Federal Office Space: More Businesslike Leasing Approach Could Reduce Costs and Improve Performance

Highlights

Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) policies, procedures, and practices for leasing office space, focusing on how they compare with private industry leasing practices.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
General Services Administration	The Administrator of General Services should fully explore opportunities to simplify and streamline the GSA leasing process and make it less costly and time consuming, more responsive to federal agencies' mission-support needs, and a better value for taxpayers.	Closed – Implemented By the end of July 1997, GSA had fully implemented several changes to streamline and simplify its leasing practices to achieve the intent of the recommendation. GSA reported that in FY 1997, $25.5 million was saved using new leasing procedures, better space management practices, and various private-sector lease administration practices.
General Services Administration	The Administrator of General Services should work closely with federal customer agencies and the commercial real estate community to more fully explore their concerns about the existing leasing process, identify alternative ways of carrying out the leasing function, and test and evaluate their use and potential adoption.	Closed – Implemented By the end of July 1997, GSA had fully implemented several changes to streamline and simplify its leasing practices to achieve the intent of the recommendation. GSA reported that in FY 1997, $25.5 million was saved using new leasing procedures, better space management practices, and various private-sector lease administration practices.
General Services Administration	The Administrator of General Services should test the benefits, risks, and potential federal application of the private industry leasing practices that are within its authority and seek the necessary authority from: (1) Congress to test other practices and alternatives that GSA believes would require legislation; and (2) the Office of Management and Budget to test any needed changes in federal procedural requirements and controls under the managerial accountability and flexibility provisions of the Government Performance and Results Act.	Closed – Implemented By the end of July 1997, GSA had fully implemented several changes to streamline and simplify its leasing practices to achieve the intent of the recommendation. GSA reported that in FY 1997, $25.5 million was saved using new leasing procedures, better space management practices, and various private-sector lease administration practices.
General Services Administration	The Administrator of General Services should adopt administratively or, if GSA determines that legislation is needed, propose to Congress the necessary legislation to enable it to adopt those private industry practices or other alternatives tested that result in documented improvements in GSA leasing performance, make sense, and are cost-effective.	Closed – Implemented The Federal Acquisition Streamlining Act has been implemented, and a number of administrative actions have been taken to adopt private-sector leasing practices and improve overall leasing performance. In addition, authority to streamline the succeeding lease process is included in the Administration's procurement reform bill. GSA has also drafted standalone language on succeeding leases and other matters which can be presented in the event the Administration bill is not passed.
General Services Administration	GSA should reexamine its standard lease solicitation and lease agreement clauses and provisions and eliminate any of those within its administrative authority that are no longer needed, are of questionable utility, or are seldom used.	Closed – Implemented Along with simplifying and streamlining its lease clauses and provisions, the Public Buildings Service (PBS) is continuing its efforts to evaluate and propose to Congress other legislative changes to enable GSA to improve lease acquisition performance and cost-effectiveness. GSA's legislative package includes a proposal to streamline the succeeding lease process.
General Services Administration	GSA should, within the limitations of the Competition in Contracting Act and other statutory provisions, empower and encourage its leasing officials to modify lease clauses and provisions as necessary and negotiate aggressively with prospective landlords for bargains and concessions to obtain good, timely leasing values.	Closed – Implemented GSA is further empowering its leasing officials to modify lease clauses and provisions not required by law and making other changes in its leasing acquisition process. Also, changes that would give contracting officers greater discretionary authority to modify or eliminate clauses not required by law were published in the Federal Register.
General Services Administration	GSA should adopt the private-sector practice of negotiating a specified dollar per square foot tenant improvement or space build-out allowance to eliminate the uncertainties and perceived added risks associated with the existing GSA process and help hold down leasing costs.	Closed – Implemented In June 1998, GSA implemented new procedures that limited the landlord cost exposure for tenant build-out and space customizing improvements. Under the new pricing policy tenants' have a $25 per rentable square foot allowance for tenant improvements and space build-out. Cost on excess of the allowance are paid by the tenant, which may be paid in lump sum or amortized over 10-years as part of the rent paid to GSA.
General Services Administration	GSA should finish developing and implement an automated realty database on commercial real estate leasing activities and rates to help leasing officials evaluate the reasonableness of landlords' proposed offers.	Closed – Not Implemented GSA has no plans to develop such a database. Because of the constantly changing nature of the real estate market, GSA felt that the development and maintenance of a database of this type on a national level would be impractical. Realty specialists use market surveys to obtain the type of information the database would provide. Four regions - NCR, Chicago, New York and San Francisco - use a commercial service called COSTAR for this information.
General Services Administration	GSA should establish performance goals for its leasing activities and measurement systems to track progress in meeting those goals.	Closed – Implemented PBS' 1997 National Performance Plan identified key performance goals, objectives, and measures of improvements in customer service, management of time and financial resources, and diversity in its program performance.
General Services Administration	While long-term improvements are being considered and tested, GSA should delegate more leasing authority to federal agencies that are ready, willing, and able to lease their own office space and monitor and oversee agencies' use of the delegated authority.	Closed – Implemented On September 25, 1996, the Acting Administrator of General Services sent a letter notifying agencies that GSA has changed its leasing policy and explained that heads of all federal agencies were delegated the authority to lease general-purpose space for up to 20 years.

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Government Operations

Comparative analysisCost controlCost effectiveness analysisFederal office buildingsFederal procurementFederal property managementLeasing policiesPrivate sector practicesProcurement practicesReal estate leases