Building Purchases:

GSA's Program Is Successful but Better Policies and Procedures Are Needed

GGD-90-5: Published: Oct 31, 1989. Publicly Released: Oct 31, 1989.

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Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) Building Purchase Program (BPP) to determine whether: (1) the program's policies and procedures ensured that GSA used funds effectively; and (2) GSA ensured that purchased buildings met federal agencies' needs for quality space and GSA needs for minimum life-cycle operating costs.

GAO found that: (1) 7 of the 10 commercial office buildings GSA purchased under BPP were modern, high-quality buildings in cities where the federal government expected to maintain a long-term presence; (2) GSA purchased the seven buildings for about $167 million, or about 11 percent less than their total appraised values of $187 million; and (3) 3 of the 10 commercial office buildings did not meet the structural or cost-saving standards achieved by the other 7 buildings. GAO also found that the GSA BPP order did not: (1) adequately define what construction services were integral to a building purchase; (2) provide guidance on when or for how long construction contracts may be modified; (3) limit construction services to those provided by building owners; or (4) define the coordination and pre-occupancy planning GSA and the occupying agencies should follow, resulting in delayed occupancy in half the purchases and additional interim housing costs of at least $1.9 million. In addition, GAO found that: (1) for three purchases where the buildings' sellers would not do the needed construction, GSA used third parties in the purchase contracts at additional cost and improperly avoided the competition requirements of the Competition in Contracting Act of 1984 (CICA) and the Federal Acquisition Regulation (FAR); and (2) GSA did not have quality criteria for purchases of special-purpose space.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: A memo was issued which updated and clarified the building purchase program order. It changed some procedures and strengthened the weight of consideration to be given to appraisal data.

    Recommendation: The Administrator of General Services should better ensure adherence to policies and procedures governing BPP by strengthening internal controls to ensure that economic analyses prepared for building purchases include complete and realistic estimates of all acquisition costs and that purchase prices do not exceed independently appraised values by amounts greater than Public Buildings Service policy allows.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: The new memorandum governing the program strengthened controls to ensure purchases outside the guidelines was justified.

    Recommendation: The Administrator of General Services should better ensure adherence to policies and procedures governing BPP by not purchasing buildings which fail to meet program criteria without adequate justification.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: A memo was issued which updated and clarified the building purchase program order. It included new instructions which defined types of R&A, which is acceptable as part of the purchase, and time periods within which R&A must be completed. If GSA resumes purchasing buildings, new instructions should have the effect of precluding abuse of R&A provisions of the program.

    Recommendation: The Administrator of General Services should revise the BPP order by including a specific definition of the limited kinds of repairs and alterations (R&A) which are integral to a building purchase and therefore may be included in a purchase contract without competition or prospectus approval.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: A memo was issued as a result of the report specifically providing instructions relating to modifications to construction contracts made pursuant to a building purchase, which should help preclude recurrence of problems GAO found. The old order was silent on the issue of modifications.

    Recommendation: The Administrator of General Services should revise the BPP order by establishing procedures that define when and for how long modifications can be made to construction contracts to prepare buildings for occupancy after the buildings have been purchased.

    Agency Affected: General Services Administration

  5. Status: Closed - Implemented

    Comments: The memo which revised the building purchase program order makes specific reference to CICA and FAR provisions and specifies that they will be followed when contracting for construction needed to prepare a purchased building for occupancy.

    Recommendation: The Administrator of General Services should revise the BPP order by specifying that CICA and FAR procedures must be used in contracting for construction services when they cannot be obtained from buildings' owners.

    Agency Affected: General Services Administration

  6. Status: Closed - Implemented

    Comments: New procedures were included in the memo which revised the building purchase order.

    Recommendation: The Administrator of General Services should revise the BPP order by establishing procedures that require coordination between GSA and agencies designated to occupy purchased buildings to reduce or eliminate the delays that have occurred in occupying purchased buildings.

    Agency Affected: General Services Administration

  7. Status: Closed - Implemented

    Comments: The memo revising the order did not address the situation that led to this recommendation. However, it is not likely that GSA will pursue such an approach given the limited funds available to the purchase program.

    Recommendation: The Administrator of General Services should revise the BPP order by ensuring that the present value of the alternatives available under leveraged purchase arrangements, including all combinations of purchased and leased buildings, is compared with the present value of constructing the total space required.

    Agency Affected: General Services Administration

  8. Status: Closed - Implemented

    Comments: The memo revising the order did not address the situation that led to this recommendation. However, it is not likely GSA will use such an approach given the limited funds available to the purchase program.

    Recommendation: The Administrator of General Services should revise the BPP order by considering establishing a threshold higher than the 20 percent for all alternatives that combine purchases and leases, to offset the increased risk in such cases.

    Agency Affected: General Services Administration

  9. Status: Closed - Implemented

    Comments: The memo revising the building purchase program order would be applicable if GSA purchased additional buildings under the program. GSA has purchased no buildings since the report was issued.

    Recommendation: The Administrator of General Services should consider the policy and procedures improvements recommended in this report before purchasing any additional buildings if purchase opportunities arise before the BPP order is revised.

    Agency Affected: General Services Administration

  10. Status: Closed - Implemented

    Comments: GSA has no current plans to purchase a building, but continues to be receptive to opportunities for affordable purchases using funds remaining available for the program.

    Recommendation: The Administrator of General Services should better ensure adherence to policies and procedures governing BPP by continuing to seek opportunities to purchase quality, modern office buildings in cities with a long-term federal presence, provided that the economic benefits of ownership exceed those of leasing or constructing equivalent space.

    Agency Affected: General Services Administration

  11. Status: Closed - Implemented

    Comments: The memo revising the building purchase program order does not establish standards defining acceptable quality required for purchases of special-purpose space. However, GSA emphasized the need to carefully scrutinize such purchases.

    Recommendation: The Administrator of General Services should develop standards defining quality for the purchase of special-purpose space, such as the Austin and Chamblee service centers, as has been done for purchases of commercial office buildings. The policy should require identifications of costs that both GSA and the occupying agencies can anticipate will need to be incurred to achieve the quality standards established.

    Agency Affected: General Services Administration

 

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