It would be tragic if this partnership notion, which was obviously an attempt to get worker involvement with management in the Federal sector the way we have in the private sector, if it dissolved because it was not being carried out properly, I want you to know that the notions about contractor misuse are now beginning to arise throughout the Federal government.
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    They are so serious that I am in the process of writing a letter, quite apart from your own allegations, to the Chairman of my own Committee. I am on the Civil Service Committee.

    I believe that there need to be oversight hearings on the buyouts and on contracting out. The buyouts were a very good thing. But now there are allegations that contract employees are being used in order to fill in for people who've been bought out.

    Mr. SCOTT. That is exactly right.

    Ms. NORTON. And Congress certainly did not intend that. They certainly do not allow civil servants to come back once being bought out, so substituting contract employees would go against congressional intent.

    And we have not had oversight hearings to see how these things play out.

    I have a number of bills in myself on contracting out.

    In your testimony, you state that OMB has resisted congressional requests to track the number of contract employees.

    I can attest to that. They will not do it. You ask them how many contract employees they have. They have no idea. I have a bill in that would require them to in fact track the number of employees so that the Congress knows whether it is paying for a shadow government without even knowing it.
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    Once a contractor gets a contract, that contract operates in the exact way that a Federal agency does. He puts in something to raise the amount of the contract every year, and we simply go along with it.

    Your—I am sorry, please go ahead.

    Mr. SCOTT. To paraphrase or to answer or give a little hindsight to that, I was in the meeting with OMB this morning at 9:00, 9:30, and it took everything I had to keep from standing back there in the back room and shouting and yelling and screaming and clapping because Mr. Traficant as well as Mr. Kim and yourself, they got what they deserved because they have been a huge problem with us between with them and management, to try to get things back on the level for the American taxpayer that is fair to the Federal worker.

    Ms. NORTON. Well, you mention that contract employees cost the taxpayer $80 an hour. I think you compared that to $33 an hour for a Federal employee.

    Could you tell us how you arrived at that figure?

    Mr. SCOTT. Yes.

    I have a document here from the real estate division that stipulates a contract at the $79.72 an hour which was, and I'll submit this along with the testimony, for a grand total of $114,796.80, but it clearly shows $79.72 an hour, which is pretty close, in my judgment, to 80 bucks an hour.
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    Ms. NORTON. Yes.

    But this comes from the fact that apparently you do not have to do a cost study before you issue one of these contracts, so you just assume that it is going to cost you less in the private sector, and you just give the contract out, and this has been documented by the GAO.

    The GAO did a study a few years ago and found that agencies were giving out contracts when the agency could do the work in-house for less.

    They found instances where you could do it for 50 percent less.

    I believe it is time for another such study because we have many more allegations of abuse, and I intend to ask for another GAO study to investigate the allegations made by your union in particular.

    Do you, how do you know that contractor employees are writing contracts and performing oversight on other contractors?

    Mr. SCOTT. I get various information from contract specialists. And the problem with the limited information that we get, these people are very hesitant to come forward with any kind of information or any kind of statements, written or verbal, because most of the time they know what is going on.

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    They have computer systems now. In fact, I have a member here that has computer access that if we put in codes, put in the name of the contractor, we can pull up information and find out what they are spending.

    The people that are finding these things out do not come forward because they know if they do, it is going to hurt their career. Management will pinpoint these people where their promotional potential is lost.

    But we have verifications through computers of what the contracts are doing, how much is being spent for that, how much is being used as far as GSA equipment.

    The contract that is written is not always what they are doing.

    Ms. NORTON. Well, I do not think there is any way to get to the bottom of this anecdotally. Now, I do not know if we are going to wait until there is a blizzard of these allegations.

    I would be very concerned, for example, about what you say about the GSA downsizing. The GSA was, like all agencies, had to do downsizing. The buyouts enabled people to do downsizing for the most part without RIFs.

    The GSA downsizing, you speak about earning $20,000 a year and about no new employees in your category since 1992 except for Welfare-To-Work.

    Now the President indeed did order the Federal government to hire 10,000 welfare workers, and that was the right thing to do.
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    My concern is with whether or not the downsizing that occurred took into account the job that had to be done and I suppose you are not the person that I can get this information from, but I do believe we are going to have to write the GSA so that we can get an explanation for whether or not hiring nobody for 4 or 5 years meant that the job could still be done.

    That does seem to me to be a long time, if you consider that there is turnover, and that no work force, particularly at the rate of pay you're describing, remains stable.

    So, are you saying, as people left, they were not being replaced?

    How was the work, at least within what you know about the workplace, how was the work being done?

    How was turnover handled?

    How was sickness handled?

    Mr. SCOTT. In my field office, which covers southwest Virginia and the whole State of West Virginia, NISH, the severely handicapped are being implemented on a grand scale. In fact, my whole region, which is Region 3, Region 2 nationally, is under a NISH contract to replace government employees as they are downsizing, taking buyouts, etcetera.

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    My particular building in Roanoke is a 13-floor building. When I first started in GSA in 1987, there were ten custodians doing 13 floors, 65 bathrooms in the entire, from top to bottom in this, and another 13 to 15 restrooms within the court system.

    They had five mechanicals on staff.

    We now have four custodians and two mechanics running the entire building.

    NISH has got over half of the building now, and throughout the region, NISH has taken over where the Federal worker was.

    And do not get me wrong——

    Ms. NORTON. Well, NISH are the Federal workers too, right?

    Mr. SCOTT. Excuse me?

    Ms. NORTON. NISH are given a contract, is that it?

    Mr. SCOTT. Yes, ma'am.

    Ms. NORTON. I see.

    Now we do not want to create a competition between disabled workers or welfare workers and Federal workers on the one hand.
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    Mr. SCOTT. I agree.

    Ms. NORTON. Because the Federal government is doing the right thing to hire workers who can do the job that others would not hire.

    Mr. SCOTT. I agree with that too.

    Ms. NORTON. The union does not object to that, I take it?

    Mr. SCOTT. No. We do not, the problem with, my concern with NISH and it is not in my particular building because I have assured that management do an excellent job of background checking their employees.

    But I do know in Trenton, New Jersey, they were hiring just anyone off of the street that had a little bit of a handicap, not necessarily a mental handicap or a physical handicap,just some type of a handicap that could get them in the door.

    These people ended up stealing various equipment out of the different agencies within that building.

    And it is my concern that if these people can be hired from off the street, then how can you call them severely handicapped?

    Some of these people are not handicapped at all. Their work leaders, they oversee or watch some of these employees because I have employees in my own building, they won't get on an elevator unless we get on there with them. They are scared of the elevators. They have to be constantly babied, watched, because their minds are just not coherent to be left wandering through a building.
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    And that is, you know, I do not have any problem with these people. Most of the people in my building are very, they are beautiful people, but there are areas where people are being hired, we have no idea where they've got them, you know, whether they are handicapped or not, or even had background checks.

    Ms. NORTON. Well, there may need to be closer monitoring of these contracts. And any such contract is subject to abuse.

    And the last thing the government wants to do is do the right thing and do it the wrong way.

    Other kinds of contract abuse, it seems to me, is far more serious because it is far more widespread, but we ought to be monitoring both kinds of contracts.

    And I think your testimony is very helpful and opens up a route that we can pursue, and that I assure you I will pursue through the Civil Service Committee.

    Thank you, Mr. Chairman.

    Mr. SCOTT. Thank you, ma'am.

    Mr. KIM. Thank you, Mr. Scott. Even though this is just outside of our Committee's jurisdiction, your statement has deeply touched us. We will contact Mr. Denny, Mr. Peck, in writing and making sure you are able to get together with them and have a dialogue.
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    Is there anything else can we do for you?

    Mr. SCOTT. We just are deeply touched that you've allowed us here today. As an employee on the lowest scale of Federal government, I represent the salaries from $20,000 up and we know that we do the work better, cheaper, every single day, and we are not given that chance.

    They downsize, they buy us out, and they replace us with contractors. I do not think that that was what was intended, and I would ask this Committee to take serious note of that.

    And I really appreciate being here today.

    Mr. KIM. Well, thank you very much for coming today and for participating.

    Thank all of you.

    Since there are no further questions, the Subcommittee stands adjourned.

    [Whereupon, at 2:20 o'clock p.m., Thursday, March 5, 1998, the hearing was adjourned.]

    [Insert here.]
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U.S. House of Representatives,

Subcommittee on Public Buildings and Economic Development,

Committee on Transportation and Infrastructure

Washington, DC.

    The subcommittee met at 10:35 a.m. in Room 2253 of the Rayburn House Office Building, the Honorable Jay Kim (chairman of the subcommittee) presiding.

    Mr. KIM. The Subcommittee will come to order now. Good morning. I'd like to welcome all of the members this morning.

    Today, we are meeting to receive testimony on GSA's Fiscal Year 1999 Capital Investment Program. The Capital Investment Program consists of requests for three construction projects and eight repair and alteration projects, with an additional request for funding of design of future RNA projects.
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    At the later date, we'll have a hearing on GSA's Fiscal Year 1999 Leasing Program. Before GSA testifies on the Capital Investment Program, we'll hear from Congresswoman Myrick on a joint public/private venture on the consideration in her District.

    We'll also receive testimony from Congresswoman Granger and Congressman Frost on a federal/local proposal under consideration in Forth Worth, Texas. I understand there are local participants from Charlotte, and local officials from Fort Worth present this morning, who will also speak on the matters of these prospective proposals.

    I wish to thank all of the witnesses for their appearance this morning.

    At this time, I would like to recognize our Ranking Member, Mr. Traficant, for his opening comments.

    Mr. TRAFICANT. Thank you, Mr. Chairman. I'd like to welcome the three distinguished members here today to testify, the Honorable Sue Myrick. I want to thank you, Sue, for helping with the burden of proof provision in the IRS bill.

    Ms. MYRICK. You're more than welcome.

    Mr. TRAFICANT. The Honorable Kay Granger, and the Honorable Martin Frost, and Martin has an extremely important program dealing with GSA down in Fort Worth. We're anxious to hear what everyone one here has to say, and also GSA.

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    I want to let us just get on with the program. I ask unanimous consent to submit my statement for the record.

    Mr. KIM. Without objection.

    Are there any other members who wish to make a statement?

    [No response.]

    Mr. KIM. Hearing none, I'd like to welcome the first witness, Congresswoman Myrick of North Carolina, and Mr. Benjamin Rook of Odell Associates,a nd Mr. John Harris, the President of Harris Group.

    Good morning. We're looking forward to hearing your testimony.


    Ms. MYRICK. Good morning. Mr. Chairman, thank you for this opportunity to testify today. I'm here on behalf of the residents of Charlotte and Mecklenberg County in North Carolina who desperately need a new Federal Courthouse to replace our aging, 82-year-old facility.

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    Our efforts to obtain federal approval for a new public/private venture four our Courthouse may aid this Committee as it attempts to adopt more reasonable budget scoring standards for the construction of new federal buildings.

    Current scoring methods make no long-term fiscal sense, and have killed the concept of building and owning property through lease acquisition procedures.

    GSA must engage in short-term leasing to satisfy the housing needs of federal agencies, and those leases are the most costly alternative. Nevertheless, current budget scoring rules, which score and operating lease annually, make these expensive operating leases attractive to federal agencies.

    Not long after I was elected in 1994, the federal judges in Charlotte came to me and said that their facility was too small and in dire need of repair. The Charles Jonas Federal Building is a great building, but it is very old.

    The federal offices and officials in Charlotte have clearly outgrown their aging quarters.

    In August 1996, your Committee directed the Administrator of General Services to conduct a building project survey on the feasibility and need for a new United States Courthouse in Charlotte, and in March 1997, GSA reported back to the Committee, recommending the construction of a new 200,000-square-foot courthouse, and calling for the modernization of the Charles Jonas Federal Building to meet the requirements of the courts in Charlotte.

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    I had told the federal judges that I would not request a direct appropriation for a public building, but that I would support a possible private/public venture. Our community is well known for using this approach, both to save and leverage tax dollars.

    Since that first meeting, they've worked with local community leaders to put together an innovative approach to solving this courthouse problem.

    Appearing with me today is Benjamin Rook from Odell Associates, and John A. Harris, from the Harris Group in Charlotte. They will go into greater detail about the type of exciting public/private venture we are proposing.

    In a nutshell, though, I can tell you that it will solve our building needs in Charlotte, and is much more cost effective than the current or traditional way of doing business.

    I strongly believe that it's time that we give local communities the flexibility they need to solve their own problems, including those that relate to the construction of new federal buildings.

    I know that you on this Subcommittee have worked very hard to correct the current flawed scoring methods, and I support your efforts. I also understand that a change in legislation is required, and I support such legislation.

    If the Committee is working on a Courthouse construction program, I urge you to consider approving the public/private Charlotte project as part of your overall program. Authorizing the project would be an important first step in making this a reality.
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    Again, thanks for allowing me to testify. With your permission, I would like to submit for the record, a set of talking points prepared by Frank Johns, who is the Clerk of the U.S. District Court for the Western District of North Carolina.

    Mr. KIM. No objection.

    [Information referred to follows:]

    [Insert here.]

    Ms. MYRICK. And I would be glad to answer any questions. Thank you.

    Mr. KIM. Mr. Rook?

    Mr. ROOK. Good morning, Mr. Chairman. My name is Ben Rook. I am Chairman and CEO of Odell Associates, an Architecture and Engineering Firm based in Charlotte.

    I'm here, of course, to testify regarding the need for the new Federal Courthouse facility here in Charlotte. Charlotte is a triple-A city in a triple-A county in a triple-A state, one of only a handful of such designations in the country.

    As you, I'm sure, know, one of the implications of such a powerful rating by the outside financial rating services is the strength and honesty of our local governing bodies.
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    Charlotte has also gained a reputation as one of the fastest growing and most livable communities in the country. Our local government bodies have been known for their history of encouraging positive economic growth and for their ability to provide for a community's needs in both an innovative and a cost-efficient manner.

    As a matter of fact, one of your colleagues in the House of Representatives, the Honorable Sue Myrick, was our Mayor of Charlotte from 1987 to 1991.

    Charlotte is known as the second largest financial center in the country, with the headquarters of both NationsBank and First Union located there.

    The financial business has brought with it, an entrepreneurial attitude, and attitude that we can solve our problems internally if other governmental entities will give us an opportunity to do so.

    The basis of that optimistic view of life is hosted in a very real partnership of longstanding between the business sector and the governmental sector called our public/private partnership.

    Charlotte's success is dotted with accomplishments of this partnership, the Ericsson Stadium for the Carolina Panthers, the Blumenthal Center for the Performing Arts, the new Transportation Center, as well as new vests, in-car video cameras, and new radios for our police department, and much more, have all come to life as a result of broad cooperation from all segments of our community, but principally our very active and committed private sector.
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    The other hallmark of this partnership is that Charlotte has been fortunate to escape any hint of public corruption or conflict of interest or incidents that have occasionally marred other communities.

    The result of Charlotte's success is that we approach our problems with a wide-open optimism, and with the belief that all of our problems are solvable. To us, the proverbial glass is always half full, never half empty.

    All of this background leads us to our discussion of how to provide for a much-needed expansion and renovation to the United States Federal Courthouse in Charlotte.

    In August 1995, several of the senior federal judges came to Congresswoman Myrick and told her of their need for more courtrooms. They talked about being overwhelmed, both in terms of caseloads and space, and that was with only three judges in the District. Shortly, there will be five.

    The 11[b] study completed by GSA in January of 1997 agrees with the judges that an expansion is long overdue. The question is, how does a new courthouse get built?

    Ms. Myrick was very supportive and clearly understood the need, but was extremely reluctant, with her well known commitment to balancing the federal budget, to add any item, even for her own city, that would make balancing the budget any harder.

    As we came to find out, even if she had been willing to support the traditional courthouse building route through GSA, GSA had no money to make it happen, and does not foresee any money in the next several budgets to begin whittling down the list of over 150 new courthouses already approved.
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    Thus, we began exploring an innovative approach to resolving the judges' needs without adding to the difficult budget decisions you are already wrestling with.

    That exploration led us to the very positive solution that we will put forward to you today, a solution that can serve as a model, a pilot program for resolving the logjam of courthouse projects around the country.

    Please understand that we enter into this with a strong desire to produce a cooperative, clean, cost-effective process that we can all be proud of.

    And now I would like to turn the presentation over to Mr. Johnny Harris, whose family, as well as he, individually, has been a major and respected part of the fabric of Charlotte's history and development for more than 100 years.

    Here's Johnny.

    Mr. HARRIS. Good morning, Mr. Chairman, and members of the Committee. Our team feels that we have the expertise and ability to deliver a much-needed Federal Courthouse expansion for Charlotte, North Carolina, in a timely, aesthetically pleasing, and cost-efficient manner.

    The opportunity exists in our community to produce a courthouse expansion that will be a very positive reflection of the image that our Federal Government likes to project, and may well serve as a model or blueprint for similar public/private partnerships to follow in the future, all over the country.
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    The need for this project is now with the addition of two more federal judges for the Western District Court of North Carolina. Our court space is going to be impossible to manage, and the purpose for adding more judges will be compromised by the lack of courtrooms for them to try criminals in.

    Currently, many elements of the Federal Court system in Charlotte, the Federal Prosecutor's Office, the Bankruptcy Court and staff, probation officers, FBI, and others, are all located in high-rent office space scattered throughout Charlotte.

    Thus, the concept of paying rent to private entities is not only not unheard of, but is, in fact, quite routine. I'm a private developer who has had successful experience in putting together individual projects as large as one million square feet.

    The Harris Group is presently developing 550,000 square feet for a hotel in Atlanta, ahead of schedule, and under budget. My appearance here before you today has very little to do with the individual accomplishments of my company.

    What Mr. Rook, myself, and the entire Charlotte team are here to do is to convince you that Charlotte is the singly best place in the country to try this kind of project, and to urge you to develop a process that will allow us to make a significant impact on public building projects in this country in the future.

    The advantage of the public/private process are fourfold. First, speed. In any development project, time is literally money.
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    The federal process, by its own admission, habitually turns a 2-year building project into a 4- or 5-year project, thus ensuring that the costs will be higher.

    With a public/private project, where the private developer has their money at stake, the process is clearly going to be more streamlined. We propose that we take the list of needs GSA and the Courthouse Building Program contains, and incorporate them in a process that will deliver a completed courthouse expansion within 2 years.

    Once the deal has been consummated and a rental rate agreed upon, the government process defers to the private process, which we believe will clearly save taxpayers a substantial sum of money.

    Second is the fact that any experienced, successful development group brings to the government building program, a design/build team that will deliver the absolute best value for the money.

    Many of you are aware of the national reputation of our design partner, Odell Associates, which is already partnered with GSA in building many current government facilities.

    Odell is very cognizant of and very experienced with how you want federal buildings built. The experience of your design/build team is a critical cost saving element to this process, which will also ensure the quality that GSA demands.

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    We feel that our group brings the experience necessary to build a project of this magnitude.

    A major element of safety to the government in this process is that the government, at any point in the process, can step in and buy the project—midway through the project, at the completion of the project, or at any point in the project, or at not point at all.

    When the funds become available to the GSA Courthouse Building Program, the government has the ability to buy out private interests. Since the project will be on a quicker development schedule, if the government does not elect to take its buyout, it should be a significant savings over similar projects.

    Under this scenario, the government had virtually not downside exposure or risk in this project.

    Finally, projects of this type can do an awful lot to help the surrounding areas they are located in. With a lifetime of experience in creating projects that bring out the highest and best use in every project we build, you can count on our private design/build team, not only to create a project that will leverage higher quality development around a new courthouse, but also to create a project that upon completion of its designed useful life, will have a valuable reuse that will continue to add value to the project and to the surrounding community.

    The project we envision in Charlotte works in total conjunction with a mixed use revival of sorts, currently beginning around the existing courthouse. The opportunity to use the existing courthouse infrastructure to help fuel the renewed growth and development already announced in that area of our city will provide a major anchor of stability in an area that has in recent years been somewhat neglected.
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    There are many positives associated with the idea that we have brought to you today. Charlotte has a history of being willing to solve its own problems if government will give us the ability to do so.

    With NationsBank, First Union, Duke Energy, and others, we have a corporate community committed to Charlotte that we feel is second to none. Our record of clean government, a government that works locally to develop many successful public/private partnerships, makes our proposal a very logical extension of what is already a long litany of success.

    The design/build team of the Harris Group and Odell Associates brings a long record of positive success in tackling projects of this magnitude and scale.

    Finally, we come to you with what we believe is a win/win proposition for all concerned. The people of Charlotte get an updated courthouse, able to accommodate the demands of a growing metropolis and the crime that unfortunately comes with it.

    GSA gets a model which, if successful, can be used to help in removing a backlog of Federal Courthouse projects in a timely and cost-efficient manner.

    A major part of Charlotte gets a much needed piece of infrastructure to help leverage its revitalization, and you, our elected Representatives, get another chance to make government less costly and cumbersome.

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    Congresswoman Myrick, again, this project, when she, upon the request of the Federal District Judges, said that she could not support a costly public building project in her District, even if it was badly needed. What we propose to you has come from 2 years of talks with senior GSA officials, the Federal Judges from our District, elected officials from our area, and both public and private entities interested in seeing Charlotte continue to grow and prosper.

    What we ask of you today is that you allow the work that we have already committed to over the last 2 1/2 years to culminate in a process that will allow GSA to work in partnership with a private design/build group to turn this project, with all the potential benefits that I have mentioned, into reality.

    We are ready to go, and we ask your support. Thank you very much.

    Mr. KIM. Thank you for that fine statement. I do have a couple of questions.

    You won't mind if I ask the questions a little later. We have Congresswoman Granger who must leave by 11:00, and so I would like to ask her to come in.

    Congressman Martin Frost, would you like to come up as well?

    We also have Mr. Jeff Wentworth, and Mr. Mike Groomer, Assistant City Manager of Fort Worth, if you would all come forward?

    Good morning. Mrs. Granger, if you would proceed, please?
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    Ms. GRANGER. Thank you very much, Mr. Chairman.

    I'm here today to discuss a beneficial opportunity for the General Services Administration, the Fort Worth Federal Center and the City of Fort Worth. As the former Mayor of Fort Worth and a member of Congress who currently represents that City, I can tell you that the City is very pleased to be the site of one of the nation's four GSA Federal Centers.

    The Southern GSA operation called the Fort Worth Federal Center is located in the southern portion of our City. Over the past decade, Fort Worth has undergone substantial urban revitalization.

    Many sections of the City have seen dramatic reductions in crime and substantial new development and job creation. Unfortunately, the area of the City occupied by the current GSA facility has not enjoyed the same revitalization as other parts of the City.

    As a result, GSA and its employees are not getting all the benefits that Fort Worth has to offer. When you visit the Center, you'll see a series of antiquated warehouses.

    The warehouses are owned and operated by the GSA, and are occupied by an assortment of federal agency tenants, many of which have expressed dissatisfaction with the current building. The Fort Worth Federal Center is simply outdated.
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    The other GSA facilities in the country, New Jersey and Georgia, have been overhauled and updated in the last 10 years. The Fort Worth Federal Center has only received bandaid fixes; however, bandaid fixes are not the answer, since the Center has outgrown its original design and cannot meet modern needs.

    One of the best examples of this comes from Kent Carter, the Regional Administrator of the National Archives and Record Collection in the Fort Worth Federal Center. According to Mr. Carter, the archives has outgrown all available space at the Federal Center.

    As a consequence of this growth, last year the Archives had to forward 2 years worth of IRS filings to Washington, D.C., because the building simply could not accommodate any more storage.

    This year, the Archives expect to forward even more IRS filings to D.C., and next year, well, who knows? The Archives grow at approximately three to four percent every year.

    Outside of space concerns, the Center is also too old to be effectively modified to meet current needs. If the National Archives could get more space in the building, the building would not be the optimal location because it cannot be effectively modernized.

    The current building can regulate temperature and humidity, but modern science now recommends that facilities storing historical documents be designed to monitor gases and particulate matter.
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    This kind of upgrade is not economically feasible in these World War II-era warehouses. You might as well start from the ground up.

    Mr. Carter is only one of many tenants, but his opinion represents a consensus of the tenants the City has heard from. As the two gentlemen from Fort Worth, who have joined me here today will tell you, the City and the current GSA tenants have been working on a local solution to this problem.

    Under the proposed plan, the City of Fort Worth would acquire the Federal Center site, and redevelop the property in accordance with the City's plan to redevelop the southern portion of the City.

    The City's plan is designed to revitalize disadvantaged areas through comprehensive job creation, neighborhood cleanup, and crime reduction strategies and initiatives.

    The City would build a new modern facility for the GSA at a site on the north side of town near the intersection of I–35 West and I–820. This site is much better for the GSA employees, and the site provides adequate equal highway access and better rail access.

    The City has shared its plan to acquire this current property with the local GSA. The City and the local GSA have informally discussed the City's proposal and the initial response has been favorable from both sides.

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    The goal is to provide GSA tenants with an upgraded facility and City residents with an upgraded community.

    In conclusion, I'd like to reiterate my desire to facilitate discussions on the proposal which would be mutually beneficial to both the United States Government and the City of Fort Worth.

    I'd like now to pass this off to my friend, Congressman Frost, who will speak, and then introduce Mr. Jeff Wentworth and Mr. Mike Groomer, who are here on behalf of the City of Fort Worth.

    I do have to leave to chair a Railroad Subcommittee hearing, and I know they will be able to answer your questions. Thank you.

    Mr. KIM. Thank you very much.

    The Honorable Mr. Frost?

    Mr. FROST. Mr. Chairman, I appreciate the chance to be here and to speak at this hearing.

    The facility that Congresswoman Granger has described is located in her District. It is very close to my District, and many of the employees who work there live in my District. We both represent portions of the City of Fort Worth.

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    And, of course, you will have the opportunity to hear from Mike Groomer, the Assistant City Manager, and Jeff Wentworth, a member of the Fort Worth City Council to discuss their proposal.

    The proposal is to acquire the Federal Center in Fort Worth, for the City of Fort Worth to acquire it.

    And as you may know, the Federal Center houses 15 federal agencies. According to the City's plan, if the City is able to acquire the Federal Center, they will utilize the property as the basis for inner city revitalization.

    The City plans to redevelop the property into a combination of commercial and industrial uses which will serve as an inner city jobs creator, which, if done, could greatly benefit this section of the City.

    In turn, the City would facilitate the relocation of the federal tenants. Mr. Groomer and Mr. Wentworth will further explain their request.

    I respectfully request the Committee's examination of this proposal, and I would urge that a proposal be approved that would benefit everyone involved—the Federal Government, the City of Fort Worth, the taxpayers, the surrounding community, and, of course, the employees.

    It is extremely important that any proposal be equitable and agreed to by all parties. Thank you for allowing me and the City of Fort Worth representatives to be here today, and I appreciate your review of this proposal.
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    I think that at this point it would be appropriate to hear from Mr. Groomer and Mr. Wentworth.

    Mr. KIM. Thank you. Mr. Wentworth?

    Mr. WENTWORTH. Mr. Chairman and members of the Committee, I'm Jeff Wentworth, City Council Member for the City of Fort Worth, and I also chair the Council's Economic Opportunity Committee.

    The Fort Worth Council has adopted as its focus, expanding the economic opportunities and neighborhood redevelopment for the inner city areas.

    The proposed project we are here today to discuss can serve as a catalyst in achieving this objective. I would hope, on behalf of the local elected leadership, that you can give favorable consideration to our proposal.

    I'll turn the meeting over to Mr. Mike Groomer, Assistant City Manager for the City of Fort Worth, who will provide you some more details on the proposal that we would like you to consider.

    Mr. GROOMER. Thank you, Mr. Chairman. Again, we appreciate the opportunity to appear before the Committee.

    The proposal basically is that the Fort Worth Local Development Corporation, which is an entity of the City of Fort Worth, would, in fact, acquire the property which houses the Federal Service Center from the General Services Administration.
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    As have Congressman Frost and Granger before me indicated, the plan is for a creative reuse of the property into a mixed-use industrial park which will generate economic opportunities in this area.

    The neighborhood surrounding the Federal Center is predominantly an older residential area, racially mixed, with low and moderate income neighborhoods. There have been no major developments or redevelopments in the area in a number of years.

    The site itself is within the confines of Interstate Loop 820, and the Federal Center constitutes the largest single land entity in South Fort Worth.

    If you look at the history of Fort Worth, we have a long and successful history of working in partnerships, both the public and private sectors in order to develop and redevelop areas of the City.

    We have been very successful in our development opportunities, and Councilman Wentworth has indicated. The downtown area of Fort Worth has undergone extensive renovation. There is a new performing arts hall that will be opening later this month.

    The City recently completed its purchase of the Convention Center, which will further generate redevelopment in the downtown areas.

    The Alliance Airport Corridor has generated, in the last 12 years, $3.6 billion of new economic opportunity in our economy, which, again, is a public/private partnership.
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    The City's cultural district has two museums in the planning stage, so there is a lot of positive things happening in the Fort Worth economy.

    But as Councilman Wentworth indicated, not all of our neighborhoods are enjoying the prosperity, and the Council has directed an aggressive strategy of economic redevelopment in the inner city.

    That is the catalyst, in some part, for the concept of creatively reusing the federal depot for this inner city redevelopment program. Basically what we are committed to is certainly working closely with GSA to facilitate the relocation of the federal tenants.

    In order to expedite that, the Corporation has secured control of the site in North Fort Worth, again, along Interstate 820.

    The plan would be that the Corporation would provide for the design, financing, building, and leasing of the facility for the GSA tenants at this particular site, or perhaps others.

    The new facility would be state-of-the-art, utilizing the latest in warehouse design and construction techniques, and we believe that providing the design, financing, and construction services at the local level will expedite the project beyond the normal federal building process.

    We would contemplate that the transaction would provide a rent credit to the GSA for the value of the existing Federal Service Center. That value, of course, would be determined by independent appraisal, as we would be required to do.
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    The Corporation has taken the action to identify a development consultant who has a track record in industrial development in our area. This development consultant, if we are able to continue the process, will be required to competitively bid and price the project so that we all realize the value of the cost-effectiveness of these facilities.

    Based on the limited information that we have at this time, it would appear that the end result will be a more cost-effective and perhaps in some cases less rent than the existing tenants are paying at the new facility than they are paying at the old facility.

    This will be realized by a better utilization of space under a modern warehouse facility. Excuse me.

    Once the replacement project is completed, it is contemplated that it will be owned by the local development corporation. However, this ownership of the new facility is not a long-term objective of either the city or the local development corporation.

    Our primary objective is to gain control of the existing federal facility to be utilized as we've indicated as a redevelopment opportunity.

    We are willing, I think, to transfer the ownership of this facility to the federal government if such a transaction can be achieved in a consistent manner that's equitable to all the parties.

    It is our understanding that there are other instances in the country where local governments have provided modern facilities for the federal government under similar type arrangements, and we are seeking an opportunity to replicate that.
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    We see this proposal as a win/win for all parties. The GSA tenants get new, modern facilities, and hopefully they achieve cost savings in the process.

    The GSA gets the value in the form of rent credit for the existing facilities.

    The city gets the opportunity to create new economic opportunities in South Fort Worth.

    The citizens and taxpayers benefit from new jobs in the community and cost savings to the federal agencies.

    We look forward to working cooperatively with the Congress and GSA to make the plan a reality.

    Be happy to try to answer any questions.

    Mr. KIM. Thank you for that fine statement.

    At this time, do you have any questions?

    Mr. TRAFICANT. I'll hold my questions.

    Mr. KIM. Do you have any questions, Mr. Cooksey, then?
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    I think we should go into questions now with them, and how many witness do we have today.

    I think we should go in and question right now.

    Mr. COOKSEY. Okay.

    Let me just make an observation. I've been to both of your cities. I have a daughter that lives in Fort Worth, and she thinks that Kaye Granger is the most impressive person in Congress, and I come somewhere further down the list.

    And the City from Charlotte, North Carolina, is a city that has done a lot of the right things too.

    And one reason Fort Worth has been so successful, particularly in your downtown area, is because you have had a business-driven economy, and it's amazing what you've done to the downtown area just since my daughter started TCU and finished many years ago.

    So I have confidence in the concept that both of you bring to the table.

    You're a city where you've had business driving the revitalization of the downtown area and it's been enormously successful. It's very safe to walk the streets there, as it is in your city in North Carolina.

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    And I think that's the right model. And your model may be the right model for what you're trying to achieve.

    I look at the city that we're in now, and the city, the largest city in my State of Louisiana, New Orleans, and look at the men that have been in charge as mayors of those cities, and I think that it's a disgrace.

    And I think that these two ladies should be mayors of every problem city in the United States, and then my daughter would be safer; the other daughters would be safer, and other people's daughters would be safe in their cities.

    So you come here with a positive record in your two cities and I'm glad of it.

    My question on Fort Worth, I'm trying to visualize in my mind, where is this place? Is it south of the stockyards or north of the stockyards?

    Mr. FROST. North. The area that they are talking about moving to is far north. 820 is a loop that goes around the city. And I–35 of course is a north/south expressway that runs the length of the city, and this is approximately at I–35 and 820. 820 is the far northern boundary of the City of Fort Worth, so this is out in the general direction heading out toward DFW Airport.

    Mr. COOKSEY. Would it be on the same latitude as DFW Airport?

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    Mr. FROST. More or less, more or less. So there's a lot of undeveloped land in that portion of the City of Fort Worth, a lot of vacant land.

    And what this does is give the federal government a new facility in a portion of the city where there is plenty of space.

    The key to this of course is that the existing GSA facility is in an older portion of the city that desperately needs redevelopment in the southern part of the city.

    The southern part of the city is significant black and Hispanic population. The key to this is the good faith efforts on the part of the City of Fort Worth to, as they've represented here today, to take the property that currently belongs to the federal government, once that is turned over to the City of Fort Worth, and in fact to use that to drive job creation in the southern part of the city.

    And that's what the member of the council who is here today, and the member of the city manager's staff here today have dedicated themselves to using the existing GSA facility to help create new jobs in the southern sector of the city and this new GSA facility will be far north. It's within the city boundaries but it's in the far northern part of the city.

    Mr. COOKSEY. Okay, I have the map, and I can visualize it. I'm a visual person.

    Mr. FROST. I would add to you and your earlier comments, I would say that it's helpful, it's been helpful to the City of Fort Worth that there are several local billionaires who are very much dedicated to the redevelopment of downtown, and who have in fact devoted their substantial resources to that redevelopment of downtown. Every city should be so fortunate.
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    Mr. COOKSEY. I'm aware of that, but whatever the reason, it's worked, and I'm glad.

    I'm addressing this question to the Fort Worth group.

    After hearing the testimony of the Charlotte group, do you think that their idea could be utilized to build your building in North Fort Worth. Have you thought about that since you've been here, since you've heard their testimony?

    Mr. WENTWORTH. I think if I understand their testimony, it's similar to ours. It's a private—public/private partnership and so I think it is, if I understand their proposal, ours would be similar to that, so that we would take the financial risk, the development risk obviously with the input of the GSA, but we would assume that risk. We would achieve a financial model that is agreeable to both parties, and as Mr. Groomer mentioned, it is not the intent of Fort Worth, long-term, to own a federal building that is housing a federal agency, unless the federal agencies want us to do that.

    So I think long-term, once the financial arrangements are completed, our intent, subject to your approval, would be to certainly have available so that this building could be turned back over to the GSA as their building.

    But I think as Congressman Frost mentioned, our real key is there's almost 300 acres in this development in the inner city.

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    As your kind comments mentioned, we've been very successful in developing areas of the inner city, but to be honest with you, there are areas within the inner city that we have not been successful.

    We think this is such a large tract of land that if we could be successful, then we would make a meaningful impact on an area of the city that desperately needs that sort of redevelopment.

    Mr. COOKSEY. Okay. One closing question to your group, and I would encourage the Charlotte group to be seeking out, too, the answer to this question.

    What is the bottomline cost for the Fort Worth project as a lease and as a purchase by GSA, just rough, round figures.

    Mr. GROOMER. We have identified, because of the corporation took a proactive action to identify a piece of property, we have calculated some models. I don't have that number exactly before me today, but we can certainly respond back with a generic response of what the pricing would be based on the land cost and the type of typical warehouse development.

    Of course it would be driven by special needs of the tenants, so it's a little difficult to quantify right now what the——

    Mr. COOKSEY. If you were to guess, would it be $100 million? $500 million? A billion? Just ballpark figure.
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    Mr. GROOMER. Mr. Cooksey, I would prefer not to speculate. I don't have that number.

    Mr. FROST. I would suggest that maybe you might want to keep the record open and that he could provide you a written response to that question. I'm sure that those numbers could be put together and they could be appropriately inserted in the record at the right place.

    Mr. COOKSEY. Okay, thank you. And thank you, Mr. Chairman.

    [Information to be provided:]

    [Insert here.]

    Mr. KIM. Thank you.

    I do have some couple of minor questions.

    This project obviously part of this redevelopment program that you have are using tax increment money, don't you? Isn't this part of this redevelopment program you're doing it using tax increment moneys?

    Mr. GROOMER. That is part of the tools available to us, yes, sir.
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    Mr. KIM. All right. Now this new area you propose to locate, is that also within the same reading of the boundaries or is outside?

    Mr. GROOMER. We do not have a tax increment district overlaid in that particular part of the city at this point in time, but it's certainly an option for us. It would be eligible for tax increment redevelopment.

    Mr. KIM. Okay, then this city corporation you're talking about, is that a private/public partnership or strictly using this tax increment money alone?

    Mr. GROOMER. The corporation itself is created by the Fort Worth Council under state law.

    Mr. KIM. The city created.

    Mr. GROOMER. And in fact the Fort Worth City Council sits as the board of the local development corporation, but it's a development entity of the city.

    Mr. KIM. So you're willing to buy this whole, this downtown area, the area that GSA has occupied?

    Mr. GROOMER. Yes, sir.

    Mr. KIM. And then you're going to move us to a northern section which is I guess a better area. And you're going to rehabilitate this downtown area using this tax increment money. Perhaps you have some kind of master plan I presume now.
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    I think it's an excellent concept.

    Is that being negotiated with the GSA right now for an area concept?

    Mr. GROOMER. Yes, sir. We are having discussions at the regional area with the local representatives and visiting on the concept.

    We've also had some contact with the major tenants at the existing facility, so there has been some discussion. We haven't priced anything out.

    Mr. KIM. Anything that this Committee can help you to expedite this whole concept I think it's a very exciting concept and win/win situation but not anything we can do.

    Mr. GROOMER. Well, I think we're all here today seeking the opportunity to go forward with GSA in some meaningful negotiations that hopefully will result in the win/win.

    Mr. FROST. Mr. Chairman, if I may add a comment, of course this area is south of downtown, it's not a part of downtown, it is critical that the City of Fort Worth, while they are getting a nice, new GSA facility, which is what they would be getting, it is critical that they be very serious about the redevelopment of this area and I would hope that they would perhaps be able to give you some more detailed information, again perhaps for the record, about what their plans are for the redevelopment of this area south of downtown, because we're not just into getting GSA a nice, pretty new facility.
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    There has to be a real plan to redevelop the southern area because that is an area of significant of unemployment, is an area, as Congresswoman Granger indicated in her testimony, that has deteriorated in recent years, and needs a lot of work.

    So I think we're entering into this all in good faith, the members of Congress supporting this, with the understanding that the City will be very serious about redeveloping this portion of Fort Worth where GSA is currently located because that is critical to the long-term viability and growth of the City of Fort Worth.

    Mr. KIM. Thank you, that makes sense.

    Mr. Traficant?

    Mr. TRAFICANT. Mr. Chairman, New Jersey and Georgia facilities were overhauled and updated in the last 10 years with GSA with federal dollars.

    I want to see if I understand this, because I don't think, I think both Congresswoman Myrick and Granger, two of the finer young members that we have, and I don't think there's a more effective member in Congress than Martin Frost.

    And I think if there's a way to do it, it would be done and Mr. Frost will ensure that, believe me.

    But I want to see if I understand this because I'm not so sure that you understand the archaic scoring rules of this body.
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    We were about to enter into a 30-year lease in Atlanta, that would have cost $750 million without equity because we are not allowed to have a lease purchase.

    We have, and we've reported out a bill that I've authored, that will change that and give flexibility to the GSA and Mr. Frost is one of the more powerful members of the Rules Committee.

    At some point, that will be brought up as an amendment. It's very important for both the projects you're discussing here, believe me.

    But I want to see if I understand this project, because I'm not so sure I'm as enthralled at this point as everybody else, not because it's public/private. I think that's innovative, I think that's the way we should go, and we can go.

    But there's several things that are very important.

    We, as a Committee, are trying to reduce our lease exposure to ownership. With your proposal, we would go from a service center, regional service center, which is of tremendous importance to GSA.

    And I want to make this statement. Don't take my comments to be negative, because I believe that service center must be taken care of, must be. It should be a priority by GSA.

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    The question is, how do we do it.

    Now, if you're saying we go from ownership to lease, that would complicate it very much for me. Because I think what you're saying is you're willing to buy this service center, or you want the government to give you the service center.

    That's my first question.

    Mr. GROOMER. I think we're contemplating a purchase, maybe perhaps a value for value trade as part of our proposal.

    Mr. TRAFICANT. Okay, and you would, as Mr. Frost said, would be very important as a consideration here that you don't just start swapping land, but you would do something for that part of the town that evidently desperately needs it?

    Mr. GROOMER. Absolutely.

    Mr. TRAFICANT. That's correct. And that would be written into the covenants of the agreement?

    Mr. GROOMER. Yes.

    Mr. TRAFICANT. Okay.

    But then you say that you would go in the city in a private/public partnership, however that might be, with participatory moneys from the city, I don't know at this point, you would build a facility where you believe it would be better-suited with the infrastructure to handle the employees, etcetera, and then you would lease it back to us?
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    But with an option to buy. But at this point, we'd have to check the realities of that option to buy in the scoring rules of the Congress.

    Mr. GROOMER. Conceptually I believe that's correct.

    Again, I think the factor would be the value of the existing facility basically discounting the cost of the new facility, though.

    Mr. TRAFICANT. GSA at the regional level supports, in concept, the theory you are bringing forward and the plan you are proposing?

    Mr. GROOMER. I believe that's an accurate statement, yes, sir.

    Mr. TRAFICANT. I think it's very important for us to understand that unless some scoring rule changes are made, these more progressive proposals coming from communities that are bright, really may not have a shot.

    And it's important for us to look at that.

    But second of all, also in the Fort Worth case, not so much with Charlotte now, if New Jersey and Georgia have been overhauled and brought up to what's needed regardless of whatever happened with scoring, it might eliminate the possibility of your proposal.

    I think the Committee could seriously want to overhaul and/or a move of some sort within our scoring rules to accommodate Fort Worth.
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    They should not be treated differently than any other service center in the country.

    So the only thing I'd like to say in closing, that I want to make sure that both representatives here, which bring a concept that is what our country needs, depends upon our Congress passing a law that gives the General Service Administration the flexibility to make the best deal for us.

    And right now, we don't have that. We can't even accept some of these deals, if that makes any sense or nonsense.

    So I just want to say, I thank, you know, Councilman Wentworth for coming here and Mr. Groomer, and I think if anybody can do it, Martin, you can do it, and we'll help.

    Let's look at the scoring rules that will be needed.

    Mr. KIM. I'd just like to make a brief comment.

    Mr. Traficant is correct. We did pass the scoring resolution and it's in the full Committee right now.

    In the meantime, we can exercise an option which is a purchase option which is not going to change the scoring system right now. That is the only option open to us right now.
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    I believe you're not going to—there'll be no cash transaction, you're going to give a GSA credit of this whatever a price value of this existing property and also rental credit combined together credit instead of any cash transaction.

    That's good. That way whatever residual cost of the new building can be worked out and then give us list of option to purchase. That option is still open to us. It doesn't affect the scoring until we overhaul this.

    Well, thank you very much.

    Are there any questions from the other members?

    Thank you, I appreciate it very much.

    Can I invite Mr. Harris, again, please.


    Mr. KIM. Mr. Harris, I have just some very minor questions about these private partnership.

    You're talking about private/public partnership without defining exactly what you're talking about.

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    And secondly, you mentioned about design build concept.

    What do you mean private/public partnership. Does that mean that you'll invest the money and build it for us, and then lease back to us?

    Is that your definition of private/public partnership? Can you define it a little more?

    Mr. HARRIS. Yes, sir, Mr. Chairman.

    I think when we talk about private/public partnerships, at least in our community, we are really talking about getting the powers that be on both sides together, address a problem, and trying to do something successfully to solve that problem.

    And what we want to propose today or have proposed is a venture where private industry would provide the expertise and the money to build a facility that was built to the specs and guidelines that GSA and the appropriate people gave us, and that we would lease that building if you wanted us to, to you, which I now understand very clearly doesn't necessarily work with the scoring situation.

    But number two, let you buy it at any time or take advantage of the different financing opportunities that are out there that in fact I believe and we can show can provide a building for you less expensively than if you did it under your normal process time-wise and cost-wise.

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    And that lease would be a lease/purchase which means at the end of some period, the building was yours.

    We can do it a number of different ways. If you want to call it a lease or it can be a time purchase.

    Mr. KIM. When you mentioned this pilot program, I was expecting something totally different than the way we're going our business. We do have this arrangement already. We have private companies building for us and lease back to us, and now are doing this option to purchase.

    So that's what you have in your mind?

    Mr. HARRIS. And we have a Charlotte Center, it's a center, central Charlotte City partnerships, which is a not-for-profit partnership that is redeveloping the uptown.

    And what we can do is they can be the front to help attract this.

    We really have looked at two different alternatives of trying to do it, and are looking for some guidance as to which way would be the most acceptable to this Committee.

    I mean, we're very flexible as to how we could approach it.

    Mr. KIM. Have you been contacted GSA and you're negotiating right now, or exchanging thoughts?
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    Mr. ROOK. We have met a number of times with Bob Peck and talked with Bob and his staff about their definitions of public/private partnerships because there are multiple definitions, as you know. There are many ways to do it.

    And what we're trying to create is a process that both the public and the private sides can agree as to the best delivery model for you.

    It goes into the Fort Worth situation also because their definition is a little bit different than our definition.

    So in Charlotte, though, the thing that you do need to know, particularly with Johnny Harris and others, all the definitions of public/private partnerships, whether it is taking public money and having private investors manage that and deliver things on time within budget, or whether it's taking public money and buying land to then leverage private development, all the scenarios have been achieved successfully in Charlotte.

    So what we're trying to do with GSA is to find a win/win proposition where both sides get what they're after.

    Mr. KIM. Mr. Traficant?

    Mr. TRAFICANT. Just real briefly, what are the two alternatives you're presenting to the Committee? Very short, very brief?

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    Mr. HARRIS. I think what we're presenting is the fact that we believe that private industry can build a facility less expensively than the federal government.

    Mr. TRAFICANT. Okay, but how would you do that?

    Mr. HARRIS. What we would do is enter into it the way we do for IBM or GE or anyone else, and we would take the facility, we have an identified need, and we were asked to do this by the Congresswoman, and we believe that given the outlined specifications, and identifying the location that's best suited for the expansion of the facility, we would build the facility under your specs and guidelines.

    If you want to own it at any time during the process, fine.

    If you don't want to own it, then we'll place the building with someone else.

    Mr. TRAFICANT. All right. Right now, we can't lease/purchase, number one.

    Number two, there's an existing building there. That existing courthouse is going to be renovated by whom?

    Mr. HARRIS. The suggestion is that we could do it at the same time. One of our problems is——

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    Mr. TRAFICANT. Who would own the existing federal courthouse that is now owned by the government?

    Mr. HARRIS. The government, GSA.

    Mr. TRAFICANT. Who would pay for the renovations of the old courthouse?

    Mr. HARRIS. We could put it in the cost of the project or not. I mean, you have to tell us. We can do both. We can actually amplify it and do the lease one one.

    Mr. TRAFICANT. Okay, so let me see.

    You're going to build a second courthouse.

    Mr. HARRIS. An annex.

    Mr. TRAFICANT. An annex. And both the old courthouse and the new and plus the annex will be part of the newly configured delivery system of the court there?

    Mr. HARRIS. That is correct.

    Mr. TRAFICANT. Okay.

    Then you would lease to us and through a private——
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    Mr. HARRIS. Public/private partnership.

    Mr. TRAFICANT. You guys are going to build this thing, this new one.

    Mr. HARRIS. Yes, sir.

    Mr. TRAFICANT. And renovate the old one and then factor in those costs and then lease it back to us?

    Mr. HARRIS. Yes, sir. Or——

    Mr. TRAFICANT. That's your proposal?

    Mr. HARRIS. Or——

    Mr. TRAFICANT. Okay.

    Mr. HARRIS. We can do a contract for sale that lasts 25 years. I know you think that's semantics. What we're saying is the building can revert to you, you can buy it over 25 years.

    There are a number of financing opportunities out there right now that may or may not be attractive, or the day we finish it, you can buy the building.
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    Mr. TRAFICANT. Actually, Mr. Harris, let me tell you something.

    Mr. HARRIS. Yes, sir.

    Mr. TRAFICANT. What you are doing is you're bringing about a change that's very much needed, and you are making recommendations that we must be able to accommodate by law.

    And I know that both the Staff of this Subcommittee is probably on top of it as well as anybody in the country.

    I think we have to look for the ways, we have to crunch the numbers, then there'd have to be a competitive aspect to it, and quite frankly at this point, I don't know.

    Just to say this. That you bring forward interesting proposals but you also bring forward somewhat of a dilemma because there are cities with major courtroom facilities around the nation that do not build them and lease them back. The government builds them to provide the court system that our Constitution requires.

    And I would just say this, that this poses then perhaps a significant change in the way of doing business, and perhaps that as well would have to be a precedent would have to be looked at.

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    I don't know how the courts are looking at that, how GSA's looking at that. But the fact that you are dealing with GSA officials and GSA officials are trying to accommodate this proposal, is that what you're telling the Committee?

    You are working with GSA?

    Mr. HARRIS. We are.

    Mr. TRAFICANT. And GSA is attempting to find ways and means to facilitate your ideas?

    Mr. HARRIS. And we would hope that basically I think the reason we are here is to ask that you allow those negotiations to continue because I'm not sure where they are going to end up.

    As you asked a very specific question of the earlier group, you know, what is the bottom line, or the other gentleman did.

    The answer to the question is, without specific requirements, it's very hard to get to a bottom line.

    But we can show you we priced a courthouse, a brand new one, gave the numbers to GSA, and we felt we were about 15 to 20 percent under right off the bat what they expected.

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    Mr. TRAFICANT. Well, just let me say this in closing.

    All these ideas will have to come forth under the scope of our capabilities by law.

    But if the service delivery system of the courts in Charlotte is being restricted, it needs more space, it needs more facilities, then the bottom line is that the people of that district should be receiving similar service that are being received in other federal district court systems of our country, so regardless of how it's done, I would not be so opposed to bringing forth a program that involves the federal government more heavily.

    I yield back.

    Mr. KIM. Thank you.

    At this time, the Chair recognizes the gentleman from Louisiana, Mr. Cooksey?

    Mr. COOKSEY. Again, as you recognize my comments having to do with Fort Worth, I applaud innovative thinking.

    Did you come up with a number, approximate number cost?

    Mr. HARRIS. Well, you know, generally, if you take the rule of thumb that my friends in the architectural community have given me for other federal projects relating to courthouses, $300 a foot is not an absurd number.
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    There have been some substantially higher than that, but that's the rule of thumb.

    We actually designed a brand new courthouse and went all the way through it with the new regulations for security and everything and we came up with a number that was actually 25 percent under that.

    Mr. COOKSEY. And what is that number?

    Mr. HARRIS. It was 200 and——

    Mr. ROOK. 120,000 square feet. $265 a square foot.

    Mr. HARRIS. 265 versus 300 that they expected.

    Mr. COOKSEY. And what was the total number? You're better at math.

    Mr. HARRIS. I should have brought it with me, but I'll be right there.

    Mr. TRAFICANT. While Johnny is figuring, the dilemma that we have heard through GSA is obviously having the 150 courthouses that need either expansion or renovation, and how that could be approved through a traditional process is very difficult.
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    So this is where the innovation needs to be focused, and this is what we're trying to do.

    So we need everyone's collective help to come up with the right game plan.

    Mr. COOKSEY. I think we need a lot more innovative, creative thinking in this city.

    Did you come up with a number?

    Mr. HARRIS. Yes. The building structure itself probably $30 million for 120,000 foot building versus $36 million, if you just do the numbers.

    Mr. COOKSEY. Good. That's all I wanted, just a ballpark figure.

    Mr. HARRIS. And interestingly enough, the new requirements are often for security and safety are often modified from site to site. So when we were sort of negotiating with ourselves, we designed a facility that had all the bells and whistles that we had seen put into a facility, and that may not have been what was necessary, it wouldn't be necessary in an expansion, sir.

    Mr. COOKSEY. Could I ask my friend, Mr. Traficant from Ohio, who is my mentor and guide on a lot of these issues.
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    Isn't $30 million the figure they started with in Atlanta?

    Mr. TRAFICANT. No, no.

    If the gentleman will yield, I'd just like to make this statement.

    That the average courthouse construction cost for the federal government is $180 a foot.

    Mr. ROOK. But we're talking total development.

    Mr. HARRIS. We're talking about all in everything, land, the whole deal.

    Mr. TRAFICANT. Okay.

    Mr. COOKSEY. What is your cost, just for the building?

    Mr. HARRIS. I would say to you that, and I look forward, we'd be glad to show you the package we delivered because it would be interest to you if nothing else.

    Mr. TRAFICANT. I just want to concur with my good friend, that you are posing a number of questions today.

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    Mr. HARRIS. Yes, sir.

    Mr. TRAFICANT. But we appreciate the creative innovative way you're going about it.

    Mr. COOKSEY. Could your actual building costs be $180 a square foot?

    Mr. HARRIS. The actual building cost was a little bit less. It was like 165 for the actual hard, hard-hard-hard construction cost.

    Mr. COOKSEY. Did you hear that, Jim?

    Mr. HARRIS. But what we'd love to do is just send to you, to the Staff, the actual proposal. Then they can evaluate it.

    Mr. ROOK. In our number also was underground parking. There's some interesting—the problem is is that when you look at a facility, we took the city block, dug it out, actually moved some hazardous material. We were going to have a cost in there for that. Put a parking deck underground with all the security measures that we'd been asked for, and it works out at about 15 to 20 percent on the surface hard cost.

    After that, it depends on what we're asked to do on it.

    Mr. COOKSEY. Well, it sounds good.
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    The last time I was in Charlotte was right after the hurricane hit, but anyway, it was still a pretty city, and you've responded very well.

    Mr. HARRIS. We lost 80,000 trees.

    Mr. COOKSEY. Yes, I know, I was there. I was there about 3 days after it hit. The destruction was amazing.

    I am not a career politician. I'm a surgeon. But I'm also from the private sector, and I also remember enough from my civics that we do have oversight responsibilities, as members of Congress, and we need to watch spending the taxpayers' money, because in the past, sometimes there's not been adequate oversight and there has been some misuse of funds, and worst of all, there's been a few political decisions made, too many, a lot of political decisions.

    But this sounds good.

    Thank you, Mr. Chairman.

    Mr. KIM. Thank you very much gentlemen.

    VOICES. Thank you.

    Mr. KIM. Our final witness this morning would be a Mr. Paul Chistolini, Deputy Commissioner of the Public Building Service of GSA.
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    Mr. KIM. Good morning, Mr. Chistolini.


    Mr. CHISTOLINI. Mr. Chairman and members of the Subcommittee, my name is Paul Chistolini, and I am the Deputy Commissioner of the Public Buildings Service, and I am pleased to be here this morning to discuss our Capital Improvement Program.

    As you are aware, GSA's Public Buildings Service has responsibility for more than 1800 government-owned Federal facilities across the country. More than half of the buildings in our inventory are over 45 years of age, and in order to maximize the value of these assets to the taxpayers, we practice sound financial planning and management.

    The decisions we make on investments for construction, acquisition, and repair and alteration of our real estate assets are very key elements in our financial and asset management planning.

    Based on our decisionmaking process, we prepared the Fiscal Year 1999 Capital Improvement Program which is before you today. It consists of ten prospectus-level repair and alteration projects totalling approximately $257 million; nine prospectus-level repair and alteration designs for future projects, estimated at about $16.7 million; and six prospectus-level design and construction projects of which this phase is looking for $44 million of authorization, and our ongoing CFC reduction program and energy reduction programs of $25 million each.
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    The Federal Buildings Fund provides sufficient funds to operate the inventory and to make payments to lessors. However, it never provides sufficient funds to meet all our capital requirements.

    With the exception of the last 2 years, it has provided enough revenue in the past to keep up with major repair and alterations or major renovation needs, or to construct new buildings that Congress has authorized, but not both.

    With the limited resources and an increasingly aging inventory, we've developed some asset management strategies which we use when we develop the priorities for allocating our resources.

    Our first priority is the protection and the safety and health of our tenants in both owned and leased assets.

    Second, we look at maintaining the operational viability of owned assets through day-to-day repairs and alterations below the prospectus level.

    Third, we look at altering vacant space in owned assets so that we can relocate clients out of leased space into government-owned space.

    Fourth, we look at completing planned modernizations of major buildings so that we can enhance their ability to support the client agencies' missions and to enhance their value.
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    Finally, we look to providing new housing solutions, whether through construction, acquisition, or leasing, to meet the changing requirements of our client agencies.

    To better select among competing projects, we have changed the way we evaluate repair and alteration (R&E) projects. We are using what we call the return-on-investment measure to determine the financial impact on each repair and alteration project.

    This use of return-on-investment is similar to the way capital real estate investments are screened in the private sector. The screening will identify, amongst other things, if an R&A project either adds or detracts from the net income into the Federal Buildings Fund when the project is completed.

    Using the return-on-investment as one of the criteria for selecting the projects, we believe, also strengthens the long-term health of the Federal Buildings Fund.

    We are also evaluating proposed major R&A projects to see if we can reduce the scope of work without jeopardizing the required results. By reducing the scope of work, we can often achieve additional cost savings, as well as reduce the time required.

    We find that by scaling down planned major modernizations, while still meeting the primary requirements of our tenants, we can free up additional funds for more projects.

    Additional criteria that we use for selection of major R&A projects include the timeliness of the project; in other words, there are follow on phases to a multiphase project, and the ability of our people to actually make the award during the planned budget year.
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    Finally, we look at the urgency of the execution, based on imminent systems failures, hazard conditions, safety and health of the tenant requirements.

    By applying these criteria during the decision process, we are able to prioritize our Repair and Alterations Program and make sure that the important ones are the ones that were targeted in the budget.

    In our Fiscal 1999 budget, GSA proposes very modest new construction and acquisition programs. We have two border stations, the design of a new U.S. Mission to the UN, some additional funding for remediation at the Southeast Federal Center, and design funds for a new headquarters facility for the Department of Transportation. This program will be totally funded out of the Federal Buildings Fund resources.

    Our first priority is the repair and modernization of the existing inventory. As I mentioned before, the Federal Buildings Fund cannot support a large construction program.

    We are aware of the needs and requirements of our other client agencies such as the Judiciary, whose needs we cannot satisfy through the existing resources in the Federal Buildings Fund.

    GSA and OMB will discuss some various options to increase resources to our construction program. These could include the retention of sale proceeds, revisions to the Property Act that might allow us to retain subleasing proceeds, and the authority to enter into partnership with the private sector.
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    It is our hope that these discussions would lead to some initiatives that would make this overall process a lot easier.

    Mr. Chairman, that concludes my formal statement, and I will be glad to answer any questions.

    Mr. KIM. Thank you very much for that fine presentation.

    The Chair recognizes Mr. Traficant.

    Mr. TRAFICANT. Mr. Chistolini, you're doing a good job. I have no questions at this time, and if I do, I will send them over in writing; how is that?

    Mr. CHISTOLINI. Thank you, sir.

    Mr. KIM. The gentleman from Louisiana.

    Mr. COOKSEY. I would concur with the comments of my mentor from Ohio, Mr. Traficant.


    Mr. KIM. I have some questions, but I will submit it to you in writing, and if you can respond back to us, it would be appreciated.
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    Mr. CHISTOLINI. Fine, thank you, Mr. Chairman.

    Mr. KIM. Thank you, thank you very much. The Subcommittee is adjourned.

    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]

    [Insert here.]