PUBLIC LAW 92-313 PUBLIC BUILDINGS AMENDMENTS OF 1972 Almost a year ago, the Congress passed and the President signed into law the Public Buildings Amendments of 1972 (Public Law 92313). For GSA the bill represented the most significant piece of legislation since the Public Buildings Act of 1959. As a direct result of the amendments, we have awarded more than one-half billion dollars in public buildings construction contracts. Within a year of the signing of the bill, one of the buildings contracted for will be occupied. These results have been very dramatic. Last year at this time GSA had a backlog of over 60 authorized public buildings. These buildings had an estimated construction value of more than $750 million. We predicted that purchase contracting would have the following beneficial results: One, it would increase the gross national product by $1.5 billion; add 180,000 jobs around the country; and consolidate nearly 40,000 Federal employees from over 500 locations to 60 locations, resulting in efficiency savings of at least $50 million annually. Second, this program would save nearly $100 million a year from inflation that will be prevented by constructing buildings now rather than later. Third, buildings constructed under the purchase contract system will remain on the local tax rolls until the payment period ends. This means that approximately $22 million will be paid to communities annually under this program. Fourth, we predicted economic analyses on a present value basis would show that the purchase contract system for construction is financially superior to direct Federal funding (utilizing Federal funds on a pay-as-you-are-billed basis). The program has proven to be even more successful than we had predicted last year. Prophets of doom predicted that the interest rate we could realize would range from 81/2 to 9 percent. Through careful planning and a highly professional approach, we have been able to realize interest rates as low as 7.188 percent. The highest interest rate we have had to pay is 7.605 percent. We have financed over $500 million worth of construction at an average interest rate of 7.4 percent. We were also told last year that construction costs would be higher under the purchase contract program. On the contrary, they were lower. We had outstanding competition everywhere in the country. We received an average of seven bids for the 33 buildings we put on the market. These bids came from 133 construction contractors, many of whom had never done business with the Government before. Practically every award was made below the estimate. Many bids came in 10 percent to 12 percent below the estimate. Last, and again because of the professional approach taken, we were able to reduce construction time for completion of the buildings. Each economic analysis we did for every building we put on the market proved the purchase contract system to be more economical than direct Federal construction. The purchase contracting program is proving to be highly successful. AUTOMATED DATA AND TELECOMMUNICATIONS SERVICE Another development last year was the reorganization within GSA in July 1972, that established the Automated Data and Telecommunications Service. Fundamentally, this reorganization brought together computers and telecommunications with a new and vigorous emphasis on the procurement, utilization, and management of computers in the Federal Government. There has been a significant change in the state of the art relating to computers. Under the old system, computers were proliferated in many locations. Under the new system, computers are being centralized and devices known as terminals are placed in remote locations. The terminals talk to the centralized computer through telephone lines and receive output from the computer through the terminals. This new dimension is being used extensively in the private sector, and we are promoting it heavily for the Federal Government. The sav ings under the new system are enormous. Predictions made by experts, in the field are that the national inventory of medium-sized computers will be drastically reduced over the next several years, and that mini and large computers will dominate the inventory. By my reorganizing and coupling telecommunications with computers, we have taken the first step toward becoming current with the state of the art. PROCUREMENT COMMISSION REPORT On December 31, 1972, the Commission on Government Procurement issued their report. I was appointed by the President as a member of the Procurement Commission, and therefore participated in their deliberations which resulted in the final report. There are 149 recommendations in the report and many of them will have a significant impact on the Federal Supply Service in GSA. The recommendations generally are very sound and should be implemented as soon as possible. Many cannot be accomplished without legislation. The administration has taken steps to evaluate all of the recommendations. Interagency committees have been established for each recommendation, and they will evaluate and recommend steps for implementation within a time frame. GSA is the lead agency on 18 recommendations and we are a participating agency for 75 recommendations. OFFICE OF EMERGENCY PREPAREDNESS REORGANIZATION On April 6, 1973, a reorganization plan was approved which permits the transfer of certain responsibilities of the Office of Emergency Preparedness to GSA on July 1, 1973. These responsibilities are to insure the continuity of civil government operations and also resource mobilization functions. The President transmitted last week proposed amendments to GSA's 1974 budget requests to include $4,846,000 for "Salaries and Expenses, Emergency Preparedness", and $3,370,000 for Defense Mobilization Functions of Federal agencies. ECONOMIC OPPORTUNITY LIQUIDATING FUNCTIONS There was included in GSA's chapter of the President's 1974 budget an item for economic opportunity liquidating functions with appro priation language providing $33 million for expenses necessary to enable GSA to terminate and provide for any orderly phaseout of projects financed by the Office of Economic Opportunity for which funds are not otherwise available. The language also provides that all funds, personnel, property, and records of the Office of Economic Opportunity, as of June 30, 1973, which relates to any function not delegated to any other agency are hereby transferred to GSA. A major close-out activity will be the monitoring, through the date of termination, of grants not transferred to other agencies. In size and number, the largest category of grants will be the section 221 local initiative grants, with approximately 931 individual Community Action agencies involved. Grantees which are scheduled and qualified for further funding before June 30, 1973, may receive phaseout grants of up to 6 months by OEO. Grantees whose current funding expires after June 30, 1973, will not receive additional phaseout grants and will close down all activities supported with section 221 funds as soon as possible. Certain other grants such as those for senior opportunities and services and State Economic Opportunity offices projects will be funded in fiscal year 1973 for up to a full year. The life of these grants, therefore, could extend through June 30, 1974, thus making final liquidation not possible until fiscal year 1975. Our budget justification reflects a breakdown of the $33 million. requested. It provides $18.2 million for administrative costs and $14.8 million for administration of grants which should be discontinued. We are expecting to have transferred to the GSA payroll 834 people on July 1, 1973, and to reduce this number to 296 people by July 1974. Those individuals on the payroll in July 1974 will consist of auditors and investigators who will complete the audits necessary for the closeout of the OEO program. TRANSFER OF MANAGEMENT FUNCTIONS FROM OMB On May 9, 1973, the President signed Executive Order 11717 transferring a number of management functions from the Office of Management and Budget to GSA. This transfer will accomplish two objectives. The first objective is that the management activities proposed to be transferred to GSA will receive much greater emphasis, and this added emphasis is sorely needed. These management activities were not able to flourish within OMB because of the day-to-day pressure on the budget process. GSA has the resources and has developed the management capability to fully effect these management activities. The second objective is to allow OMB to improve the budget process by spending more time and money on the evaluation, preparation, and submission of the budget to the Congress. For these reasons, GSA has agreed to reprogram funds in its 1974 budget to finance these management activities. Once we became aware of these management functions to be assumed by GSA, we made a reassessment of our priorities. As a consequence, we proposed a reduction of $400,000 in the 1974 budget request for "Operating Expenses, Public Buildings Service" and $1 million in "Operating Expenses, Federal Supply Service." It was agreed that OMB funds would not be transferred to GSA because of their need to utilize these funds to improve the budget process. The management activities being transferred to GSA are: financia management, property management, procurement management, aut matic data processing management, and management systems. All of these activities, with the exception of financial managemen are compatible with activities now carried on in GSA. We have de veloped some expertise in financial management and a strong cadre o people in this area will be transferred from OMB to GSA. The stature of GSA will be substantially increased and a new rela tionship will exist where we will be a partner with OMB, workin together to improve the management of the Federal Government. am personally excited about this opportunity and I am confident tha we can make great strides toward improving management through out the Federal Government. BORDER STATION PROJECTS We activated last year an intense program with respect to borde stations. This activity covered the construction of new facilities and the renovation and modernization of existing facilities. Under the purchase contract program, we will construct new facilities at the following locations: Lukeville, Ariz., Laredo, Tex., and Blaine, Wash We have funds programed in fiscal year 1973 to repair and improve the following projects: Tok Junction, Alaska; Houlton, Maine; Grand Portage, Minn.; Chateaugay and Mooers, N.Y.; Pembina, N. Dak.: Brownsville, Tex.; Laredo, Tex.; Derby Line, Vt.; North Troy, Vt.:| Norton, Vt.; Terry, Laurier, and Metaline Falls, Wash. In addition, we have asked to reprogram funds to construct new residences at the Alaska Highway border station. In fiscal year 1974 we plan to repair and improve five projects: Nogales, Ariz.: Calexico, Calif.; Madawaska, Maine; Paso del Norte and the Bridge of Americas, El Paso, Tex. We will continue to place a great deal of emphasis on modernizing the border stations. There were, of course, many other significant developments within GSA last year. I am sure many of these accomplishments will be brought out during the question-and answer period of the individual services when they present their budgets. 1974 AMENDED BUDGET REQUEST Our amended budget request for fiscal year 1974 asks for new budget authority of $628,234,000 and a transfer of $198,055,000 appropriated in 1973. This will give GSA a total availability of $826.289.000. In summary, this means our 1974 request is $158,449,000 less than the comparable amount for 1973. CLASSIFIED PAY INCREASES In accordance with administration policy the recently granted clas sified pay increases are to be absorbed within total appropriations currently available to GSA for fiscal year 1973. It should be noted. however, that GSA appropriations requested in the President's budget for 1974 do not reflect the impact of the full-year cost of these increases. I will now present a breakdown of our request by activities in GSA. I will point out the modifications in the budget submitted. to the committee as a result of the amendments transmitted by the President. OPERATING EXPENSES, PBS In the Operating Expenses, Public Buildings Service appropriation we are now asking for obligating authority totaling $490,700,000 (a reduction of $400,000 from the original budget.) This consists of $390,582,000 in new budget authority and a proposed transfer of $100,118,000 from the unobligated balance of the 1973 construction aproppriation. Ninety-six percent or $471,646,000 is for the buildings. management activity to operate, protect, rent, and utilize governmentowned and leased space. Of the total requested for the buildings management activity well over half is required for fixed obligations for rents, electricity, fuel, other utilities, and supplies and materials needed for operating buildings. REPAIR AND IMPROVEMENT The $97,937,000 total new obligating authority requested for Repair and Improvement of Public Buildings is proposed to be funded by transfer from the unobligated balance of the 1973 Construction appropriation. This request provides for an increase of $9,892,000 from the 1973 appropriation for this item. CONSTRUCTION, PUBLIC BUILDINGS PROJECTS No new funds are included in the budget for Construction, Public Buildings Projects. The language in the budget for this item does however request authority to reprogram $732,000 from the 1973 appropriation to provide for an additional amount required for the Alaska Highway border station project I mentioned earlier. On May 9, 1973, a proposed revision to this language was transmitted by the President in the budget amendment to provide authority to reprogram $1,840,000 for projects at Fayetteville, Ark.; San Diego, Calif., and Buffalo, N.Y., to cover requirements which arose after the original budget was transmitted. SITES AND EXPENSES The $2 million new budget authority requested for Sites and Expenses, Public Building Projects is $23 million less than the amount appropriated in 1973 and provides primarily for design supervision and management and inspection for the Alaska border station project and costs related to the purchase contract program. PAYMENTS, PUBLIC BUILDINGS PURCHASE CONTRACTS With respect to the purchase contract program, we are requesting $7.3 million for the appropriation, Payments, Public Buildings Purchase Contracts to meet the Government's obligation for installment payments of principal, interest, and taxes on purchase contracts authorized in the Public Buildings Purchase Contract Act of 1954 and the Public Buildings Amendments of 1972. The increase of $4,850,000 94-174 073 pt. 4- 23 |