Federal Office Space:

More Businesslike Leasing Approach Could Reduce Costs and Improve Performance

GGD-95-48: Published: Feb 27, 1995. Publicly Released: Feb 27, 1995.

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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.

GAO found that: (1) GSA has a highly prescriptive and process-oriented leasing approach which prevents it from timely securing good values on office space leases and impedes its ability to deliver office space to federal agencies; (2) federal procurement laws and procedural controls enacted to ensure leasing uniformity, compliance, and fairness unduly restrict GSA flexibility; (3) GSA may be paying too much for leased space because of its confusing and time-consuming solicitations and standard contracts; (4) the 12 private-sector firms reviewed use a simpler, more flexible, results-oriented leasing approach that reduces their leasing costs; (5) the private firms do not use detailed specifications and contracts or require multilevel reviews of proposed leases; (6) the firms rely on their staff's expertise, conform to customary commercial practices, and assume more leasing risks; (7) GSA has streamlined its procedures for small leases and is exploring other leasing alternatives in response to initiatives to reduce the government's size and improve performance; (8) GSA could make other administrative changes to improve timeliness and reduce costs, but significant improvements will require fundamental changes in its leasing approach, organizational culture, and role in meeting federal office needs; and (9) federal procurement laws and regulations and other national policies need to be reexamined and possibly changed in order for GSA to adopt a more results-oriented leasing approach.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  5. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  6. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  7. Status: Closed - Not Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  8. Status: Closed - Implemented

    Comments: 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.

    Recommendation: GSA should establish performance goals for its leasing activities and measurement systems to track progress in meeting those goals.

    Agency Affected: General Services Administration

  9. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

  10. Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: General Services Administration

 

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