Federal Office Space:

Increased Ownership Would Result in Significant Savings

GGD-90-11: Published: Dec 22, 1989. Publicly Released: Dec 22, 1989.

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Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) efforts to reduce office space leasing costs by increasing government-owned office space.

GAO found that: (1) 43 proposed construction projects could save $12 billion in leasing costs over a 30-year period; (2) mandated rent restrictions on government-owned property limit Federal Building Fund (FBF) revenues for capital investment and a budgetary bias towards leasing will continue to restrict the availability of construction capital; (3) Congress directed GSA to finance office construction by borrowing capital funds, but financing costs were higher than those incurred from financing through rent revenues; (4) GSA did not develop a long-term plan for achieving government-ownership goals; and (5) GSA budgeting did not separate capital components from operating expenses or identify the long-term benefits associated with capital investment.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: GSA initiated a capital budget presentation in the 1991 budget without being directed to do so by Congress. GSA indicated its plans to continue the presentation and improve it when new accounting systems are in place.

    Matter: Congress should direct GSA to provide a model on the benefits of capital budgeting to the federal government.

  2. Status: Closed - Implemented

    Comments: Legislation was introduced in both the 102nd and 103rd Congresses and is pending in the 104th Congress that would require GSA to biennially provide Congress with comprehensive data on building capital investment and leasing needs up front for that 2-year period, including return on investment and other supporting economic analyses. GAO has continued to encourage key congressional committees to seek such a legislative requirement. In response to another recommendation, GSA has prepared several iterations of a 5-year capital plan and submitted them to OMB for review and approval. However, OMB has not yet approved GSA's capital plan, and it has not yet been used to directly support GSA's annual budget requests, facilitate congressional oversight of building capital investment needs, or guide capital spending decisions to help ensure that the government's return on investments is maximized.

    Matter: Congress should direct GSA to submit a long-range plan in support of its annual budget requests and for meeting long-term federal office space needs economically.

  3. Status: Closed - Implemented

    Comments: Congress allowed GSA to use $1.9 billion that FBF borrowed from the Federal Financing Bank in 1990 and supplemented FBF with a $1.6-billion appropriation in 1991. This money was used to finance direct federal construction of several new federal buildings.

    Matter: Congress should stop directing GSA to use alternative financing techniques, such as lease-purchase agreements, and instead: (1) substitute less costly capital financing techniques, such as borrowing through the Federal Financing Bank; or (2) provide direct appropriations to FBF.

  4. Status: Closed - Implemented

    Comments: Congress and the Office of Management and Budget agreed to remove restrictions on rent paid to GSA by tenant agencies. Subsequently, most rent restrictions have been eliminated.

    Matter: Congress should: (1) remove restrictions on rent paid to GSA by tenant agencies; and (2) not mandate future restrictions.

  5. Status: Closed - Not Implemented

    Comments: Congress allowed GSA to use $1.9 billion that FBF borrowed from the Federal Financing Bank in 1990 and appropriated $1.6 billion to supplement FBF in 1991. This money was used to finance direct federal construction of several new buildings.

    Matter: When Congress decides to approve building acquisition projects, it should use the most cost-effective methods of financing.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GSA cannot yet separate Federal Building Fund (FBF) revenues into operating and capital components. GSA does not expect to have the ability to do this until 1996, when it expects to complete efforts to upgrade its management information system. GSA, however, lacks the necessary OMB and congressional support and legislative authority to move to a capital budget. GSA requested support from OMB in July 1992, but such support has not been received. The Vice President's National Performance Review is exploring the feasibility and desirability of moving to a capital budget, and several key congressional committees have recently expressed interest in capital budgeting.

    Recommendation: The Administrator of General Services should take a leadership role in demonstrating the benefits of capital budgeting for the federal government by preparing a capital budget which would: (1) match expenses and revenues for capital and operating programs; and (2) include a charge for depreciation to represent the consumption of physical assets for each year.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: Beginning in fiscal year 1991, GSA modified the format of its FBF budgets to include elements of capital budgeting; expenditures were split into capital and operating components.

    Recommendation: The Administrator of General Services should initiate plans for a capital budget by separating the activities in the FBF budget into categories of operating expenses and capital investment, in compliance with Office of Management and Budget Circular A-11.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: GSA has prepared several iterations of a 5-year plan laying out its desired facility ownership goals and various projects it believes should be completed. GSA continues to develop a 5-year capital plan, but OMB has not yet approved GSA's 5-year capital plan, and the plan has not been used to directly support GSA's annual budget requests, facilitate congressional oversight of building capital investment needs, or guide building capital spending decisions to help ensure that the government's return on investment is maximized.

    Recommendation: The Administrator of General Services should prepare and periodically update a long-range plan using individual economic analyses to show the facilities for which federal ownership would be the most economical way of meeting long-term federal office space needs.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: GSA is using the supplemental FBF revenues--$1.9 billion borrowed and $1.6 billion in supplemental appropriations--in ways that indicate it is seeking the most cost-effective alternatives to continued leasing of office space. However, GSA lacks authority to purchase commercially available buildings.

    Recommendation: Where practical, the Administrator of General Services should seek approval and funding for constructing or purchasing buildings that represent cost-effective alternatives to continued leasing of equivalent office space.

    Agency Affected: General Services Administration

 

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