Federal Real Property:
GSA Should Clarify Savings Goals for the National Broker Contract Program
GAO-14-14: Published: Oct 31, 2013. Publicly Released: Dec 2, 2013.
What GAO Found
While the General Services Administration (GSA) has used the National Broker Contract (NBC) program to assist with the agency's lease portfolio, it is unclear whether the program has resulted in the rental rate cost savings that GSA anticipated when proposing the program. GSA officials have stated that brokers should be able to obtain lower rental rates than in-house staff because brokers have greater market expertise and in addition are able to credit a portion of the broker's commission to the rental rate. In 2012, when GSA attempted to compare rental rates negotiated by brokers with those negotiated by in-house staff, the agency not only found little difference between the two, but also stated that the data were insufficient to conduct a meaningful comparison. In April 2013, GSA began requiring the use of a different market rent data report --"Bullseye"-- which includes market information, analysis, and insight regarding the local submarket. Officials said this new data would improve their ability to compare rental rates negotiated by brokers to market rental rates, but will likely not allow officials to determine whether brokers are negotiating better deals than in-house staff. Beginning in fiscal year 2013, GSA also deemphasized previous annual goals for broker use and began identifying and assigning leases to brokers based on where agency officials believe the brokers provide the greatest value.
GSA's goals and metrics for evaluating the NBC program have not been linked to the anticipated cost savings in rental rates. As a result, GSA has no means of evaluating and reporting on this aspect of the program and the value of the NBC program in terms of cost savings continues to be unclear. Clarifying goals and linking them to cost savings would also serve as a way to be transparent with Congress and other stakeholders about the program's purpose and how GSA plans to monitor and achieve its objectives. Clear, linked goals are especially important given that GSA is planning to seek a third generation of broker contracts in 2015.
Officials from all 11 GSA regional offices and representatives from all 4 broker firms identified challenges and made suggestions to improve the program. Two areas frequently cited are: the broker evaluation process and greater flexibility using brokers.
- Broker evaluation process: Both GSA regional officials and brokers expressed dissatisfaction with the current broker performance evaluation system and brokers suggested additional guidance and training would help. Both groups also suggested that GSA officials be allowed to use region-specific performance evaluation data to award tasks.
- Greater flexibility using brokers: Regional officials suggested that greater flexibility in applying the NBC program would allow them to make better use of brokers. Regional officials described a preferred "menu of services" that would allow them to use the brokers more selectively for the specific tasks where GSA wants assistance as opposed to working with the broker throughout the entire lease procurement.
GSA has begun identifying potential changes to the structure and administration of the NBC program as the agency develops a strategy for the third generation of NBCs. For example, officials told GAO they are examining alternatives to the current commission and rent structure.
Why GAO Did This Study
For fiscal year 2013, GSA expected to lease approximately 197 million square feet at a cost of about $5.2 billion. Since 2005, GSA has acquired some leased space using its NBC program to enlist commercial real estate brokerage firms to negotiate with building owners on behalf of the government. In 2012, GSA relied on this contract to replace approximately 33 percent of its expiring leases.
GAO was asked to review GSA's NBC program. This report examines (1) NBC's program goals and the extent to which they are being realized and (2) the changes GSA has made to the program and what challenges and suggestions for improvement, if any, key stakeholders identified. GAO reviewed NBC contract documentation, agency documents, relevant legislation and regulations, and available data on leasing tasks assigned to brokers. GAO interviewed officials from GSA headquarters, all 11 GSA regions, and representatives of all 4 brokers currently participating in the program.
What GAO Recommends
GAO recommends that GSA ensure the program's goals are linked to cost savings achieved through the use of NBC brokers, and develop and implement a means of evaluating and reporting results. GSA concurred with the recommendation.
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Recommendation for Executive Action
Comments: The General Services Administration (GSA) developed a performance measure for the National Broker Contract program which GSA says will provide a data point to gauge the effectiveness of the program by providing a comparison of the broker negotiated rate to the surrounding market at the time of the least award. Beginning in fiscal year 2014, GSA began measuring lease rates against market rates and the result of this measurement are reported as key performance indicators to GSA regions on a quarterly basis. GSA says the results are being used internally to manage the program. GSA issued a new program administration guide in November 2015 which is says will help measure the program's performance by comparing the efficiency of brokers and in-house leasing personnel. GSA says that it is in the process of measuring how broker's leases compare to in-house leases and measuring and reporting cost savings and GSA plans to complete these tasks by September 30, 2016. We will follow-up with GSA regarding the implementation of this recommendation.
Recommendation: To promote transparency and fully reflect the expectations GSA used to justify the NBC program, the Administrator of GSA should ensure the program's goals are linked to cost savings achieved through the use of NBC brokers and develop and implement a means of evaluating and reporting results.
Agency Affected: General Services Administration