Joe Moravec: Man on a Mission, Site Selection Magazine, July 2002

oe Moravec, commissioner of the Public Buildings Service of the U.S. General Services Administration, recently sat down with Site Selection’s Director of Publishing Ron Starner for an interview on the changing role of GSA and how the agency’s new direction will impact corporate America.

       
The linchpin of Moravec’s strategy is passage of the Federal Property Asset Management Reform package, part of President Bush’s Freedom to Manage agenda. The proposal would amend the Federal Property and Administrative Services Act of 1949 to allow federal property managers – including those who manage GSA’s $260-billion inventory – to use modern property management processes to maximize portfolio performance.

       
Specifically, the reforms would allow federal agencies to exchange property among themselves and private-sector entities; sublease assets on unexpired portions of government leases; lease under-utilized assets to the private sector; explore public-private financing mechanisms to help finance a backlog of public building maintenance needs; provide incentives to dispose of old assets; and streamline and enhance existing disposal processes. It is estimated that it will cost more than $4 billion to upgrade GSA’s 1,800 owned buildings throughout the country – facilities that are on average more than 50 years old.

       
Joe Moravec: Our budget year begins in October. Our 2003 budget includes $6.9 billion in direct expenses plus another $1 billion in reimbursable work authorization for our client agencies. It costs about $450 million a year to run the agency. Much of our annual budget goes out in the form of rent. About $2 billion a year pays for our own operations and the operations of the buildings. That includes maintenance and utilities for all federal government-owned facilities. About $3 billion in rent is paid to the private sector each year. We pay another $200 million in debt service. Our new construction budget is $557 million, plus an additional $986 million this year for repairs and alterations. That is our top priority. Our security budget is $417 million in 2003 for all GSA facilities, and that cost has been escalating in the last few years.

Moravec: I am very comfortable in the Public Buildings Service. This is a very large and diverse property management organization. Our mission is to provide a superior workplace for the federal worker and a superior value for the American taxpayer. We have 7,000 associates in 11 regional offices and 200 field offices in the PBS. We have a portfolio of 334 million square feet of managed space – mostly office space. We are in 1,600 communities coast to coast and the U.S. territories. We design, build, manage, lease and protect a very large real estate portfolio. In fact, there are more than $5 billion in projects in design or under construction. We are very businesslike in the way we run. There is very private sector-like discipline here at the PBS. My goal is to focus on three core initiatives: asset management, human capital and operations. My first innovation at PBS last year was to streamline the organization’s hierarchy. When I came on board last summer, I learned that each region had different job titles. I wanted to make us more user-friendly, so I instituted the National Coherence Program to have us look and act like a consistent national organization. All national goals now link the budget to performance. The realty services specialty was too diffused, so I created a new Office of Realty Services to manage a $3 billion real estate budget. I also instituted national outsourcing of our commercial brokerage services. As a result, we are now seeking truly national commercial real estate brokerage contracts. We have become an agency of contract managers. And there will be more opportunities for national brokerage companies to do business with the PBS. I also created a centralized Customer Service Organization.

Moravec: All contracting for site selection is done at the regional level. We are a full-service real estate organization, so we do it all. Our goal is on-time, on-budget delivery of all major capital projects. That is how we practice good financial stewardship. Remember, a lot of our building sites are historic, so we have an important responsibility. One thing we must do is figure out what buildings are worthy of investment and what buildings need to be disposed. Our portfolio management strategy is what we call a life-cycle management strategy. That process is challenging because we have a lot of older buildings. So we adopted a national portfolio management strategy.

Moravec: The challenge of addressing these tired, old buildings is complicated by the fact that we still have our hands tied behind our back. It’s not just the GSA. It’s government-wide. This reform package would require development of asset management expertise for all government agencies that own property. In other words, what happened decades ago in the private sector is finally coming to the federal government. This legislation would give us the authority to lease and sublease space to the private sector. Under current law, we are prohibited from doing that. Currently, about 12 percent of all federal government-owned space is vacant. This is non-revenue-producing space. This bill would give us the ability to do long-term ground leases with the private sector. We do a lot of build-to-suits in the market, so the developer gets a good, solid investment. This bill is now in committee (the Reform Committee of the House). Once it gets out on the floor, I don’t think it will be controversial. We really think that this will happen this year. It is part of President Bush’s Freedom to Manage agenda. The problem is that, right now, there is no incentive for the government to get rid of dilapidated federal properties. And even if we are offered money for these buildings, we can’t keep it.

Moravec: Most people don’t realize that the federal government is often the largest employer in a community. There are more than 60 communities across the USA in which GSA owns more than 1 million square feet of space. We really do look for opportunities to catalyze economic development. Also, we are trying to outlive the legacy of the Great Society years of the 1960s and 1970s, when the federal government built a lot of nondescript, monolithic

structures that weren’t aesthetically pleasing. We want to build 100-year buildings that architecturally stand the test of time. But, more importantly, I have almost a religious zeal about informing the private sector about what’s happening in the public sector. We in government are subject to a level of accountability not found in the private sector. And this is true because this is the people’s business. Unfortunately, career civil service has been a punching bag for people running for office. In the real estate business in the private sector, it’s all about money. But in the public sector, there is a higher mission. And part of my mission is to foster more public-private partnerships. I also want people to know that the federal government operates its buildings at a significantly lower cost than the private sector and that we get the best deal in town.