Hearing Of The Financial Services And General Government Subcommittee Of The Senate Appropriations Committee - FY 2010 Budget Estimates For The Small Business Administration And The General Services Administration
Statement
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SEN. DURBIN: Good afternoon. I am pleased to convene this hearing to consider the fiscal year 2010 funding request of two agencies within the jurisdiction of the Appropriations Subcommittee on Financial Services in General Government; the Small Business Administration and the General Services Administration.
My distinguished ranking member, Senator Collins, will be here shortly along with others. SBA and GSA are both playing key roles in the federal government's efforts to stimulate the economy.
The Recovery Act provided SBA with $730 million to expand access to capital for small business. As the lifeblood of the American economy, small businesses must be the main driver of our nation's economic recovery.
The Recovery Act also provided $5.5 billion for GSA to initiate new federal building projects. These projects employ architects, engineers, electricians, plumbers, carpenters and many others that provide an indirect benefit to local economies by spurring increased economic opportunity.
Capital construction projects led by GSA are important investments, not only for the government but also for the communities in which the projects take place including many small businesses. Small businesses are at the heart of many sectors of the economy including information technology, retail and green jobs.
In fact, in fiscal year 2008 alone, small businesses were awarded over than $1 billion in GSA contracts. In addition to Recovery Act initiatives and implementation, we're also going to discuss the fiscal year 2010 funding request for SBA and GSA.
Joining us for our first panel is Karen Mills, the new administrator of the Small Business Administration.
I welcome you to the subcommittee.
MS. MILLS: Thank you.
SEN. DURBIN: The budget request for fiscal year 2010 for SBA is $779 million, which will provide funding for a wide array of programs supporting small business lending and entrepreneurial development.
SBA has been on the front lines of the economic crisis working to help small business owners as they face difficulty gaining access to capital. SBA oversees a loan portfolio of $85 billion and in a typical year makes -- are guarantees loans to $20 billion for small businesses.
We'll discuss the good news regarding the performance of new programs as well as an array of entrepreneurial development programs that can help small businesses stay on their feet and even grow in this tough environment.
Administrator Mills, I look forward to hearing your testimony on your fiscal year 2010 budget request and on SBA's progress on implementing new Recovery Act programs, and I give you the floor.
MS. MILLS: Well, thank you very much, Senator Durbin.
Chairman Durbin and Ranking Member Collins -- who I know is going to be here -- and members of the committee, it's an honor to testify here before you and I'm very pleased to be here to support the president's 2010 budget for the Small Business Administration.
First, though, I'd like to briefly update you on the progress that we've made with the Recovery Act with the launch yesterday of the ARC loans -- that's America's Recovery Capital. The SBA has implemented more than $645 million of the $730 million in our Recovery Act funding.
So on March 19, we announced that we're going to raise the guarantees -- that we raised the guarantees on most of the 7(a) loans and that we also would reduce or eliminate the fees on 7(a) and 504 loans.
The results actually are quite encouraging. The problem we were trying to address is that we have an environment -- we had an environment of very, very tight credit for small business and small businesses were suffering because they couldn't get any liquidity and any credit.
And we were able to, with these two programs, increase our loan volume by more than 30 percent compared to the weeks before the Recovery Act. And just as importantly, we've been able to bring back over 500 banks who had not been lending, some of them since 2007, and who are now lending through the SBA programs.
So at this pace, the funding for the 90 percent guarantee and the fee reductions will last through December 2009. As I said, on Monday we began the ARC loans and actually 30 were approved yesterday. We actually expect there to be 10,000, but we're off to quite a lot of demand.
These are loans that are going to provide relief for some viable small businesses that are struggling. They are 100 percent guaranteed by the SBA. They are $35,000 or up to $35,000. They have no interest for borrowers and they have over 12 months before any repayment begins and then the repayment is over five years.
Overall, the SBA is here to ensure that small businesses will continue to drive the American recovery and also to be able to build the strong foundation for America's competitiveness and for the creation of what we call "21st century well-paying jobs."
The 2010 SBA budget request is $779 million and it is in support of these objectives. There are four basic functions of the SBA and they are included, each one, in this budget. First, is our disaster assistance programs and they are to ensure that communities will recover from a disaster and begin to again contribute to the economy.
We actually have more than 1,200 trained standby employees and they go from the ice storms in Maine to the wildfires in California. And then they go to the tornadoes in the Midwest and the floods and now they're ready to go down to the Gulf Coast or the Eastern Seaboard for hurricane season.
And they help communities. They are deployed to communities who are affected by disaster and they process and give out both homeowner and business loans. And I'd be -- I'm pleased to say that they are ready to go for the season and that our processing times in this disaster center, which we've worked very hard to bring quite low, are on target and that is 14 to 18 days. Our 2010 request in this area is $101 million for administration of the direct loan program.
The second area is our capital access division and that oversees our business loans and I heard Senator Durbin mention I was going to say more than $80 billion, it's -- you actually said 85? Thank you. That, actually, is right where we are.
We are requesting the same authorization levels that were enacted in 2009 to support more than $28 billion in small business financing. This is through our 7(a), 504, our SBIC investments, and our micro- loan programs. The total subsidy request for this is $83 million in fiscal year 2010.
Our third division is our government contract division and that helps small businesses that have the opportunity -- helps them have the opportunity to participate in government contracting and subcontracting.
This budget requests an additional $2 million. We're going to revise the certification process for our hub zone and 8(a) Business Development programs and we're going to make sure that only eligible businesses participate and we're going to be able to determine when our site visits and our oversight is necessary.
Our fourth division is our entrepreneurial development division and that's really the backbone of the agency. We have over 900 Small Business Development Centers -- SBDCs. We have more than 100 women- owned business centers. And we have more than 350 chapters of SCORE, which is our retired executive program. Overall we have 14,000 affiliated counselors. And one of the partner organizations said to me the other day that he thinks that we are within 45 minutes to an hour of most small businesses with counseling assistance.
The performance of these operations is quite strong. We have seen 34,000 clients since October and that's a 5 percent increase, as you can imagine in these times in this -- compared to last fiscal year. So as you can see, we're a small agency with a big mission, especially in today's economic climate.
Already, federal agencies throughout the administration are turning to the SBA. They are looking for ways to tap into our network of staff and our partners who are already on the ground and working with small business owners.
One recent visible example of our work has been with the auto task force and where we've helped devise dealer floor plans -- the financing for dealer floor plans. This budget is going to allow us the flexibility to build more of these partnerships in response to these challenging times.
Specifically, $20 million in the 2010 budget allows us to create three important collaborations. The first initiative is on veterans. We are going to provide an additional $5 million to focus throughout our agency on serving veterans.
You know, we have 12,000 troops returning this summer. We have tens of thousands over the next coming year. And we have to be ready to serve these veterans who are or who want to become small business owners.
So already we have eight specialized veteran centers, but we actually need to be serving veterans in all of our resource partners. There are 2 million women veterans. We need to be ready to serve them in our women-owned business centers.
We're already in conversations with the secretary at Veteran Affairs on how to coordinate our efforts and this is part of an overall objective at the SBA and across the administration to collaborate; to break down sacred turf in order to make federal dollars work more efficiently for those who need our help.
The second initiative is $10 million, which is requested to form a ready reserve or SWAT team. This is an interagency collaboration with SBA. At the request of a community, these teams will go into areas that have been disproportionately impacted by the economy and help them plan for jobs and growth.
The focus is going to be on the manufacturing sector, on the automotive industry, on communities that are reinventing their economy from the ground up. And I went to Kokomo, Indiana -- which is one of the highest concentrations of Chrysler employment -- two weeks ago. And the mayor, Greg Goodnight, he asked me for just this kind of help. Could we send this kind of team in?
The ready reserve teams are going to work closely with this network -- this bone structure of SBA partners -- to help leverage the local assets, create jobs, grow small businesses. The third initiative in this budget is $5 million to support small businesses through regional economic clusters.
An example is -- that I like to talk about is the Maine boat builders. And the Maine boat builders have formed a cluster with the University of Maine working on new composite technology. This is a 400-year-old industry now competing across the globe.
Maine's small boat builders are one example and I know that Senator Collins has actually been working with this group actually for a long time -- even longer, much longer than I have. So clusters like this are forming in every state. They are going to be fueled with -- by efforts in the Department of Commerce. The Department of Commerce has $50 million in their budget for these cluster activities.
The SBA resources on the ground will coordinate with Commerce's manufacturing and export centers with Labor's Trade Assistance Programs and a number of other programs to assist the cluster's needs.
In the coming year, my personal commitment with all our efforts at the SBA is that we will measure our progress on an agency-wide basis and transparently report our activities to Congress and to taxpayers.
Already we're tracking our progress in a systematic and integrated way. We have a dashboard of data on a weekly basis and on a monthly basis. And we're going to continue to use these metrics in our objectives of implementing the Recovery Act, reinvigorating the agency and serving as the strongest possible voice for small business.
Thank you very much.
SEN. DURBIN: Thank you, Administrator Mills.
I welcome my colleague, Senator Collins.
I'd like to ask a question or two. First, you've requested some $20 million for new entrepreneurial development initiatives. And your testimony says this money will be used in part for increased focus on veterans, SBA SWAT teams and small business clusters.
I like the idea of innovative thought and new approaches. However, there's something that I find I can't resolve. Also in this budget is a proposed $13 million decrease in the Small Business Development Centers. They have an established network of connections across the country and are already on the street, ready to address the challenges that you've identified. I could give you the list of accomplishments of these SBDC associations, but I think you would know them.
So here's what I'm trying to struggle with: Why would you try to cut back on an established network that has proven that it can help business and then start a new function to go after three specific business needs?
It would seem to me that we wouldn't want to sacrifice the SBDCs to create a new experimental program. And also, will there be SWAT uniforms for the SBA employees?
MS. MILLS: Well, yes on the SWAT uniforms, of course.
SEN. DURBIN: That'll be interesting.
MS. MILLS: Well, you're absolutely right and to point out this anomaly in the data. And let me be very clear: It is not our intention to cut the SBDC programs.
So here's how the anomaly appeared. When we proposed our 2010 budget -- proposed $97 million for SBDCs. That was level funding for this absolutely critical program with, say 2009. So 2009 was $97 million. We proposed in our 2010 budget the same amount.
This is a critical program and it is what we call the bone structure, the foundation stone, as you pointed out, of how we are executing, how we are on the ground. The numbers -- the metrics on this are very, very good. Not only are they up 5 percent, but we have -- we document how when they serve clients on a long-term basis, the performance of these clients increase versus the control group who are not served.
So these are really critical elements of our plan. The reason that you see $110 million in the 2009 is that Congress passed the actual 2009, after we had submitted 2010, and there was an increase for the SBDCs which we are very grateful for.
SEN. DURBIN: So you're saying that the $97 million is flat funding from the previous fiscal year?
MS. MILLS: Yes. And our intention was never to cut this program. We rely on this program. It is a backbone program. So there was no replacement contemplated.
SEN. DURBIN: It would seem that flat funding would not anticipate just ordinary increase in cost of living and the like.
MS. MILLS: Well, as I said, we are very, very happy to talk about supporting this program, because this program is a foundation stone of everything that we want to do.
SEN. DURBIN: Let me ask you about one of the -- since you're brand new to the agency, just ask you what your thought is about this particular issue.
OPM did a survey in 2008 on the best places to work in the federal government. The Small Business Administration in 2008 ranked 26th out of 30 agencies.
That is low but an improvement over the previous year, where it ranked 30th out of 30 agencies -- dead last.
So when it comes to this issue of morale and the like, I'd like to know what your thoughts are and how you're going to change that particular -- or at least address that particular challenge. One of the things that's been a suggestion is more money into employee training so that there's a notion that if they do train and improve their skills, that there's a chance for advancement within the organization.
However, the report states the agency has not yet documented a comprehensive plan for training that links core competency to your goals. So can you tell us if you're aware of this problem, what you're doing to address it, whether it involves any training component or things like student loan forgiveness?
MS. MILLS: Senator, this is -- I'm very happy to talk about this. When we talk about the priorities, when I talk about my priorities for the agency, once of the most important ones is reinvigorating the agency.
And there are two components of this: investing in our people and investing in information technology. And what you've just described is at the core of our plan to invest in our people. It is unacceptable to be 30th out of 30.
We won an award last month for most improved agency and we're only at 26th. This is not good enough. So we have embarked on a revision of our training program. And this is a priority for me as administrator and for our whole team because we have terrific people and we ask them, as I said, to do a lot of jobs -- to carry a big load.
And we need to prepare them and invest in them in order for them to be great managers, in order to lead them to be great counselors. And we actually have some excellent programs in the planning process that we plan to begin to implement in the next month.
So we are also looking at student loan forgiveness and I'm pleased to tell you that we are going to do that as well and that's going to be implemented within the next 30 days.
SEN. DURBIN: You have the legal authority to do that?
MS. MILLS: Yes, I believe we do.
SEN. DURBIN: Good.
Senator Collins?
SEN. SUSAN COLLINS (R-ME): Thank you. Thank you, Mr. Chairman.
I'd ask unanimous consent that my opening statement be entered into the record.
SEN. DURBIN: Without objection.
SEN. COLLINS: Thank you.
I want to apologize to you, Mr. Chairman, and to our witness for my late arrival. Since the witness is from the state of Maine, she can appreciate that I was at the Sea Power Subcommittee of Armed Services, which is also very high priority for our state.
Administrator Mills, let me first associate my remarks -- myself with the remarks made by the chairman about the Small Business Development Centers. As a former regional administrator of the SBA, I know personally how valuable those centers can be in providing advice and guidance which can be at least as important -- well, maybe not as important, but almost as important as money to a new business or a business that is thinking of expanding. So I too hope we're not seeing a cutback in those valuable centers.
I'd like to ask you for an update on the implementation of the Recovery Act. This committee gave the SBA some $730 million to help get small business lending going again through a variety of means including increasing the amount of the loans that the SBA could guarantee, cutting fees, a variety of programs. What is the status of the SBA's efforts to implement the Recovery Act?
MS. MILLS: Thank you, Senator Collins.
The status of the Recovery Act is that as of yesterday, with the implementation of the ARC loans, we have implemented $345 million of the $730 million of Recovery Act money is now available for funding.
The first stage went out on March 19th, which was the increase of guarantees to 90 percent and the reduction of fees. And the reaction -- we really have to thank you for putting this money forward because the reaction was immediate.
When the small businesses had been having difficulty getting credit, we were able to see our loan volume go up by 30 percent. And actually I'm told, as of yesterday, it's now 35 percent over the weeks before the Recovery Act.
In addition, we were able to attract 500 new banks into the program who had not made a loan since -- some of them since 2007. So the formula in that Recovery Act is exactly right, and we are seeing the loan volumes increase and increase. We're not back yet to pre- October, pre -- you know, 2008 levels. But it is money in the hands of small businesses and the Recovery Act is working to keep those jobs.
SEN. COLLINS: That's great to hear.
MS. MILLS: Yes.
COLLINS: I will tell you, and I know you hear it back in Maine as well, that there are still a lot of small businesses that are having their lines of credit terminated -- that are having loans called.
And this infuriates me because a lot of times the financial institutions that are cutting off lending to small businesses are those that have received billions of dollars in TARP money.
So it's just infuriating to me that they are cutting off credit to small businesses that in many cases are -- in most cases are paying on time. They have not violated the terms of their loan agreements, but it's just a matter of the bank trying to build up its capital or reduce its exposure.
When I was the regional administrator in New England in 1992 or '93 -- I can't even remember which year -- banks were failing throughout New England and we initiated a New England Lending and Recovery Project, which I discussed briefly with you. And what this project did is go into failed banks and take out the credit-worthy loans and place them with a new lender with a SBA guarantee.
And the result was that we were able to intervene in cases where through no fault of its own, a small business was losing its credit. Is SBA looking at some sort of proactive program like that, where you would go in and offer to put a guarantee on a loan in order to keep it from being called or credit line terminated?
MS. MILLS: Well, yes. We absolutely have. And in fact, you had mentioned this a while ago.
There are two programs that are really going to be helpful to this quite distressful problem of credit lines being cut to small businesses. The first is actually the ARC loans.
What is happening to many of these small businesses is that the credit lines that are being cut are actually credit card -- business credit card lines. And availability on those lines have been cut and therefore they have no liquidity to run their business.
The ARC loans, which went out yesterday and became available, are $35,000 lines of loans to businesses to pay down any loan they want -- including credit card loans. And that would give them an additional $35,000 line of credit.
These are 100 percent guaranteed by the SBA. They have no interest to the borrower. The SBA pays the interest. And they have no repayment due for at least 18 months -- six months to give the loan, then 12 months after.
So this will be very good for smaller borrowers who particularly have this issue of their lines of credit cut on credit card loans. The second -- and it'll give them a much cheaper option.
The second thing that we are implementing and have implemented is that you can refinance a bank loan into a SBA guaranteed 7(a) loan today. And in the next couple weeks, you are going to be able to implement -- to refinance into a 504 loan.
So if you meet the criteria for a 504 expansion loan, you in the past could not refinance existing debt into that guaranteed loan, but because of the provisions of the Recovery Act, we're going to be able to implement new rules.
And so those will be available for exactly the kind of taking great businesses that for various reasons, the bank is not able to be the provider of enough liquidity, and putting that with an SBA bank with a guarantee.
SEN. COLLINS: Thank you, Mr. Chairman.
SEN. DURBIN: I understand, Administrator Mills, that on July 1st, SBA will begin guaranteeing loans to dealerships to finance inventories of cars, trucks, R.V.s, boats and even manufactured homes. That this is because of recent changes to old regulations that used to prohibit this kind of lending.
This is kind of a bold step for the SBA and it clearly will be needed by some. But it is a stressed marketplace and I'm just wondering as the SBA considers these loans, what steps are you taking to mitigate the risks that are part of this new loan program?
MS. MILLS: We worked very hard to do a number of things in response to the crisis in the automotive industry. The first was to provide some kinds of financing that the distressed dealers were looking for.
And this goes to not just dealers in the Chrysler and GM, but of course to all dealers -- including used car dealers. And it goes to boat builders, boat dealers, R.V. dealers, as you said, and also motorcycle dealers in fact.
And the steps that we have taken, what we needed to do was make sure we were taking no more risk with these loans than with our normal 7(a) portfolio. So we actually constructed credit criteria including our guarantee on this for instance is 75 percent not 90 percent and the advance rates are of a certain level. So we have been quite careful to balance the need to step up and provide liquidity to the sector and also to not take on additional -- to manage our risk to the appropriate level.
SEN. DURBIN: I'd like to ask you about one issue that you're going to face and we've all faced in federal government.
Federal agencies reported a total of $78 billion in federal prime contract dollars went to small businesses in 2006. Many of these were obtained using contracting preferences, such as sole source of warrants and set asides for small businesses.
The SBA's inspector general and others have reported flaws in this procurement system related to the contracts. There's evidence that large firms are awarded contracts reserved for small businesses. In addition, federal agencies have inappropriately been counting contracts performed by large firms toward their small business procurement goals.
SBA introduced a scorecard to rate small business procurement practices at federal agencies, including the accuracy of reporting, and issued regulations to require small businesses to regularly recertify.
How is the SBA working with federal agencies to ensure contracting personnel are properly trained to understand what is a small business, what is a masquerading large business and how we meet our goals to actually do business with smaller entities?
MS. MILLS: Well, Senator, our government contracting program is designed to have the SBA help ensure that 23 percent of all federal contracts throughout all the agencies go to small businesses. And the purpose of this, it should be a win -- we believe it should be a win- win situation.
These are very good for small businesses -- particularly some of the high-growth, innovative businesses -- because it allows them to get to the next level of volume and then after that they can export and they graduate and they become job creators and sort of the mainstays of the growth in our economy.
From the federal agency point of view, it's a win-win also, because they get access to some of the most innovative companies and technologies. And when you contract with a small business, very often you get top management and you get the CEO at the table working on these issues.
However, as you point out, it's difficult sometimes for federal agencies to know how to access great small businesses. And they worry: Will the small business I'm contracting with be there; is it financially stable?
So one of the things that we are focusing on in answer to your question, is increased training and activities that improve the reach and access and availability of small businesses to speak to these procurement agents and connect to these procurement agents.
The second issue you raised though is that we have had a series of issues relating to whether this is really reserved for small business. This program is for small businesses. It is not for big businesses masquerading as small businesses.
There have been a series of findings on this and we are engaged in addressing every single one that has come out of the report. And in the budget you will find funding for our hub zone program and our 8(a) certification programs so that we can relook at a number of ways we do business. Certifying that sometimes it's good for a big business to be affiliated and mentor a small business, but it is not good if the small business is not actually the one engaged in the contract and in fulfilling the contract.
So we are working very hard on these issues that you've described and consider them one of our important priorities because we think actually this can be a win-win for small businesses and for the federal government.
SEN. DURBIN: Thank you.
Senator Collins.
SEN. COLLINS: Thank you, Mr. Chairman. I want to follow up on the questions that the chairman has just raised about the ability of your agency to guard against fraud.
You've had an enormous budget increase as a result of the stimulus bill. And yet, I'm told that SBA's non-disaster staffing has decreased by about 28 percent since 2001. Your loan portfolio went up by 59 percent during that period. Information that you've given us today shows that it has gone up even further.
How is the SBA going to ensure -- when you have over 5,000 lenders and 270 certified development companies that are making loans -- how are you going to ensure the integrity of that process when your non-disaster staff is shrinking?
MS. MILLS: Thank you, Senator Collins, for asking that.
In fact, this agency went from 3,000 people eight years ago to 2,000 people now. The budget has gone down by 24 percent.
But to answer your question, I said there are two areas that we were going to invest heavily in reinvigorating the agency and the first is our people; the second is information technology. A large part of the information technology investment that we are making and we got some money in the stimulus act -- in the Recovery Act to look at this is for lender oversight and risk assessment.
We have formed a new committee on risk assessment and we are beginning the process of understanding how we can use technology, as well as people to identify risk, to collect better data on risk and to be more proactive about our understanding of how we go after risk- based solutions.
And I think we do -- at this moment, we have some very good components, but we are raising the level of this activity to really my level -- to the administrative level. So I'm getting very involved in this myself.
SEN. COLLINS: Speaking of human capital, I'm told that the chief financial officer of the SBA, as well as three senior staff who were involved in estimating credit subsidies, all recently left the agency.
That concerns me at a time when you are working so hard to expand your lending programs. What are you doing to fill that particular gap at a critical time?
MS. MILLS: Well, thank you for that question, because it gives me an opportunity to brag about our people a little bit. Our financial staff did, at the period of January-February, largely go over to the TARP program.
But we have been able to actually build inside a first rate crackerjack chief financial officer's office and staff, who are doing just a terrific job. So I am pleased to say the staff has totally risen to the occasion and we are very confident about our numbers. As you know, I'm a metrics-oriented person, so that was the first priority for us.
SEN. COLLINS: Thank you.
And finally, you and I share a common interest in helping to develop business clusters, particularly in rural areas of a state such as in our state of Maine. Does this budget have support for the development of small business clusters?
MS. MILLS: Yes, Senator Collins. There is $5 million in this budget.
And Senator Collins put forth a bill last year, which designed a program for clusters and much of that is now incorporated in the Commerce Department's $50 million cluster program.
This $5 million is designed to have the SBA resources -- the footprint that we have on the ground, which is so substantial -- be linked and leveraged in the lines with those cluster programs.
SEN. COLLINS: Great. Thank you.
SEN. DURBIN: Thank you, Senator Collins.
And Administrator Mills, Thank you for your testimony today. We certainly appreciate it. We'll be working with you and your staff on your budget for the next fiscal year.
MS. MILLS: Thank you.
SEN. DURBIN: We'll probably submit some written -- some written questions and as you can take a look at them and send us some replies on a timely basis, it would help us do our work. Thank you for being here today.
MS. MILLS: And we'll do that. Thank you very much.
SEN. DURBIN: Appreciate it.
The next panel is the General Services Administration, and I'll give a little introduction here as the panelists are going to take the table.
GSA employs more than 12,000 staff in 11 regions throughout our country, oversees a vast and diverse portfolio of federal assets, manages more than 8,600 buildings with a total value of $74 billion, including 1,500 government-owned buildings -- this may be one of them.
It is responsible for servicing the workspace requirements for 57 federal agencies, with approximately 354 million square feet of workspace for over 1 million federal employees in 2,000 American communities. It's a big job; they're big landlords.
First, we will hear the testimony of Paul Prouty, acting administrator of the General Services Administration. We look forward to hearing about the GSA's plans to implement the Recovery Act by converting federal buildings to high performance green buildings, as well as discussing the 2010 budget.
Also joining us to discuss the budget requests for GSA is the Honorable Joseph Bataillon, chief judge of the U.S. District Court for the District of Nebraska. He's chair of the Space and Facilities Committee of the Judicial Conference, which prepares an annual five- year plan detailing our needs and priorities of the Judiciary for courthouse space.
GSA and the administration use this project plan in selecting projects each fiscal year in preparing the budget request.
We thank you both for being here. Your statement will be made a part of the official record and at this point, the floor will be available to each of you for five minutes.
MR. PROUTY: Thank you very much.
Chairman Durbin, Ranking Member Collins, Senator Bennett -- good to see you, sir -- distinguished members of the subcommittee. I'm honored to appear before you today in support of GSA's 2010 budget request.
With your permission, I would also like to provide an update on our efforts to implement the American Recovery and Reinvestment Act of 2009.
GSA's fiscal year 2010 budget request supports the administration's commitments to build a transparent, participatory and collaborative government through the use of new technologies, as well as address significant shortfalls in our national infrastructure.
The FY 2010 budget request, in conjunction with the Recovery Act, provides $6.4 billion for capital projects. These projects will create new jobs for thousands of Americans and will stimulate industries that have been battered by the economic downturn.
In addition, these projects will deliver lasting progress towards modernizing our nation's infrastructure, reducing the federal government's consumption of energy and water and increasing our reliance on clean and renewable sources of energy.
GSA's FY 2010 budget requests $645 million in net budget authority. This amount is just 2.4 percent of our total planned obligations of $27 billion. The majority of our funds come in the form of customer reimbursements for good purchased or rent paid for space under GSA's jurisdiction, custody or control.
For the public building service, GSA requests $8.5 billion in new obligational authority. Of these funds, $658 million are requested for the construction and acquisition of critical facility projects for the Food and Drug Administration, the Federal Bureau of Investigation, U.S. Customs and Border Protection and the judiciary.
We also request new obligational authority of $496 million to address the backlog of repair and alteration projects. Although the Recovery Act funding provides GSA with some relief from our substantial backlog of repair and alteration needs, our inventory of aging federal buildings requires continued reinvestment.
We also request $40 million for our energy and water retrofit and conservation program and our federal high performance green buildings program to help address federal requirements for energy conservation and reduced energy consumption in federal buildings.
The GSA Federal Acquisition Service is a leading acquisition organization for the federal government. Last year, revenues increased by 4.6 percent making FY 2008 the first year, since FY 2004 that GSA has seen revenue growth across the combined programs of FAS.
FAS also realized a 2 percent increase in cash collections from our multiple awards schedule program. This business resurgence is a result of a concerted effort to reduce operating costs, standardize the fees we charge our customers and restructure our service offerings.
Today, GSA and FAS are delivering value to our customers by offering products and services that meet or exceed their expectations. As a leader in green government, GSA continues to encourage federal agency customers to consider the environmental impact of their acquisition decisions.
The American Recovery and Reinvestment Act has provided GSA with an opportunity to contribute to our nation's economic recovery by investing in green technologies and reinvesting in our public buildings.
The Recovery Act provided GSA's public building service with $5.55 billion, including $1.05 billion for federal buildings, U.S. courthouses and land ports of entry and $4.5 billion to convert federal buildings into high performance green buildings. We are moving forward with speed tempered by careful consideration of our procurement responsibilities and our ultimate accountability to the taxpayer.
On March 31st, GSA delivered to Congress a list of 254 projects in all 50 states, the District of Columbia and two U.S. territories to be completed with funds provided by the Recovery Act. GSA selected the best projects for accomplishing the goals of the Recovery Act based on a detailed analysis of a number of factors.
Our goals in developing this list were to both put people back to work quickly and increase the sustainability of our buildings. As of June 5th, PBS has awarded contracts totaling $244 million to begin the construction, modernization or repair of 25 federal buildings across the country.
Of this, $213 million has been obligated to convert GSA facilities to high performance green buildings. We have also obligated $30 million for the construction of new energy efficient land ports of entry.
The Recovery Act provided GSA Federal Acquisition Service with $300 million to replace motor vehicles across the federal fleet with those that are new and more efficient. GSA strategy to improve the energy efficiency of the federal fleet balances energy efficiency goals with the need to expedite procurement in order to maximize economic benefit for the auto industry and the economy as a whole.
To date, GSA has obligated $287 million to order over 17,000 fuel-efficient vehicles of which 3,100 are hybrids. In the final phase of this procurement, GSA will order $13 million of compressed natural gas and hybrid buses and electric vehicles by September 30th, 2009.
Today I've discussed our FY 2010 budget request, the Recovery Act and GSA's eagerness to undertake the new challenges that lie ahead. Your approval of GSA's budget request is a vital step in helping us achieve our mutual goals of economic recovery, energy efficiency and increased citizen engagement in government.
GSA is committed to delivering on these goals, contributing to the long-term objectives of the administration, and providing the best use of taxpayer funds. I look forward to continuing this discussion of our 2010 budget request with you and the members of this subcommittee.
Thank you.
SEN. DURBIN: Thank you.
Judge Bataillon.
JUDGE BATAILLON: Good afternoon, Mr. Chairman, Senator Collins, Senator Bennett, members --
SEN. DURBIN: Would you check and make sure that your microphone switch is on?
JUDGE BATAILLON: Now it's on. Thank you very much.
SEN. DURBIN: Thank you.
JUDGE BATAILLON: That's what I say to the lawyers all the time, "You have to speak into the microphone, gentlemen."
At any rate, thank you for inviting us here today. I appreciate the opportunity to appear before this subcommittee today to discuss the judiciary's courthouse construction needs, the process for identifying and prioritizing these needs for federal construction projects, as well as lease-construct projects which are an alternate approach for acquiring smaller courthouse facilities.
Before addressing those issues, however, I want to convey the judiciary's gratitude to this subcommittee for supporting and furthering the administration of justice through appropriating monies from GSA Federal Building Fund for the construction of new courthouses and for the renovation of existing courthouses.
We understand that there are many federal needs competing for scarce capital resources in government, and we deeply appreciate this subcommittee's willingness to champion the needs of the judiciary, in terms of the real estate infrastructure necessary to conduct the work of the courts and administer justice.
We are particularly grateful for the subcommittee's appropriation of additional funds for the San Diego courthouse in 2009, and for its support of courthouse construction with the American Recovery and Reinvestment Act funds.
On April 1st of this year, James Duff --director of the administrative office of the United States Courts on behalf of the Judicial Conference -- transmitted to this subcommittee and other cognizant congressional committees, the White House, the Office of Management and Budget, the General Services Administration the five- year plan for courthouse construction projects, as approved by the Judicial Conference of the United States in March of 2009.
An advanced copy of the plan was provided to GSA earlier this year for use in developing the 2010 federal buildings fund budget request. We are disappointed that none of these projects listed on the 2010 plan appear on the president's 2010 budget.
The projects that were included, however, were Yuma, Arizona and Lancaster, Pennsylvania, which were initially determined by GSA and by the courts as lease-construction projects, as opposed to federal building projects. They now appear on the budget as federal building projects.
The distinction between these two execution strategies for acquisition of new construction has never been in place before and it's never been part of the five-year plan for the courts. Federally constructed projects have to be ranked and prioritized because federal construction dollars are scarce, and at any given year only so much money is available to be appropriated for these projects.
Lease-construct projects, on the other hand, do not compete with each other for funding from a limited pool of government construction capital, but are privately financed. Consequently, there has been no need for the judiciary to rank or prioritize lease-construction projects as long as they fit within our budget requirements.
Moreover, federal construction has been and remains the primary means by which GSA provides new space for the courts. Lease construction has only played a small role in one or two courthouse construction projects in low-density population areas, where a large court presence is not necessarily needed.
In addition, lease-construction courthouse projects are delivered in a fraction of the time that it takes the government to construct a federal courthouse. This expedited delivery feature is a key benefit to the lease-construction alternative.
While the use of the lease-construction method has been very modest with the judiciary, it has been critical to the judiciary and GSA, to deliver small projects on an expedited basis.
We now understand that the Office of Management and Budget has raised objections to the lease-construction courthouse process, even for modest projects like the ones in Yuma and Lancaster.
If the lease-construct execution strategy will no longer be accorded to GSA as an alternative to federal construction methods for delivery of new courthouses, and the administration seeks funding for these projects from the Federal Buildings Fund, the projects on the judiciary's five-year plan will suffer and the president's budget this year is an example of that.
None of the five-year construction projects are included in the president's budget request; only what would otherwise be considered as lease-constructions.
If that continues to be the case, lease-construction projects would have to compete for scarce federal building dollars, along with long-term judicial space requirements and Yuma is a prime example.
Yuma was on the verge of a lease-construct contract award and scheduled for completion in June of 2011. A federal construction execution will likely delay the project by at least another year or two years. Yuma to date, to date, has handled over 2,000 defendants and it's anticipated that they will handle at least 5,000 defendants this calendar year. The security requirements are so limited in this leased facility that ICE has required the court only to process 40 defendants a day because we don't have the capacity to do any more than that and it becomes a bottleneck for the prosecution of these individuals.
The judiciary was not consulted prior to this change in execution strategy. We are disappointed that the Yuma and Lancaster projects, which we believe were appropriate for the lease-construct path, have now been redirected to the federal construction path apparently at the expense of the five-year plan.
With regard to the FY 2010 projects, if they are not funded in this budget year, then they will be pushed back yet again another year, and it's been our experience that every time we push back a project, the costs for the project increase substantially.
The judiciary urges this subcommittee to support remaining lease- construction as necessary and appropriate and as an alternative to federal construction, especially in locales where the court space is modest acute, and of possible intermediate duration.
The judiciary believes that GSA has the authority to use this procurement method which is a widely accepted method of delivering buildings in the private sector.
Again, the judiciary is grateful for the past and continuing support shown by this subcommittee for its facilities and space needs.
Thank you very much.
SEN. DURBIN: Well thank you both very much. And first let me get it straight, "Prouty" or "Pruty"?
MR. PROUTY: Prouty.
SEN. DURBIN: Thank you. I'm sorry I mispronounced your name to start with.
This really is a classic constitutional confrontation here -- the building of courthouses -- where we literally have three branches of government involved in it and obviously going in different directions.
It reminds me when I was in the House and then Appropriations Chairman Jamie Whitten allowed me to come in as a new member, and I said that I'd like to also serve on the budget committee, which was permissible. You could be on appropriations and budget.
And he said, "You can do it if you want to do it, but just remember the budget committee deals in hallucinations and the appropriations committee deals in facts." So I went on and took on the budget assignment and it turned out he was right. (Laughter.)
So here, let me show you some charts here just to give you an idea of some things that we've noticed about construction.
This one is interesting and I think that Senator Bennett will like it a lot. And it shows on the left-hand side what the judiciary lists as priorities in fiscal year '10 and Salt Lake City's on there.
SEN. BENNETT: (Off mike.)
SEN. DURBIN: I know your timely arrival. (Laughter.)
And you'll notice the president's budget zeroed it out, and then you'll notice what the history has been in the past. We've, I guess, appropriated some $40 million for a $211 million project.
I won't go into detail here other than to show you that the three branches of government all have different priorities when it comes to this construction. I'm going to mention in a moment -- why don't you get the last chart, the bar chart there that shows the increased cost which was a point that was made by Judge Bataillon.
Salt Lake City, off to the right, has been delayed for nine years and the estimated cost of construction has gone up from somewhere in the range of $50 million to over $200 million. And we've all been very cognizant of that.
So it appears that the judicial branch picks its priorities. The president then picks his priorities and then Congress decides what to fund which may be a different priority and that has been the way this has worked back and forth, or has failed to work back and forth. And I don't know if we'll be able to resolve that at this moment, Judge, but we'll try to at least discuss it here.
If I can ask about two specific courthouses -- and I believe one or both have been mentioned: the San Diego courthouse. In the fiscal year 2009 appropriation, we provided an additional $110 million to cover cost overruns necessary to complete the project. The law was enacted in March, but a contract has yet to be awarded. It appears it's stalled once again. The GSA didn't inform us of a delay.
Would you like to tell us, Mr. Prouty, what is going in San Diego?
MR. PROUTY: We are currently, at the request of the House staff, reviewing the San Diego housing plan. It appears that there may be some space that is in the building which we, like you, would like to award that is not currently designated for the courts.
So we're putting a plan together. We think that there is some space that we can give to another federal agency until such time as the courts needs need that space. So it's just a space requirements issue.
SEN. DURBIN: So what's going to happen to the $110 million?
MR. PROUTY: It's going to be spent and hopefully soon.
SEN. DURBIN: Okay. And the contracts will be awarded soon?
MR. PROUTY: I certainly believe that to be true.
SEN. DURBIN: Let's take a look at downtown photograph of the home of the NBA champion Los Angeles Lakers.
We appropriated $300 million for the construction of a federal courthouse in fiscal year 2005. And you'll notice that empty lot in the corner there. There's no indication that construction will begin any time in the foreseeable future. Costs have obviously escalated dramatically in four or five years, making the initial project prohibitively expensive.
As a result, GSA and Judiciary have been exploring less costly alternatives. Can you tell us what's, you know, when we're so short on money and we do appropriate the money and nothing happens for four or five years, you can understand why that gives us a fair degree of angst. Would you like to comment on that?
MR. PROUTY: I think it's safe to say that we're at a total impasse. For the amount of money that we have, we can't build what the courts want. So we currently have a project -- the original project as you indicated is with the scope, even with the reduced scope, is beyond the money that we've got.
We proposed a project which included a smaller building and a renovation of existing federal building, and the discussions continue.
JUDGE BATAILLON: It's been very problematic for us and that is a tremendous understatement. I've been on the space and facilities committee for nine years. The Los Angeles courthouse showed up on the five-year plan in 1999 and it was scheduled for site and design number one on our list in '99 and number one on our list for construction in 2000.
And frankly, the extraordinary increases in constructions costs in the Los Angeles area have presented tremendous problems for both the courts and GSA. And we've tried to work together to solve these problems.
The latest scenario would be to split the courts even more than they are already. And Los Angeles is one of the largest courts, if not the largest court, in the country that has not had a comprehensive housing plan.
And it is important for the courts in order to maintain the way we operate to get this problem solved. And unfortunately we haven't been able to overcome that and part of the problem I believe is that any further authorization from the House side for this project has pretty much been blocked.
SEN. DURBIN: One last quick question, Mr. Prouty.
This morning on NPR local broadcast there was an indication that D.C. charter schools are having a tough time finding space to open new schools. I assume there is some excess GSA property in the District of Columbia.
Is it possible that we could open up a dialog between you and the District of Columbia government and see if there's any opportunities there that could be utilized?
MR. PROUTY: The answer is absolutely yes, although I don't know the authorities and I don't know the vacant inventory.
SEN. DURBIN: Okay. Well let me try to work with you on that.
MR. PROUTY: Great, thank you.
SEN. DURBIN: Senator Collins.
SEN. COLLINS: Thank you. Thank you, Mr. Chairman.
Judge, as Senator Durbin has pointed out, the administration did not follow the priorities set forth in the Judiciary's five-year courthouse project plan. Had the budget reflected your plans, Salt Lake City would have been first on the list.
Could you give us more insight into the process? Is there a back and forth discussion of the priorities with GSA, with OMB, or did the budget proposal come as a surprise to you?
JUDGE BATAILLON: Well, the budget proposal came as a surprise to us. We submit the five-year plan every year to GSA and then it's up to the president to decide how the president wants to fund our building requirements.
The stimulus bill included two courthouses -- one in Bakersfield and one in Billings, Montana -- and those were both originally slated as lease-construct buildings. When that occurred last year, we received some signals that OMB was changing the way it was interpreting the A-11 Circular.
And when that happened, then when the president's budget came out this year, I suppose it was somewhat of a surprise -- but not too much of a surprise -- because apparently we've changed the way we've decided to score these courthouses. And it does create problems as far as the five-year construction plan is concerned.
We've always done a five-year construction plan. That plan is based on the priorities set by the judiciary. We score these courthouses and we've re-scored these courthouses and now we even have a new method of scoring courthouses to make sure that the needs of the judiciary, in order to administer justice appropriately, are met. And that's why they give the five-year plan.
By taking these two projects off of the lease-construct line, if you will, or execution plan, it creates a problem about how we prioritize our courthouses. And it really puts these two projects in jeopardy, because we've already set the five-year plan and the conference won't meet again until September to determine whether we can incorporate these, so it's very problematic for us.
SEN. COLLINS: Mr. Prouty, this doesn't make much sense to me.
I would understand if the GSA or OMB said we have X amount to spend and we're going down the list until that's spent. But it doesn't make sense to me that the priorities are different than those established by the Judicial Conference.
Let me ask you about another line item in the construction budget, which is almost as much as it would cost to build the courthouse that is so high on the Judicial Conference list. The budget request includes almost $191 million for federal construction for a new FBI field office in Miami.
Prior to this request, the project was originally planned as a lease-construct project, which is obviously far lower cost. What criteria -- what objective criteria, led GSA to decide to request this funding for the Miami FBI field office at a time -- at this time, as opposed to other projects that are urgently needed?
MR. PROUTY: The only -- first of all, I want to mention that in the recovery funding, we did fund the top priority which was Austin, but there are competing challenges here. Both OMB and GAO are concerned about the lease-construction program.
It's been our goal for a very long time to have few, if any, courts in leased properties because it's problematic. So the challenges have been to find a way to deal with those issues.
If you look at the payback on the FBI project in Miami over the 15 years of that initial lease period, it's beneficial to do it in government construction to the tune of $130 million.
SEN. COLLINS: But initially, the up-front cost is more to do construction, correct?
MR. PROUTY: The payback. It's $190 million up front, you're right.
SEN. COLLINS: And could the FBI's needs be met should the building proceed as was originally planned as a lease-construct project?
MR. PROUTY: It certainly could have been.
SEN. COLLINS: Thank you, Mr. Chairman.
SEN. DURBIN: Senator Nelson.
SEN. BEN NELSON (D-NE): Thank you, Mr. Chairman.
Welcome, Judge Bataillon.
JUDGE BATAILLON: Senator, always good to see you.
SEN. NELSON: Good to see you.
My colleagues may not know that when I was governor, I was pleased and proud to recommend you for the judgeship and I've been proud ever since.
JUDGE BATAILLON: Thank you very much, Senator.
SEN. NELSON: One of the challenges that's obvious before us is that the three branches of government have not come together with any common understanding, or common agreement, as to where to proceed or how to proceed.
Is it possible -- or is it naive to assume that it's even possible -- to work with OMB, to sit down and go through the priorities? Do we know what their priority list -- what criteria they use to establish their priority list that's different than what you do?
I guess first, Judge, I'll ask you and then Mr. Prouty.
JUDGE BATAILLON: Well, OMB communicates directly with GSA on these issues and GSA, of course, has to, I assume, follow what OMB tells them to do as far as their scoring method under the A-11 circular.
Previously, they have, on small projects that the courts have been presenting, those -- that scoring criteria was such that they believed that courthouse buildings were not special use. In other words, that there was no other governmental -- there was no other private market for it. It wasn't uniquely governmental.
A courthouse has courtrooms. You could use that for a banquet hall, you could use that for a gathering hall and it has office space just like any other office might have -- a bank or any kind of business. And so these smaller projects generally were scored so that they could be a lease-construct.
The part that was scored as uniquely governmental was the marshal's money for the holding cells, and so we would always bring the money -- or the marshals would bring the money up front for the holding cells.
Now, OMB, as we understand it, has changed their interpretation of the scoring and has decided that this is a special purpose building and it ought not to be built as a lease-construct. So I'm sure the administrator can, you know, elaborate on that.
MR. PROUTY: There certainly is a discussion about the benefit to the government and about the nature of these properties. And I'm certainly not in a position to speak on behalf of OMB, but we at GSA would very much like to have a discussion which would preclude these types of discussions in the future.
JUDGE BATAILLON: So would we. (Laughter.)
SEN. NELSON: Well, it does seem that that would be part of the answer, to come to some sort of an agreement on whether it's a special use or not a special use to resolve the question about lease- construct. And just because they've taken that position that it's special use doesn't make it so.
And, hopefully, we -- I don't know how to facilitate that. But I wish you would think about what we could do to help facilitate that, because I think we're as frustrated as you are when you see the lack of construction on a project that's been appropriated and then you see the cost of construction go up.
It's as frustrating in some ways as seeing cost overruns. You just -- it takes more Treasury dollars to be able to complete at some point.
If you're putting together another five-year courthouse project plan, do you have any idea how long it might take for the Judicial Conference to come up with another five-year plan? And if you do come up with it, can you come up with it assuming lease-construct with one -- under one assumption, and then no lease-construct under another assumption?
JUDGE BATAILLON: We can come up with another five-year construction plan and the five-year plan is a priority on how to spend the federal buildings fund money.
If it's a lease-construct, then it doesn't come out of that pot of money and is just like leasing any other office space, except that GSA makes a contract with a developer. And so we haven't put those buildings on the five-year plan for a number of reasons.
One is because we have acute court needs, administration needs, like in Yuma and we want to get the building built as quickly as we can and it's a small project and so we can deliver it. But as far as the five-year plan, we have a particularly difficult problem.
In 2004 -- through 2004 and 2006, we had a moratorium on any construction because of the budget problems that we encountered in 2004 and had to lay off people, as a matter of fact, in order to meet our budget constraints.
So we did a moratorium. And when we did the moratorium, there were 15 courts that had some appropriation from Congress and so we left those on the five-year plan. And the 35 that didn't have some appropriation, we pushed off of the five-year plan, and now we're re- evaluating all of those courts in what we call an asset management process.
So we've frozen the 13 courts that were -- the 13 to 15 courts that were on the original five-year plan and now we're trying to bring on other courts on the five-year plan. And meshing those two groups of folks is getting to be very problematic.
And then if we throw Yuma into the mix or Lancaster into the mix or some other lease-construct projects that we're talking into the mix, we've just created a quagmire for the judiciary.
But to answer your question: We're smart folks and, if you tell us that we have to do five-year -- put these programs on the five-year plan, we'll do the best we can to do it.
SEN. NELSON: Well, I'm not telling you to. I'm just asking if you can. It's perhaps over my head to try to require that, but it seemed to me that it might be one of the ways to proceed.
JUDGE BATAILLON: Well, it's not that you would require it. I think it's basically OMB saying that they won't accept the lease- construct process and GSA communicating that to us and so then we'll have to take a different approach. But it's a Gordian Knot and I go off the committee in October and I'll be happy to do it then. (Laughter.)
SEN. NELSON: Well, on the way out will you rule them in contempt?
JUDGE BATAILLON: I'll try. (Laughter.
)
SEN. NELSON: Thanks to both of you.
JUDGE BATAILLON: Thank you.
SEN. DURBIN: Senator Bennett.
SEN. ROBERT BENNETT (R-UT): Thank you very much, Mr. Chairman. I appreciate the opportunity to be here with the committee.
Judge Bataillon, I couldn't have written your testimony better than you did.
JUDGE BATAILLON: Thank you very much.
Sen. BENNETT: And the chairman, of course, has highlighted the fact Salt Lake City first went on the list in 1998. Is that correct?
JUDGE BATAILLON: Right.
BENNETT: So it's even older than the --
JUDGE BATAILLON: It's been on the list for nine years.
SEN. BENNETT: Yeah. And I would like to -- I can't appropriately give you the full letter because the last paragraph of the letter says, "The specific weaknesses in building security highlighted by this inspection should be treated as sensitive information and should not be released to the public."
But this is a letter from the senior inspector of the U.S. Marshall Service, just this month having gone through the Salt Lake City courthouse and looked at the various security problems that are there.
JUDGE BATAILLON: Right.
SEN. BENNETT: Is it your understanding that this project is -- to take a term that's been vastly overused here in the Congress in the last six months -- "shovel ready"?
JUDGE BATAILLON: It is absolutely shovel ready. We have a site. And I'm sure you've been to the site and seen the chain link fence that's around it. We moved the Masonic Temple and a local pub in order to get this place and now we have vacant property in Salt Lake and it's ready to go.
We have designs -- in fact, I've talked to members of the House and the Senate and it is a model of appropriateness and efficiency for the judiciary and it needs to be built.
SEN. BENNETT: As I say, I couldn't do this any better than you have done for me.
JUDGE BATAILLON: Well, thank you very much.
SEN. BENNETT: Mr. Prouty, I would be ungrateful if I didn't acknowledge how helpful you have been over the years as we've wrestled with this problem, and your office has always been available to mine and you've always been very helpful.
Now, we've been in touch with Allen Camp, who is the project manager in your Denver office, and he's informed my staff that the building prices are their lowest point in three years. And if funding is not received in the 2010 budget, there's the possibility that costs will escalate. And the Salt Lake courthouse is currently projected to come in right under budget. Is that your understanding as well?
MR. PROUTY: We are seeing -- we're testing the market. We're obviously -- we do a lot of research in the market, and now with all the recovery funds we think we are seeing and we anticipate the projects will come in less than they were. So we think the markets are decreasing. The extent of that, we're not sure, but you're right. The Salt Lake City project, if it were bid today, would certainly come in within budget.
SEN. BENNETT: Thank you very much.
Mr. Chairman, I've laid out my case and I've had a lot of help from your two witnesses and I'm now completely at your mercy.
SEN. DURBIN: I've been waiting for this for so long. (Laughter.)
SEN. BENNETT: Thank you very much for allowing me to participate.
SEN. DURBIN: Well I'm glad that you came by Senator Bennett. You're always welcome here.
Senator Collins, do you have any additional questions?
SEN. COLLINS: Mr. Chairman, I would just like to submit for the record with your consent a follow-up letter from the chief judge -- actually I take it back. It's from the Judicial Conference of the United States. It's a letter from James Stubb that expresses disappointment that the budget does not fund any of the projects on the five-year plan, and talks about the impact on the judicial process where courthouses are out of space as well as the critical security deficiencies.
I think it strengthens the case that our witness has made today on the behalf of the judiciary and strengthens the case that Senator Bennett has made as well.
Thank you, Mr. Chairman.
SEN. DURBIN: Without objection will be made part of the record -- if you'd like it to be.
SEN. COLLINS: Yes, please.
SEN. DURBIN: Okay. Can I switch off courthouses for a very quick observation and question of Administrator Prouty?
I recently was invited to tour what was formerly known as Sears Tower in Chicago. It's now known as Willis Tower. And it was built 35 years ago and I think still is the tallest building in the United States and maybe it's been eclipsed overseas by some other building, but it's certainly a dominant feature on the Chicago skyline.
And the management company brought me in to show me what their plans were. And their plans involve about a $300 million investment in making this 35-year-old building energy efficient. It turns out when it was built 35 years ago, no one paid any attention to the basics.
They have 16,000 single-pane windows in the Sears Tower, for example, and if you can imagine a heating and air conditioning system that is ancient by today's modern standards. And it costs a fortune, 125 elevators and all these things.
They have decided that it is economical for them to invest the $300 million in energy savings and that it will be paid back rather promptly. And that, of course, means replacing the windows maybe even repainting the building, putting wind turbines on every roof, adding solar panels, creating new heating and air conditioning unit.
Actually creating a cogeneration opportunity with 125 elevators, which with the friction they create, can be generating electricity. They think that this building can become an energy producer to the point where they can build a hotel next door and use the energy off the old Sears Tower to sustain a building next to it.
I think of that in terms of your responsibility, with a lot of buildings even older and pollution coming off of them every day -- someone estimates 60 percent of our pollution comes off of our structures as opposed to what we drive.
And I'm wondering as you get into this decision-making about the future of GSA buildings, what calculations are you making that may parallel what I found at the Sears Tower?
MR. PROUTY: I think we're in the same category. I was just going to say that we wished we had buildings so young as 35 years old. Our buildings are a lot older, a lot more inefficient. There's a lot of really good things that are happening right now. The technology is improving to the point that you're getting a payback that causes these all to pay out in reasonable amounts of time.
Also what we're seeing is green buildings in the market perform better. We also know with the $4.5 billion that we've been given that we're going to drive that industry. So we absolutely agree; we're looking for every innovative approach we possibly can.
We're using solar, we're using wind, we're doing windows, we're doing insulation, we've improved technology in all the systems. So we agree. We're learning more every day. I'm not an expert. We happen to have an expert with us.
SEN. DURBIN: How do you stay in front of it on the technology? For example, it appeared that the first blush, the window replacement would be some -- at least double pane insulated window and then it turns out there are other windows coming on the scene with film that allows in sunlight at certain times of the year -- the winter when you want it -- and shields in the building, inside the building parts of the year when you don't want it. And this is really, just seems to be coming so quickly. How do you evaluate these technologies when you're about to make massive investments?
MR. PROUTY: Yeah. We are tied to the industry. We have a green building program, Kevin Kampschroer leads that program. He meets with them all the time. In many cases, we're leading that industry. So as you say, it's a very dynamic world. It's changing every day. But the good news is we have $4.5 billion, which causes us to be able to test out some of these new technologies.
SEN. DURBIN: At the risk of a commercial announcement, I've discovered a company that just bought a facility in Chicago called Serious Materials. It's out of California. And they have production facilities in several different places.
And they are doing the window replacement on the Empire State Building with these new filmed windows and so I'm going to promote them and hopes it means more jobs in Chicago -- a place that I am proud to represent.
Thank you very much.
Do you have anything further?
Well, thanks a lot for your testimony, Mr. Prouty and Judge Bataillon. Thank you for coming and giving us an insight into this constitutional clash that we have over the construction of courthouses. Thanks a lot.
At this point, we're going to adjourn this subcommittee and tell you that there will be some written questions coming your way. Hope that you can respond to them in a timely basis and maybe by -- we'll leave the record open until Wednesday, June 24th at noon.
So that's about it for today -- (sounds gavel) -- and the subcommittee is going to stand adjourned. Thank you very much.
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