Review of the Procedures Used To Value Air Force Plant No. 3, Tulsa, Oklahoma

LCD-79-317: Published: Jun 20, 1979. Publicly Released: Dec 3, 1982.

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An evaluation by the General Services Administration (GSA) and the Tulsa Airport Authority of Plant No. 3, located at Tulsa, Oklahoma, showed a large discrepancy in values. GAO was requested to review the procedures used to estimate the value of the plant. The plant consists of over 300 acres of land and 79 structures totaling more than 2.7 million square feet. The government-owned plant is currently operated by McDonnell-Douglas Corporation. The Air Force reported the plant excess in October 1972 with the condition that GSA negotiate a sale to McDonnell-Douglas for continued use as an aircraft fabrication and assembly facility. The Air Force specified that, as a condition of sale, the plant's existing capability for defense production be preserved for 5 years from the date title to the property is transferred to the contractor.

In February 1973, GSA contracted with an independent appraisal firm to provide a valuation of the plant and all related government-owned personal property. In September 1977 and September 1978, the firm stated that the value of the entire plant for negotiated sale to McDonnell-Douglas was $10.4 million. The Airport Authority estimated the value of the plant and special tooling to be over $107.1 million. GAO examined the procedures used by the Tulsa Airport Authority and by the GSA appraiser to identify the reasons for the major differences in the estimated values for the plant and to evaluate the reasonableness of the procedures as a basis for valuing the plant. Some issues were noted concerning the value of the property which GSA and the Air Force need to consider further. GAO believed the procedures used by the appraiser for GSA were more appropriate.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Administrator, GSA, and the Secretary of the Air Force should make sure that the government receives adequate compensation for: the value of equipment furnished by the government since 1974, because this equipment was excluded from the appraiser's valuation at the request of GSA; the value of all capital rehabilitation improvements to plant facilities not previously included in the appraiser's valuation; and the value of parking aprons. In addition, the Administrator of GSA and the Secretary of the Air Force should establish the appropriate acreage to be sold, in view of the differences reported by the Airport Authority, the GSA appraiser, and the Tulsa County Assessor's Office. The appropriateness of the bulk discount taken on equipment, due to its subjective nature, should also be reevaluated.

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