Government Operations:

Acquisition of Leased Space for the U.S. Patent and Trademark Office

GAO-01-578R: Published: Jun 5, 2001. Publicly Released: Jun 5, 2001.

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This report reviews the data, assumptions, and conclusions reached by the General Services Administration (GSA) and the Patent and Trademark Office (PTO) on the acquisition of about two million square feet of leased space for the consolidation of PTO activities. This build-to-suit lease, valued at approximately $1.2 billion over its 20-year term, was signed in June 2000. this report responds to allegations and questions from two public interest groups about the PTO lease acquisition. One public interest group alleged that during the procurement process for the lease (1) GSA improperly awarded the lease to an offeror who had not complied with the solicitation's stated requirements, (2) GSA failed to compete the construction of the interior finishes phase of the project as required by law, and (3) GSA used an illegal cost-plus-a-percentage-of-cost contract. The second public interest group asked (1) whether the requirements in GSA's Solicitation for Offers for the PTO lease transformed the lease from an operating lease to a capital lease under Office of Management and Budget (OMB) Circular A-11; (2) whether the new facility will be able to house all PTO employees and contractors throughout the lease term because the staff may grow, including whether this growth invalidates the potential cost savings from consolidation; (3) whether some of the standard requirements of the lease, such as a day care center and a fitness center, are essential to providing adequate office space for PTO; (4) whether the cost estimates for the tenant improvement allowance and furniture costs are excessive; and (5) whether constructing the PTO facility would have been less costly than leasing it. In response to the first public interest group's allegations, GAO found nothing improper in GSA's award of the lease for the PTO facility. In response to the questions from the second public interest group, GAO found that (1) GSA acted in accordance with OMB's and its own guidance in determining that the PTO lease was an operating lease; (2) it is unclear whether PTO's new space will meet all of its future housing needs; (3) features such as the day care and fitness centers are either authorized by law or governmentwide policy; (4) none of the available information indicated that the funding planned for tenant improvements was excessive, and the competitive procurement for the furniture was aimed at achieving the best value for the money; and (5) although constructing a facility would have been less costly, this was not a viable option because funds for government ownership were unavailable when GSA made its decision.

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