This is the accessible text file for GAO report number GAO-07-17 
entitled 'GSA Leasing: Initial Implementation of the National Broker 
Services Contracts Demonstrates Need for Improvements' which was 
released on March 2, 2007. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Requesters: 

January 2007: 

GSA Leasing: 

Initial Implementation of the National Broker Services Contracts 
Demonstrates Need for Improvements: 

GAO-07-17: 

GAO Highlights: 

Highlights of GAO-07-17, a report to congressional requesters 

Why GAO Did This Study: 

The General Services Administration (GSA) provides leased space to over 
55 percent of federal employees at an annual cost of $3.6 billion. In 
2004, GSA awarded four contracts for national broker services (NBS). 
Performance of the contracts began on April 1, 2005. This report 
focuses on GSA’s administration of the leasing contracts for the first 
contract year, ending March 31, 2006, and addresses, among other 
matters, (1) how GSA is attempting to prevent conflicts of interest in 
the NBS leasing program and to safeguard its information; (2) what, if 
any, savings have accrued to the government; and (3) how GSA is 
distributing its leasing workload among the brokers. To address these 
matters, GAO, among other actions, analyzed the contracts; GSA’s 
contract administration guide; and GSA’s policies, procedures, and 
controls related to these matters. 

What GAO Found: 

GSA has developed controls to help prevent conflicts of interest in the 
NBS leasing program, but has not fully mitigated potential conflicts of 
interest or federal information security concerns related to 
safeguarding information and systems used by the brokers on GSA’s 
behalf. For example, while GSA appears to have resolved the 20 
conflicts identified by the brokers during the first contract year, it 
has not modified the contracts to ensure that each contains all of the 
requirements applicable to the brokers’ disclosure of potential or 
actual conflicts of interest. Further, GSA has not assessed the risk 
and magnitude of harm that could arise from the brokers’ unauthorized 
access to, or disclosure of, GSA’s proprietary information. Until GSA 
conducts a risk assessment, it cannot (1) modify the brokers’ contracts 
to include additional controls, as appropriate, or (2) test, as needed, 
the brokers’ controls to ensure that they are adequate to safeguard 
GSA’s information. GSA also has not adequately mitigated, as required, 
the inherent conflict created by allowing the brokers to represent the 
government while negotiating their commission payment with building 
owners. Commissions are factored into the cost of the government’s 
rental payments. Absent additional controls, GSA has insufficient 
assurance that the brokers will not accept excessive commissions; 
thereby increasing the government’s costs. At the end of GAO’s review, 
GSA had not taken action on these issues. 

GSA expected the contracts to result in various savings. It anticipated 
reductions in (1) rent from the brokers’ expert knowledge of the 
commercial real estate market and (2) administrative expenses from 
reductions in its costs for previous contract fees, administration, and 
personnel. However, more than 2 years after the contract awards, GSA 
does not know what, if any, savings have resulted, largely because it 
has not developed procedures for quantifying most of its expected 
savings. 

GSA distributed its initial leasing workload fairly equally among the 
brokers during the first year, as required, but program delays, 
insufficient data, and a lack of procedures have slowed the transition 
to performance-based distributions. Once a record of performance is 
available, GSA is to distribute work among the brokers on the basis of 
their performance. GSA planned to begin performance-based distributions 
after the first contract year, anticipating that the brokers would have 
completed a sufficient number and variety of task orders to establish a 
record of their performance. However, as of March 31, 2006, the brokers 
had completed only 11 of the 479 task orders issued to them and 
eligible for a commission payment. GSA now expects to begin performance-
based distributions by April 1, 2007—the start of the third contract 
year—but has not defined how many and what types of task orders are 
needed to establish a record of performance. Without this information, 
GSA cannot demonstrate that it has established a record of performance 
and is ready to move to performance-based distributions. GSA also has 
not developed needed guidance and procedures, but plans to do so before 
moving to performance-based distributions. 

What GAO Recommends: 

GAO is making numerous recommendations. For example, GAO recommends 
that GSA perform a risk assessment of the NBS program; modify the 
contracts to include additional controls; test, as needed, the adequacy 
of the brokers’ controls; improve controls over broker commissions; 
develop procedures for quantifying savings; and define the factors 
needed to establish a record of the brokers’ performance. GSA agreed to 
implement the recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-17]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Mark Goldstein at (202) 
512-6670 or goldsteinm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Controls Have Not Fully Mitigated Potential Conflicts of Interest or 
Federal Information Security Concerns: 

Brokers Will Be Compensated through Commissions Paid by Building 
Owners, but Controls for Minimizing the Government's Rental Costs Are 
Insufficient: 

GSA Does Not Know What, If Any, Savings Have Resulted Largely Because 
It Has Not Developed Processes for Quantifying Most of the Anticipated 
Savings: 

GSA Distributed Its Initial Workload Fairly Equally, but Several 
Factors Have Slowed Its Transition to Performance-Based Allocations: 

GSA Implemented a New Organizational Structure and Numerous Management 
Tools to Help Ensure Consistent Oversight of the NBS Brokers: 

GSA Has Numerous Measures for Evaluating the Brokers' Performance, but 
Issues Could Result in Inconsistent and Inefficient Evaluations: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Scope and Methodology for Assessing Our Reporting Objectives: 

Methodology for Selecting Other Entities for Interviews: 

Appendix II: Potential Conflicts Identified and GSA's Resolution of the 
Potential Conflicts, as of March 31, 2006: 

Appendix III: Applicable Performance Evaluation Criteria by Stage of 
Evaluation, as Specified by Various Sources: 

Appendix IV: Comments from the General Services Administration: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Number of Task Orders Issued and Completed, Including Those 
Eligible for a Commission Payment, as of March 31, 2006: 

Table 2: Total Commission Payments Accrued by Each NBS Broker, as of 
March 31, 2006: 

Table 3: Payment Approach Used by the 10 Public-and Private-Sector 
Entities That Contracted for Leasing Services: 

Table 4: Percentage of Commission Credit, by NBS Broker and Contract 
Period: 

Table 5: Example of How Commissions and Commission Credits Are 
Calculated: 

Table 6: Number of Task Orders Issued and Completed, Including Those 
Eligible for a Commission Credit, as of March 31, 2006: 

Table 7: Distribution of Commission-Eligible Task Orders Agencywide, by 
NBS Broker, as of March 31, 2006: 

Table 8: Distribution of Square Footage, by Region and Broker, as of 
March 31, 2006: 

Table 9: Distribution of Task Orders for Market Data, by NBS Broker, as 
of March 31, 2006: 

Table 10: Distribution of Expedited Task Orders, by NBS Broker, as of 
March 31, 2006: 

Table 11: Responsibilities of Key National and Regional Management 
Positions: 

Table 12: Staff Allocated Full Time and Part Time to Oversee and 
Administer the NBS Contracts, as of December 31, 2005: 

Table 13: GSA's Staffing for the NBS Contracts, as of December 31, 
2005, and for the Prior Contracts, as of December 31, 2003: 

Table 14: Frequency of Evaluations, by Type of Task Order Performed: 

Table 15: Long-term Performance Goals Applicable to the NBS Brokers' 
Performance, by Fiscal Year, as of July 31, 2006: 

Figure: 

Figure 1: GSA's 11 Regional Offices and the States They Serve: 

Abbreviations: 

COTR: contracting officer's technical representatives: 

FAR: Federal Acquisition Regulations: 

FDIC: Federal Deposit Insurance Corporation: 

FISMA: Federal Information Security Management Act: 

GSA: General Services Administration: 

NBS: national broker services: 

NIH: National Institutes of Health: 

January 31, 2007: 

The Honorable James Oberstar: 
Chairman: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

The Honorable Eleanor Holmes Norton: 
Chair: 
Subcommittee on Economic Development, Public Buildings, and Emergency 
Management: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

More than half of all federal employees work in space leased from the 
private sector. The General Services Administration (GSA), as the 
federal government's principal landlord, is responsible for acquiring 
much of this leased space. In 2004, GSA leased approximately 155 
million square feet in over 7,200 buildings nationwide at an annual 
cost of about $3.6 billion, making it the largest U.S. entity leasing 
space from the private sector. 

Formerly, GSA performed lease acquisition, management, and 
administration functions in-house, relying primarily on its realty 
specialists. Downsizing initiatives in the 1990s reduced GSA's in-house 
capacity, and, in 1997, GSA started entering into contracts for real 
estate services to carry out a portion of its leasing program. By 2003, 
GSA was accomplishing about 20 percent of its leasing program through 
these contracts, most of which were regional in scope.[Footnote 1] 
However, according to GSA, the contracts were problematic because they 
were inconsistent across GSA's regions and did not produce the 
operating efficiencies GSA expected to leverage from its position as 
the nation's largest leasing entity. To address these issues, GSA 
awarded four contracts for national broker services (NBS)[Footnote 2] 
in October 2004, and contract performance began on April 1, 
2005.[Footnote 3] GSA planned to shift at least 50 percent of its 
leasing workload to the four awardees (commercial real estate brokerage 
firms (i.e., brokers)) in the first year of the contracts and to 
increase their share of GSA's overall leasing program to approximately 
90 percent by 2010--the fifth and final year of the contracts. GSA 
estimated the potential value of each of the four NBS contracts at $33 
million over a 5-year period, for a total of $132 million. 

Under the NBS contracts, the four brokers are eligible to receive 
commissions for lease acquisition, expansion, and extension services, 
as well as for expedited transactions for these services, but not for 
task orders involving a request for market data, which brokers normally 
perform free of charge. If additional commission-eligible work results 
from a request for market data, the broker who performed the market 
data task order is expected to receive the follow-on work. Performing a 
commission-eligible task order does not necessarily mean that the 
broker will be paid. For example, while GSA expects building owners 
(which is the term we use throughout this report for landlords, 
property owners, and developers) to offer a commission to GSA's broker 
if they are paying a commission to their own broker, owners may decide 
not to offer any commissions if, for example, the task order involved 
minimal work. Furthermore, as discussed in more detail in the body of 
this report, each broker agreed to forgo a percentage of its 
commission--in the form of a commission credit--for use in reducing the 
government's initial rental costs. Commission credits are applicable 
for most commission-eligible task orders, but not for expedited leasing 
transactions. Also, commission credits do not apply to task orders for 
market data, since these tasks are not eligible for a commission. 

In entering into the NBS contracts, GSA departed from its prior leasing 
practices in two important respects. First, GSA provided for 
compensating the NBS brokers through the commissions paid by building 
owners, as is typical in the commercial real estate industry. Formerly, 
GSA paid its brokers through appropriations.[Footnote 4] Second, GSA 
awarded two of the four contracts to dual-agency brokerage firms--firms 
that represent both building owners and tenants (in this case, GSA 
acting on behalf of a tenant agency). The other two awardees were 
tenant-only brokerage firms--firms that represent only the tenant in 
real estate transactions. Potential conflicts of interest would arise 
if the government allowed itself to be represented by a dual-agency 
broker under circumstances where that broker also represented a 
building owner whose building was offered for lease to the government. 
An employee of a dual-agency broker, for example, might be tempted to 
manipulate the transaction or misuse privileged government information 
to gain an unfair advantage over others, attempting to ensure that the 
client's building was leased by the government. Even if the dual-agency 
employee did not seek an advantage, the potential for a conflict of 
interest exists. To avoid such conflicts, federal contracting 
requirements ordinarily would prohibit federal agencies from using dual-
agency brokers, but GSA waived the requirements, as allowed, to 
increase competition for the NBS contracts. 

Under the NBS contracts, all of the brokers representing GSA work with 
proprietary and procurement-sensitive information and information 
systems and have, or soon will have, access to e-Lease (an electronic 
information system GSA uses to manage its leasing transactions). 
Improper disclosure of confidential information is prohibited and could 
create an unfair competitive advantage for a broker. Furthermore, 
unauthorized access to GSA's information or information systems used by 
the brokers on behalf of GSA would raise security concerns addressed by 
the Federal Information Security Management Act of 2002 
(FISMA).[Footnote 5] 

This report follows up on a legal opinion that we provided at your 
request in July 2004, in which we addressed several questions you 
raised about the nature of the services that GSA was intending to 
procure through the NBS contracts.[Footnote 6] Specifically, this 
report addresses (1) how GSA is attempting to prevent conflicts of 
interest in the NBS program and to safeguard information and 
information systems used by the brokers on GSA's behalf; (2) how the 
brokers will be compensated for their services and what, if any, 
controls exist to minimize the government's rental costs; (3) what, if 
any, savings have accrued to the government; (4) how GSA is 
distributing its leasing workload among the brokers; (5) how GSA is 
overseeing the brokers; and (6) how GSA is measuring the brokers' 
performance. 

To address these questions, we analyzed GSA's policies, procedures, and 
controls related to our six reporting objectives and interviewed 
cognizant GSA officials, including those responsible for managing the 
NBS program and for ensuring compliance with FISMA. We also interviewed 
officials from 10 public-and private-sector entities--3 large, private 
companies; 4 state agencies; and 3 other federal agencies--that 
contract for leasing services to determine, among other things, how 
these parties address conflict-of-interest issues and compensate their 
brokers. To gain the views and understand the experiences of real 
estate brokers related to our objectives, we interviewed 
representatives from 9 large nationwide brokerage firms, including the 
4 NBS brokers, and 6 commercial real estate trade associations. 
Furthermore, to obtain information about how localities regulate 
conflicts of interest and broker compensation issues, we interviewed 
regulatory personnel in 4 states and the District of Columbia. We 
performed our work between November 2004 and December 2006 in 
accordance with generally accepted government auditing standards. 
Additional information about our objectives, scope, and methodology, 
including a detailed discussion of the various methods we used to 
select entities for interviews, appear in appendix I of this report. 

Results in Brief: 

GSA has developed controls to help prevent conflicts of interest in the 
NBS program, but has not fully mitigated potential conflicts of 
interest or federal information security concerns related to 
safeguarding information and information systems used on GSA's behalf. 
Some of GSA's controls apply to both tenant-only and dual-agency firms, 
but additional and more stringent controls apply to the two dual-agency 
firms. For example, requirements for disclosing any actual or potential 
conflicts of interest within 3 days of receiving a task order and for 
keeping GSA's information confidential apply to both types of firms, 
but requirements for establishing a "conflict wall"--that is, physical 
and electronic controls that isolate and limit access to GSA's 
procurement-sensitive information--apply only to the dual-agency firms. 
In addition, GSA prohibited the same employee within a dual- agency 
firm from representing both parties in a leasing transaction. According 
to our analysis, three of the contract requirements that GSA applied 
only to dual-agency firms, including the requirement for dual- agency 
firms to disclose conflicts that arise during the performance of work, 
are also applicable to the two tenant-only firms. GSA agreed with our 
analysis in March 2006 and said it would include the requirements in 
its contracts with the tenant-only firms; however, as of October 31, 
2006, it had not done so. As of March 31, 2006--the end of the first 
contract year--the four NBS brokers had disclosed 20 potential 
conflicts of interest. These potential conflicts represent about 4 
percent of the 479 commission-eligible transactions--known as "task 
orders"--issued to the brokers in the first contract year.[Footnote 7] 
GSA determined that 9 of the 20 disclosures represented actual 
conflicts, and GSA took steps, such as reassigning task orders, to 
resolve the conflicts. GSA also confirmed that the brokers have 
electronic and physical controls (i.e., a conflict wall) to help 
prevent information sharing among broker employees. However, more than 
1-1/2 years after beginning work under the contracts, GSA had not 
assessed whether the controls are adequate to preclude unauthorized 
information sharing. In addition, although GSA had recommended that the 
two dual-agency brokers implement additional conflict wall controls, it 
had not taken action to require the brokers to implement the 
recommended controls. Furthermore, GSA had not assessed whether NBS 
program controls satisfy federal requirements for safeguarding 
information and information systems used on GSA's behalf. More 
specifically, GSA had not (1) conducted an assessment of the risk and 
magnitude of harm that could arise from, among other things, the 
broker's unauthorized access to, or disclosure of, GSA's leasing 
information; (2) modified its contracts with the brokers, as 
appropriate, to impose additional controls for protecting the 
information and information systems; or (3) tested, as needed, the 
adequacy of the four brokers' controls for safeguarding the information 
and information systems. GSA was aware that FISMA's requirements would 
be applicable when the brokers gained access to e-Lease, but it was not 
aware that these requirements had been applicable to the information 
and information systems the brokers have used on GSA's behalf since 
April 1, 2005--the start of the first contract year. Additionally, 
three conflict-of-interest requirements imposed on the two dual-agency 
firms--but also applicable to the tenant-only firms--had not been 
included in GSA's contracts with its tenant-only brokers. To help 
ensure that controls are adequate to prevent conflicts of interest, we 
are recommending, among other actions, that GSA extend the applicable 
conflict-of-interest requirements to tenant-only brokers; assess the 
adequacy of the dual-agency brokers' conflict walls; and, as needed, 
test the four brokers' controls over information and information 
systems to determine whether the controls are sufficient for protecting 
GSA's information from unauthorized access to, or use, disclosure, 
disruption, modification, or destruction. 

Under the terms of their contracts with GSA, the four NBS brokers will 
be compensated for the majority of their services through commissions 
paid by building owners, as is typical in the commercial real estate 
industry. However, at least one important control to help ensure that 
the brokers do not improperly increase the government's rental costs is 
lacking. The contracts allow the brokers to collect commissions for 
lease acquisition, expansion, and extension services as well as for 
expedited transactions for these services. GSA expects that building 
owners will pay commissions for these services and, to help ensure that 
commissions are paid, GSA requires owners to offer a commission to 
GSA's broker if they are paying a commission to their own listing agent 
or broker. However, GSA has no obligation to pay its brokers, even if a 
building owner does not offer a commission to the brokers. Offers that 
include a payment to the building owner's broker, but not to GSA's 
broker, must be rejected. In contracting with GSA, the brokers accepted 
the risk that they would not always receive commissions because they 
anticipated, first, that nonpayment would be rare and, second, that the 
volume of government business would more than compensate them for any 
isolated losses. As of March 31, 2006, the end of the first contract 
year, too few task orders had been completed to determine whether or to 
what extent commissions will not be paid, but the financial risk to the 
brokers appears to be limited, in part, because of the requirement that 
building owners pay GSA's broker if they intend to pay their own. 
Specifically, the NBS brokers had completed 11 of the 479 commission- 
eligible task orders issued by GSA during the first contract year. One 
of these task orders did not result in a commission payment. The 
remaining 10 (involving about 460,000 square feet of leased space) 
resulted in about $1.2 million in commission payments, of which the 
brokers are entitled to receive about $960,000 and the government is 
entitled to the remainder.[Footnote 8] Commission payments are factored 
into the cost of an agency's rent. GSA oversees the NBS brokers 
throughout the leasing process and ultimately signs the leases 
negotiated by the brokers, but GSA does not prohibit the brokers from 
negotiating commission rates in excess of those specified in its 
commission agreements because,[Footnote 9] according to GSA, it does 
not want to influence the commercial real estate market. Allowing the 
NBS brokers to represent the government while negotiating their 
commissions, creates, by design, an inherent conflict between the 
brokers' interest in promoting and negotiating higher commissions and 
their responsibility to effectively represent GSA's interest in 
selecting properties that best meet the government's needs, including 
cost.[Footnote 10] As a result, the brokers could potentially favor 
building owners who pay excessive commissions; thereby increasing the 
rental rates that the government will eventually pay.[Footnote 11] We 
are recommending that GSA establish additional controls to mitigate the 
brokers' inherent conflict of interest. 

In 2003, before entering into the NBS contracts, GSA expected savings 
from reductions in rent and agency costs. However--more than 2 years 
after the October 2004 contract awards--GSA does not know what, if any, 
savings have resulted largely because, with the exception of savings 
resulting from commission credits, it has not developed processes for 
quantifying most of its anticipated savings. GSA expected reductions in 
rent costs primarily from commission credits--a type of savings 
commonly realized by entities that contract for commercial leasing 
services. A commission credit is the percentage of the commission that 
a broker agrees to forgo in anticipation of the opportunity to do a 
large volume of business with an entity such as GSA.[Footnote 12] 
Commission credits are applicable to most, but not all, of the services 
that the brokers perform for GSA. GSA uses commission credits to reduce 
the initial rental payment or payments for its tenant agencies and has 
processes for quantifying the credits. Specifically, GSA reviews and 
approves each broker's calculations, enters the credits in GSA's 
electronic e-Lease system, and conducts periodic peer reviews to help 
ensure that the proper credit accrues to its tenant agencies. GSA has 
little information on the amount of savings resulting from commission 
credits because the vast majority of the task orders completed in the 
first contract year (65 of 76) were not eligible for 
commissions.[Footnote 13] Of the 11 completed task orders for 
commission-eligible services, 10 resulted in a commission, and, of 
these, 7 were for services that also can result in a credit to the 
government. These completed task orders are expected to result in about 
$216,000 in commission credits, which GSA will use to reduce the 
initial rental payments for approximately 418,000 square feet of leased 
government space. GSA anticipated further reductions in rent costs from 
what it believed to be the brokers' greater knowledge of the commercial 
real estate market. Finally, GSA anticipated savings to accrue from 
reductions in its costs for (1) contract fees, (2) administration 
expenses, and (3) personnel. As the tasks associated with GSA's 
previous contracts are completed, GSA will no longer have to pay the 
fees and administration costs associated with those contracts. Whether 
GSA will avoid personnel costs is unclear. By shifting its leasing 
workload to the NBS brokers, GSA initially believed it could avoid 
hiring additional realty specialists. GSA subsequently identified 
additional tasks for this position, however, and now believes that it 
must maintain an adequate (but unspecified) number of realty 
specialists to oversee the NBS brokers. It is unclear how this change 
in view will affect future personnel levels and long-term costs. 
According to GSA, it plans to quantify savings from most of these 
sources. However, as of October 2006, GSA had not developed procedures 
or time frames for doing so. We are recommending that GSA develop 
processes for quantifying the savings, if any, resulting from its use 
of the NBS contracts. 

GSA distributed its initial leasing workload fairly equally among the 
brokers agencywide, as the contracts require, but program delays, 
insufficient data, and a lack of program procedures have slowed the 
transition to performance-based distributions. According to the 
contracts, GSA is required (1) initially to distribute task orders to 
the four NBS brokers "as equally as possible," unless their performance 
is unsatisfactory, and (2) once a record of their performance is 
available, to base its distributions on the brokers' performance. The 
contracts further define the initial equitable distribution as "similar 
size projects in similar geographic areas (e.g., urban or rural) to the 
maximum extent possible within the existing workload available." In 
addition, GSA's contract administration guide specifies that its 
initial distributions are to be based on square footage "with each firm 
[broker] receiving equal distribution in all eleven GSA regions and in 
all markets." GSA originally planned to start performance-based 
distributions after the first contract year, anticipating that by then 
the brokers would have completed a sufficient number and variety of 
commission-eligible task orders to establish a record of their 
performance. However, delays in starting up the program--attributable, 
in part, to bid protests--limited the number of commission-eligible 
task orders completed by the end of the first contract year to 11, 
which is a number that GSA considered insufficient to establish a 
record of performance. GSA now expects to begin performance-based 
distributions at the start of the third contract year, but has not yet 
defined how many and what types of task orders are needed to establish 
a record of performance. Without this information, GSA cannot 
demonstrate that it has established a record of performance and is 
ready to move to performance-based distributions. In addition, GSA has 
not yet developed guidance and procedures for making performance-based 
distributions, but plans to do so before altering its current 
distribution approach. We are recommending that in developing these 
procedures, which GSA describes as a top priority, GSA clarify the 
number and types of completed task orders needed to establish a record 
of the brokers' performance. 

According to our analysis of GSA's data, GSA's initial distribution 
among the brokers was fairly equal agencywide, but varied from region 
to region. In total, for example, each broker received between about 
2.3 million and about 3 million square feet of leased space. However, 
in GSA region 3, broker C received about 11 times more square footage 
than broker B,[Footnote 14] and in GSA region 11, which distributed 
nearly half of the square footage issued in the first contract year, 
broker A received about 40 percent of the region's total, while broker 
C received about 16 percent. According to GSA, such variation reflects, 
among other factors, differences in the sizes of the task orders 
available for distribution, changes in its client agencies' space 
requirements, and decisions to keep certain projects in-house. GSA 
views regional variations as unavoidable and--on the basis of our 
analysis--plans to modify the language of its administration guide to 
conform to the contracts, specifying that its initial distributions of 
task orders will be allocated "as equally as possible," rather than 
"equal," across the regions. Our analysis of GSA's data also found that 
GSA's distributions of task orders for market data and expedited 
leasing transactions varied. Although task orders for market data are 
not eligible for commissions, they often lead to commission-eligible 
follow-on work, and disparities in their distribution could create 
future workload imbalances. Disparities in the distribution of 
expedited leasing transactions have an immediate impact because the 
broker retains the entirety of any commission offered by the building 
owner. On the basis of our analyses, GSA agreed to provide greater 
management attention of its distribution of task orders for market data 
and expedited leasing transactions. Finally, GSA had not tracked 
information on the geographic location (e.g., rural or urban) of task 
orders and, therefore, did not have data to assess the equitability of 
its distributions by similar geographic areas, as specified in its 
contracts with the NBS brokers. We are recommending that GSA begin 
tracking this information. 

To oversee the NBS brokers, GSA has put a new organizational structure 
in place and implemented numerous management tools designed to help 
ensure consistent oversight. These actions are intended to address 
weaknesses in GSA's administration of its earlier contracts for leasing 
services and to provide consistent direction for its 11 regions. In 
December 2002, GSA's Office of the Inspector General reported that 
GSA's administration of the earlier broker contracts was inadequate and 
inconsistent, thereby hampering GSA's oversight of the contracts. GSA 
acknowledged these weaknesses and developed a new--and substantially 
different--organizational structure to help ensure consistent oversight 
of the NBS brokers. More specifically, GSA established key national and 
regional management positions, defined the roles and responsibilities 
of these positions, designated many of its realty specialists as 
project managers, and redefined the realty specialists' 
responsibilities to reflect their new roles. In addition, GSA 
implemented numerous management tools to improve its management and 
oversight of the NBS program. Two of these tools are used for GSA's 
entire leasing program--the Transaction Management Playbook (a handbook 
with standardized templates that provide consistent criteria for GSA's 
client agencies to determine their space requirements) and the e-Lease 
system (GSA's electronic system for managing its leasing transactions, 
including transactions completed by NBS brokers). The other tools are 
unique to the NBS contracts. Specifically, GSA (1) developed national 
guidance for administering the contracts, (2) created a performance 
evaluation board that meets quarterly to assess both the regions' and 
the brokers' performance, (3) established peer reviews to help ensure 
that its regions implement the NBS contracts consistently, (4) created 
a program for certifying personnel with responsibilities for overseeing 
the NBS brokers, and (5) required the brokers to attend quarterly 
performance review meetings. 

GSA has numerous measures for evaluating the NBS brokers' performance, 
but several issues, if left unresolved, could lead to inconsistent 
evaluations and inefficiencies in the evaluation process. GSA's 
performance measures address the quality, timeliness, and 
responsiveness of the brokers' work and the brokers' contribution to 
GSA's meeting long-term performance goals, such as satisfying its 
client agencies and reducing the government's costs. GSA uses its 
evaluations of the brokers' performance to, for example, hold 
performance discussions with the brokers and determine whether to renew 
its contracts with them. GSA evaluates the brokers' performance of task 
orders for lease acquisitions, expansions, and extensions, but not for 
market data. The evaluations occur at the completion of certain task 
order activities, at the completion of an entire task order, and 
annually, and the performance measures vary depending on the evaluation 
stage. GSA records the scores for completed task orders in e-Lease. In 
addition, at the end of each contract year, the National Contracting 
Officer is required to prepare and enter an annual evaluation of each 
broker's performance into a nationwide, government database on 
contractor performance. The annual evaluation considers, among other 
factors, the broker's performance on completed task orders and the 
broker's contribution to GSA's progress in meeting its long-term 
performance goals for its leasing program. According to GSA's first 
annual evaluations of the NBS brokers, each met its contract's 
requirements. However, the evaluations are limited to the brokers' 
performance of the 11 task orders that were subject to evaluation and 
completed as of March 31, 2006. Throughout the course of our review, we 
identified and discussed with GSA officials numerous issues related to 
GSA's contracts, guidance, and processes for evaluating the NBS 
brokers' performance, including inapplicable criteria such as GSA's 
measure for evaluating the brokers' help in reducing the amount of 
vacant space in GSA's inventory. According to NBS program managers, the 
brokers cannot influence GSA's progress in this area and, thus--while 
specified in the contract--GSA does not evaluate them on this measure. 
NBS program officials acknowledged inaccuracies and inconsistencies, 
within and between the contracts, the administration guide, and e- 
Lease, as well as omissions in the guide. However, according to the 
officials, these issues have not adversely affected GSA's 
administration of the contracts or GSA's evaluation of the brokers' 
performance. GSA officials also acknowledged that e-Lease needs to be 
revised to eliminate factors that GSA's Contracting Officer's Technical 
Representatives cannot adequately address when they are performing 
their assessments. At the completion of our review, GSA had corrected e-
Lease, but it had not addressed any of the other issues that we 
identified. We are recommending that GSA conform its contracts and 
administration guidance to help ensure that its regions consistently 
evaluate the brokers' performance. 

We requested comments on a draft of this report from GSA. In its 
written comments, GSA stated that it is pleased with the results of the 
first year of the NBS program. However, GSA noted that the agency had 
experienced challenges in implementation due to the magnitude and 
impact of the program. GSA stated that it had already initiated a 
number of actions to address issues identified in this report and 
agreed to "work on the implementation" of our recommendations. GSA's 
comments are reprinted in appendix IV. GSA also provided technical 
comments that we have incorporated in this report, as appropriate. 

Background: 

GSA provides workspace for more than 1.1 million federal workers 
through the Public Buildings Service, the landlord for much of the 
federal government. When GSA began planning for the NBS contracts in 
late 2003, the National Office of Realty Services, within GSA's Public 
Buildings Service, was responsible for the acquisition and 
administration of GSA's leases.[Footnote 15] About half of the federal 
employees are housed in about 1,600 federally owned buildings, while 
the remainder is located in leased space within over 7,200 privately 
owned buildings at an annual cost of about $3.6 billion, according to 
GSA. Whenever possible, GSA satisfies its tenant agency needs within 
space that GSA already owns or leases. When suitable space is not 
available, however, GSA acquires additional space in privately owned 
buildings. More than 80 percent of GSA's leases are for 20,000 square 
feet or less. GSA leases a wide variety of space for federal agencies, 
including office space, laboratories, clinics, border stations, and 
courthouses, in both urban and rural areas throughout the United 
States, the District of Columbia, and the U.S. territories. GSA signs 
leases on behalf of its tenant agencies and collects rent from them. 
The rental payments are deposited into the Federal Buildings Fund-- 
which is the principal funding mechanism for GSA's Public Buildings 
Service to construct and maintain facilities for federal agencies. 

Before initiating the NBS contracts, GSA compared the cost of doing 
business using various contract vehicles,[Footnote 16] including: 

* no-cost contracts--under which brokers collect commissions paid by 
building owners as payment for their services, with no additional 
payment made by the government; 

* fixed price contracts--under which the government guarantees payment 
of a fixed fee for broker services, to be paid from appropriated funds; 
and: 

* the continued use of GSA's previous contracts. 

GSA concluded that awarding "no-cost," nationwide contracts was the 
best option available because, according to GSA's analysis, such 
contracts addressed GSA's capacity issues, resulted in the lowest cost, 
and best addressed GSA's previous contract administration issues. In 
addition, according to GSA, entering into the contracts would (1) allow 
its realty specialists--the individuals responsible for carrying out 
GSA's leasing transactions--more time to manage projects and customer 
relationships; (2) enable GSA to leverage its national position in the 
market and take advantage of the best financial terms being offered; 
and (3) provide consistent services from region to region, leading to 
better overall service to its customers (tenant agencies).We did not 
evaluate GSA's 2003 analysis for entering into the NBS contracts. 

GSA issued its request for broker proposals for nationwide leasing 
services in March 2004. GSA received 18 offers in response to its 
request and, on October 4, 2004, awarded four nationwide contracts to 
the real estate companies of Jones Lang LaSalle; Julien J. Studley, 
Inc; The Staubach Company-Northeast; and Trammell Crow Services, Inc. 
The contracts were expected to begin on December 6, 2004, but were 
delayed by bid protests related to the awards. Three of the bid 
protests were withdrawn, and, on January 31, 2005, GAO issued a 
decision denying the final protest.[Footnote 17] GSA held its 
orientation for the four NBS brokers in March 2005 and initiated the 
contracts on April 1, 2005. Each of the contracts has a 1-year base 
period--which expired on March 31, 2006-- and four option periods that 
allow the government, at its sole discretion, to extend the contracts, 
in annual increments, through March 31, 2010. GSA exercised the first 
option, extending each of the contracts through March 31, 2007. During 
the contract period, each broker is expected to provide lease 
acquisition services for GSA's 11 regions. See figure 1 for the 
locations of GSA regional offices. 

Figure 1: GSA's 11 Regional Offices and the States They Serve: 

[See PDF for image] - graphic text: 

Sources: GAO and Map Resources (map). 

[End of figure] - graphic text: 

In 2004, GSA anticipated that the four NBS brokers would perform at 
least 50 percent of its expiring lease workload in the first year of 
the contracts, with yearly increases of 10 percent, culminating in the 
brokers' performance of 90 percent of GSA's workload by 2010--the fifth 
and final year of the contracts. GSA estimated the value of each NBS 
contract at $33 million, over a 5-year period. 

GSA and the brokers who represent GSA use a "solicitation for offers" 
to obtain offers from building owners (offerors) with available space 
that may meet GSA's leasing needs. The solicitation, among other 
things, describes the government's space and location requirements and 
the criteria that will be used to assess the building owners' offers. 

GSA issues work to the NBS brokers through task orders. Under the terms 
of their contracts, the NBS brokers are required to perform the 
following types of task orders and activities on behalf of GSA: 

* lease acquisitions (i.e., assist tenant agencies with the development 
of their space requirements, develop project schedules, prepare market 
surveys, develop and issue GSA's solicitations for offers to building 
owners who may have space available for leasing, evaluate the offers, 
and negotiate the offers with building owners); 

* lease expansions (i.e., review the tenant agency's existing occupancy 
agreement, conduct an orientation to inform parties about the 
government's requirements and criteria for evaluating offers from 
building owners, and develop the requirements necessary to perform 
requested alterations related to the expansions);[Footnote 18] 

* lease extensions (i.e., determine the appropriate term of the 
required extension through discussions with GSA and tenant agency 
personnel and submit a request for the lease extension to the building 
owner);[Footnote 19] and: 

* market data (i.e., provide summary market information, including 
comparable rental rates, by building type, in the relevant market). 

The Federal Acquisition Regulation (FAR) is the principal regulation 
applicable to the acquisition of supplies and services by federal 
agencies, including brokerage services. The FAR prescribes, among other 
matters, requirements related to identifying and avoiding conflicts of 
interest. The FAR allows the head of an agency, or a designee, to waive 
FAR subchapter 9.5 requirements, which deal with organizational 
conflicts of interest, when doing so would allow the government to test 
new techniques and methods of acquisition and when it is determined 
that applying a particular FAR requirement would not be in the 
government's best interest. 

The NBS brokers are expressly precluded from performing inherently 
governmental functions and activities. Inherently governmental 
functions and activities, including the execution of a lease obligating 
the government to pay the building owner, must be performed by GSA 
employees. 

Controls Have Not Fully Mitigated Potential Conflicts of Interest or 
Federal Information Security Concerns: 

To increase competition for its NBS contracts, GSA took steps to allow 
dual-agency brokerage firms--that is, firms that simultaneously 
represent both building owners and tenants, such as GSA (acting on 
behalf of a federal agency), to be considered for the contract awards. 
GSA recognized that allowing such firms to offer properties to GSA that 
other employees of their firms were simultaneously marketing could 
violate federal conflict-of-interest requirements. Therefore, GSA 
waived the requirements--as permitted by the FAR--and developed 
controls to detect and mitigate conflicts of interest. Conflicts of 
interest arise when a contractor is required to assume conflicting 
roles that might bias its judgment. This can result in the contractor 
gaining an unfair or improper advantage over its competitors. Some of 
the controls, such as requirements for disclosing potential conflicts 
of interest, apply to both dual-agency firms and tenant-only firms-- 
that is, firms that represent tenants exclusively. Two of the four NBS 
brokers are dual-agency firms and two are tenant-only firms. Other GSA 
controls, such as a prohibition against the same broker employee 
representing both itself and the building owner on the same leasing 
transaction and requirements for a "conflict wall" to isolate 
procurement-sensitive information, apply only to dual-agency firms 
because of concerns that an employee of a dual-agency firm could, among 
other things, manipulate a transaction to maximize the firm's 
commission or misuse government information to gain an unfair 
competitive advantage over other firms. As of March 31, 2006, 20 
potential conflicts of interest had been disclosed, 13 of which were 
determined to be actual conflicts. GSA resolved these 13 conflicts by, 
among other actions, reassigning them to other brokers. The 20 
potential conflicts represent about 4 percent of the 479 commission- 
eligible task orders issued to the brokers in the contracts' first 
year. GSA also confirmed that the brokers have electronic and physical 
controls (i.e., a conflict wall) to help prevent unauthorized 
information sharing between dual-agency broker employees. However, more 
than 1-1/2 years after beginning work under the contracts, GSA had not 
assessed whether the controls are adequate. In addition, GSA had not 
assessed whether NBS program controls satisfy federal requirements for 
safeguarding information and information systems used on GSA's behalf. 
More specifically, GSA had not (1) conducted an assessment of the risk 
and magnitude of harm that could arise from, among other things, the 
broker's unauthorized access to, or disclosure of, GSA's leasing 
information; (2) modified its contracts with the brokers, as 
appropriate, to impose additional controls for protecting the 
information and information systems; or (3) tested, as needed, the 
adequacy of the four brokers' controls for safeguarding the information 
and information systems. In addition, three conflict-of-interest 
requirements imposed on the two dual-agency firms--but also applicable 
to the tenant-only firms--had not been included in GSA's contracts with 
its tenant-only brokers. 

Dual-Agency Practices Create Potential Conflicts of Interest: 

Allowing the government to be represented by dual-agency firms creates 
the potential for organizational conflicts of interest. Concerns about 
a conflict of interest would arise if the government allowed itself to 
be represented by a dual-agency firm that was also representing a 
building owner whose building was being offered for lease to the 
government. An employee of a dual-agency firm, for example, might be 
tempted to manipulate the transaction or misuse privileged government 
information to gain an unfair advantage over other firms, attempting to 
ensure that the client's building was leased by the government. Even if 
the employee did not take any such improper action, the potential for 
impropriety exists. Recognizing this, the FAR requires a federal agency 
to identify potential organizational conflicts of interest as early as 
possible during the procurement planning process and to avoid, 
neutralize, or mitigate any significant conflict before awarding a 
contract--that is, in this context, before selecting a dual-agency firm 
as its contractor. 

GSA Waived the FAR's Conflict-of-Interest Requirements to Increase 
Competition: 

GSA recognized that allowing dual-agency firms to compete for the NBS 
contracts would create a significant potential for conflicts of 
interest. GSA could have avoided the threat of potential conflicts by 
refusing to allow dual-agency firms to compete for the NBS contracts. 
GSA also could have required firms to disqualify themselves from 
offering property to GSA that the firms were concurrently attempting to 
lease. Nevertheless, GSA believed that the government would benefit 
from including these firms in the competition, in part, because dual- 
agency firms are common in the commercial real estate market. For this 
reason, GSA chose to seek a waiver of the FAR's conflict-of-interest 
requirements and to focus, instead, on conflict mitigation on a 
transaction-by-transaction basis. 

The waiver request--submitted by GSA's former National Office of Realty 
Services--cited concerns about limiting competition for the contracts 
and noted that dual-agency firms are regulated in most states by an 
ethics board, which monitors brokers for violations and may impose 
penalties ranging from large monetary fines to license 
terminations.[Footnote 20] Nevertheless, the request recognized a need 
to, among other matters, (1) prohibit the same individual from 
representing both the government and the building owner in the same 
leasing transaction and (2) establish additional controls over dual- 
agency firms.[Footnote 21] GSA's Deputy Associate Administrator for 
Acquisition Policy granted the waiver on November 11, 2003, subject to 
the implementation of the controls specified in the waiver request. 

GSA Developed Numerous Controls to Help Ensure the Impartiality of 
Brokers When Handling Its Leasing Transactions: 

To mitigate the potential for conflicts of interest stemming, in part, 
from GSA's decision to allow dual-agency firms to compete for the NBS 
contracts, GSA developed a number of specific controls for both types 
of NBS brokerage firms. Two of the four NBS brokers are dual-agency 
firms, and two are tenant-only firms, representing tenants like GSA 
(acting on behalf of a federal agency), exclusively. For example, GSA 
applied one control--a requirement to inform GSA of any potential 
conflicts of interest--to all four NBS brokers, but applied additional 
controls only to the dual-agency firms, including a requirement that 
the firms establish "conflict walls" to help prevent electronic and 
physical sharing of information between brokers who represent GSA and 
other employees within the same brokerage firm who represent building 
owners. GSA also imposed other dual-agency controls, three of which are 
also applicable to the tenant-only firms. 

GSA Required All of the NBS Brokers to Inform GSA of Potential 
Conflicts: 

Recognizing that, with knowledge of potential conflicts, GSA could 
minimize their impact on a task-order-by-task-order basis, GSA required 
each of the four NBS brokers, including the brokers' subcontractors, to 
inform GSA in writing, and within 3 working days after receiving a task 
order, whether it would have any organizational conflicts of interest 
in performing work related to an assigned task order.[Footnote 22] The 
four firms are expected to disclose the following two types of 
potential conflicts: (1) dual-agency situations--when a brokerage firm 
represents a building owner with available space that might meet GSA's 
needs--and (2) property management responsibilities--when the brokerage 
firm is the property manager for a building owner who has space that 
may be suitable for the government. While such conflicts generally 
would not apply to tenant-only firms, all of the firms are subject to 
the disclosure requirement. In addition, all broker and subcontractor 
employees--regardless of the type of brokerage firm--who will be 
working on a GSA task order must submit, within 3 days of receiving a 
task order, an individual conflict-of-interest and nondisclosure 
statement acknowledging that they (1) have read and agreed to follow 
their contract's conflict-of-interest requirements; (2) understand that 
the performance of work related to a GSA task order involves restricted 
procurement information that--if disclosed--may subject both the 
discloser and the recipient of the information to contractual, civil, 
and criminal penalties; and (3) understand that the disclosure of 
proprietary information submitted by a building owner in response to a 
solicitation for offers is strictly prohibited and subject to a variety 
of penalties, including fines or jail time, or termination of the 
contract. 

As of March 31, 2006--the end of the first contract year--the four 
brokers had disclosed 20 potential conflicts of interest.[Footnote 23] 
The 20 potential conflicts occurred in about 4 percent of the 479 
commission-eligible task orders GSA issued for lease acquisitions, 
expansions, and extensions, as well as expedited leasing transactions 
for these services during the first contract year.[Footnote 24] 
Seventeen of the 20 disclosures involved task orders issued to the two 
dual-agency firms, and the remaining 3 involved task orders issued to 
the two tenant-only firms. The National Contracting Officer and legal 
counsel in GSA headquarters are responsible for reviewing the 
circumstances of each potential conflict of interest to determine 
whether the circumstances involve an actual conflict.[Footnote 25] If a 
conflict is determined to exist, GSA has three possible options for 
accomplishing the work. Specifically, under the terms of GSA's 
contracts with the brokers, GSA can: 

* select another broker that does not have a conflict; 

* elect to perform the work in-house; or: 

* issue the task order to the original broker if GSA determines, after 
considering such factors as the broker's expertise and GSA's capacity 
to perform the work in-house, that doing so is in the government's best 
interest. 

After reviewing the circumstances of the 20 potential conflicts of 
interest,[Footnote 26] GSA officials determined that for 7, the 
circumstances did not involve a potential or actual conflict of 
interest, and the work proceeded as planned under the original task 
orders. For the other 13 broker disclosures, however, the circumstances 
were determined to involve actual conflicts of interest.[Footnote 27] 
The majority of these conflicts involved disclosures that the brokers 
represented or managed property for one or more building owners with 
space that might meet GSA's requirements. One of the 13 conflicts 
required no alternative action on GSA's part, since the task order was 
canceled after the agency's space requirements changed. To resolve the 
remaining 12 conflicts, GSA reassigned 9 of the task orders to brokers 
without conflicts, and, for the 3 other task orders, required 
subcontractors of the originally assigned brokers to comply with 
various conflict-of-interest restrictions. See appendix II for more 
details on the 20 potential conflicts identified as of March 31, 2006. 

GSA Imposed Additional Controls for Dual-Agency Firms: 

To prevent conflicts of interest when it could not reassign work to 
another broker or perform the work in-house, GSA prohibited the same 
employee within a dual-agency firm from representing both GSA and the 
building owner in the same leasing transaction and required dual-agency 
firms to establish a "conflict wall" to help prevent electronic and 
physical sharing of information between broker employees, who represent 
GSA, and other employees within the same brokerage firm who represent 
building owners. GSA specified numerous controls related to the dual- 
agency firms' conflict wall, including the following: 

* Establish separate electronic file servers and other electronic 
safeguards to prevent non-GSA broker employees within the brokerage 
firm from obtaining access to GSA-related documents, files, and 
information. 

* Ensure that paper files and documents are kept, safeguarded, and 
maintained in separate, secure locations that preclude access by anyone 
not working on GSA's contracts. 

* Inform all members of the brokerage firm of the existence of the 
conflict wall. 

* Maintain the conflict wall throughout the term of the contract. 

* Execute, when directed by the National Contracting Officer, 
certifications confirming the continued existence of the conflict wall 
and related processes and procedures.[Footnote 28] 

* Allow GSA's periodic inspection and verification of the conflict wall 
during the term of the contract. 

The conflict wall and associated controls that GSA established for its 
dual-agency brokers are in addition to those typically required in the 
commercial real estate industry. None of the five local real estate 
regulators (four states and the District of Columbia) that we contacted 
imposed such requirements. Furthermore, officials from nearly all of 
the 10 public-and private-sector entities we interviewed that contract 
for leasing services said they do not require their brokerage firms to 
establish a conflict wall to safeguard their procurement-sensitive 
information. In their view, they have adequate recourse, ranging from 
fines to license revocations, to identify and manage conflicts of 
interest. The one exception was the Department of Veterans Affairs, 
which modeled its contracts, including the requirement for a conflict 
wall, after GSA's contracts. GSA's two dual-agency brokers incurred 
additional expenses to address GSA's conflict wall requirements. 
Nevertheless, officials from these firms indicated that they are 
comfortable with the additional requirements, given the need to ensure 
the integrity of the government's procurement processes. 

GSA Established Other Dual-Agency Controls, Three of Which Are Also 
Applicable to the Tenant-Only Brokers: 

GSA established other controls to deal with the potential for dual- 
agency conflicts. First, before a dual-agency firm can solicit offers 
from any building owner (offeror), the firm must inform the owner that 
the firm represents both tenants and other prospective offerors and 
obtain a signed statement (dual-agency notification statement) 
indicating that the building owner is aware of the broker's 
affiliations before making an offer. Second, under the terms of their 
contract, personnel from a dual-agency firm are not permitted to share 
in any fees or commissions received by, or payable to, the broker for 
the broker's representation of a building owner, representative, 
lessor, or other third party in a GSA leasing transaction. Finally, GSA 
implemented three additional controls exclusively for its dual-agency 
firms. These three controls are as follows: 

* First, all dual-agency personnel performing work in connection with 
an issued task order must execute--if directed by the National 
Contracting Officer--additional confidentiality agreements, 
nondisclosure agreements, or other documentation deemed necessary to 
protect the proprietary nature or confidentiality of information 
related to the task order. 

* Second, a dual-agency firm must immediately notify the National 
Contracting Officer of any conflicts of interest discovered during the 
performance of work. 

* Third, a dual-agency firm must include a conflict-of-interest clause 
in all of its subcontracts. 

While GSA imposed these controls exclusively on the dual-agency firms, 
none of the controls address situations uniquely faced by these firms. 
For example, individuals within a tenant-only firm could also discover 
a conflict of interest after completing their conflict-of-interest and 
nondisclosure statements, which are required within 3 working days of 
receiving a task order from GSA. In addition, because a tenant-only 
firm could also subcontract with a dual-agency firm or be a 
subcontractor for a dual-agency firm, the need for a special 
confidentiality agreement or a nondisclosure agreement is also 
applicable to both types of firms. In March 2006, GSA's legal counsel 
agreed that the controls are applicable to GSA's tenant-only firms, but 
noted that the omission of the additional requirements in the contracts 
is of "low risk to the overall successful implementation of the [NBS] 
program" because there are numerous contractual and noncontractual 
remedies if a firm fails to report a potential or actual conflict of 
interest. The contractual remedies include the right to terminate a 
task order, or the contract as a whole, and to have the work redone by 
another broker at the original broker's expense. The noncontractual 
remedies include debarment or even criminal sanctions if,[Footnote 29] 
for example, a broker's actions violate the False Claims Act.[Footnote 
30] GSA officials further noted that brokerage firms have other reasons 
to properly disclose potential conflicts. They explained that, in their 
view, it is difficult for firms to hide potential conflicts because the 
existence of a conflict will eventually surface during the procurement 
process.[Footnote 31] NBS program officials also noted that as long as 
GSA's task orders are distributed as equally as possible among the 
brokers--as is initially required under the contracts--the brokers do 
not have an incentive to avoid disclosing potential conflicts.[Footnote 
32] Nevertheless, GSA agreed to include all of the dual-agency conflict-
of-interest requirements in its contracts with the tenant-only 
firms.[Footnote 33] The contracts allow GSA to issue change orders, 
which unilaterally modify the contracts, and GSA indicated that it 
planned to do so "as quickly as possible and in concert with other 
priority issues requiring its attention." As of October 31, 2006, the 
contracts had not been modified. 

GSA Confirmed the Existence of the Dual-Agencies' Conflict Walls, but 
Had Not Assessed Their Adequacy: 

In October 2005, GSA preliminarily inspected the conflict walls at its 
two dual-agency brokerage firms, as the NBS contracts allow. A team of 
four GSA staff, including GSA's Public Buildings Service Information 
System Security Manager, conducted the inspections, which GSA called 
"site compliance visits." According to GSA officials, these visits were 
the "first step" toward a full evaluation of the firms' compliance with 
GSA's conflict wall requirements. Site compliance visits are intended 
to validate and ensure that security controls are in place for properly 
safeguarding federal information managed by contractors. However, 
because of time constraints, the scope of GSA's review was limited to 
visual observations and interviews with on-site broker personnel. GSA 
recorded its observations, indicating that the brokers had physical 
controls, such as electronic access badges and cabinets with locks and 
keys, to restrict access to GSA's procurement-sensitive information and 
had electronic controls to help prevent unauthorized access to files 
and folders contained on the brokers' file servers.[Footnote 34] 

While GSA confirmed that the brokers have electronic and physical 
controls (i.e., a conflict wall) to help prevent the sharing of 
information among broker employees, it had not assessed whether the 
controls were adequate to preclude unauthorized information 
sharing.[Footnote 35] Nevertheless, GSA recommended, among other 
actions, that the brokers consider implementing the following four 
additional electronic controls: 

* Apply "applicable" federal standards to ensure that (1) the brokers' 
servers are more secure and (2) applicable security controls are in 
place.[Footnote 36] 

* Implement controls such as folder-level or file-level encryption to 
limit access to GSA's procurement-sensitive information. 

* Evaluate and modify access controls in accordance with the defined 
roles and responsibilities of each user to help ensure that users have 
access only to the information they need to conduct GSA's business. 

* Avoid the use of shared accounts, and enforce accountability of 
activities performed by users.[Footnote 37] 

According to NBS program officials, they discussed issues related to 
GSA's preliminary inspections with GSA's Information Security Manager 
on various occasions, including whether the recommendations "were 
appropriate to apply to NBS because some of those requirements were not 
specifically required" by the contracts. At the completion of our 
review, GSA had neither resolved this issue nor taken action to help 
ensure that it could require the two dual-agency NBS firms to implement 
its inspection recommendations. In addition, although GSA performed 
follow-up visits with the two dual-agency firms in early August 2006, 
these visits also did not assess the adequacy of the brokers' conflict 
wall controls.[Footnote 38] 

GSA Had Not Assessed Whether NBS Program Controls Satisfy Federal 
Requirements for Safeguarding Information and Information Systems: 

GSA also had not assessed whether NBS program controls satisfy federal 
requirements for safeguarding information and information systems. 
FISMA requires each federal agency to develop, document, and implement 
an agencywide information security program to protect information and 
information systems used or operated by contractors on behalf of an 
agency. This security program is intended to provide assurance that 
contractors and others are protecting the information and information 
systems in a manner commensurate with the risk level assigned to the 
information and systems by the agency. To comply with FISMA, GSA and 
other federal agencies must periodically assess the risk and magnitude 
of harm that could result from unauthorized access to, or use, 
disclosure, disruption, modification, or destruction of, (1) 
information collected or maintained by, or for, the agency and (2) 
information systems used or operated by the agency or by another 
entity, such as a contractor, for the agency. Agencies also must 
develop risk-based policies and procedures for reducing its security 
risks to an acceptable level. Such policies and procedures must 
identify and prescribe appropriate controls for safeguarding 
information--of varying sensitivity--as well as information systems, 
such as those containing procurement-sensitive information. 
Furthermore, after establishing the risk level of various types of 
information and the controls applicable to each, an agency must 
periodically test the effectiveness of its information security 
policies, procedures, and practices to ensure that its employees and 
other users, such as contractors, are safeguarding its information 
appropriately.[Footnote 39] 

FISMA's requirements are similar to GSA's conflict wall requirements in 
that they call for establishing physical and electronic controls to 
safeguard agency information. However, FISMA's requirements differ from 
GSA's in that they are risk-based, can apply to information systems as 
well as information supplied by GSA or collected for GSA, and are 
applicable to contractors who act on GSA's behalf--not just the two NBS 
dual-agency brokers. In addition, GSA's contracts with the NBS brokers 
allow GSA to inspect the dual-agency brokers' conflict wall controls to 
assess whether they comply with contract requirements; 
whereas, FISMA requires agencies to periodically test--at least 
annually--their information security controls.[Footnote 40] Depending 
on the outcome of the agency's annual risk assessment, the requirement 
for testing may also apply to the NBS brokers. 

In February 2006, NBS program officials, including the National 
Contracting Officer, acknowledged that FISMA is applicable to the NBS 
program, but noted that GSA's contracts with the brokers do not include 
language requiring the brokers to comply with FISMA. At that time, the 
National Contracting Officer noted that he can unilaterally modify the 
contracts to add the appropriate requirements. However, before he 
proceeded, he said, GSA would need to determine, among other actions, 
how the contractors are using information and information systems on 
its behalf as well as what risk levels are appropriate to the 
information and systems involved. As of October 31, 2006, GSA had not 
completed these actions and had not incorporated the appropriate 
controls into its contracts to help ensure the brokers' compliance with 
FISMA, including those related to periodic testing. Moreover, GSA had 
not budgeted for or scheduled any type of FISMA assessment of the NBS 
program. 

GSA officials also provided two other reasons why GSA had not assessed 
the four brokers. First, in February 2006, GSA officials, including 
GSA's Information System Security Manager, told us that they were 
unaware that FISMA requirements apply to information that is either 
supplied by GSA or collected by the four brokers for use on GSA's 
behalf. Consequently, GSA had not assessed the risk and magnitude of 
harm that could arise from unauthorized access to, or use, disclosure, 
disruption, modification, or destruction of, the information, including 
GSA's procurement-sensitive information.[Footnote 41] According to the 
Security Manager, GSA inspected the two dual-agency firms to get a 
basic understanding of their conflict walls and, therefore, did not 
assess the adequacy of the brokers' controls for safeguarding GSA's 
information under FISMA. Furthermore, GSA had not inspected any aspect 
of the controls employed by the two tenant-only firms to safeguard 
GSA's information. 

Second, regarding FISMA's requirements to test, as appropriate, 
information systems used or operated by the brokers on behalf of GSA, 
GSA's Security Manager told us that GSA intends to assess the adequacy 
of the brokers' controls after the brokers gain access to e-Lease. As 
of February 2006, the assessments were not yet contemplated, because 
the brokers still did not have access to GSA's electronic interface. 
NBS officials explained that while GSA had anticipated that the brokers 
would have access to e-Lease by March 31, 2006, delays had occurred, in 
part, because of a governmentwide backlog in completing a federal 
security verification process required for contractors who have access 
to federal facilities and information systems. Now that the brokers are 
obtaining access to e-Lease, they said they plan to use e-Lease as a 
"catalyst" for incorporating FISMA-related controls into each of the 
NBS contracts prior to the next contract year.[Footnote 42] Although 
FISMA's testing requirements for electronic interfaces with agency 
information systems did not apply until the brokers had access to e- 
Lease, it is important to note that FISMA's requirements for ensuring 
the adequacy of controls for safeguarding (1) GSA's information and (2) 
information systems, including broker controls--as appropriate to the 
agency's assessment of the risk--have been applicable since April 2005, 
when performance began under the contracts. 

Brokers Will Be Compensated through Commissions Paid by Building 
Owners, but Controls for Minimizing the Government's Rental Costs Are 
Insufficient: 

GSA is using commissions paid by building owners to compensate its 
brokers, as is typical in the commercial real estate industry. GSA's 
compensation approach has evolved over time and, according to GSA, is 
the most sensible and cost-effective option for acquiring needed real 
estate services. Under the NBS contracts, GSA expects building owners 
to pay commissions and requires them to do so if they are offering a 
commission to their listing agent or broker. The cost of commissions is 
factored into the rent paid by tenant agencies. GSA has no obligation 
to pay its brokers--even if a building owner does not offer a 
commission to the brokers. Because the vast majority of GSA's leasing 
transactions issued through March 31, 2006--the end of the first year 
of the contracts--had not been completed, GSA has little information 
about the number of transactions that may not result in commission 
payments. NBS program officials are aware of the potential for conflict 
between the brokers' interest in receiving higher commission rates and 
the government's interest in acquiring the most suitable leased space, 
including its interest in cost matters. As a result, GSA has developed 
controls to help prevent such a conflict; however, the controls do not 
adequately mitigate the inherent conflict of interest created by 
allowing the brokers to represent the government while also negotiating 
their commissions. Absent additional controls, GSA has insufficient 
assurance that the brokers will not increase the government's rental 
costs by favoring building owners who offer them higher commissions. 

GSA's Compensation Approach Is Typical in the Commercial Real Estate 
Industry: 

Under the terms of their contracts with GSA, the four NBS brokers have 
an opportunity to obtain substantial payments for their services by 
collecting real estate commissions that building owners typically pay 
to tenant representatives (brokers).[Footnote 43] The brokers are 
expected to negotiate a market-based commission with a building owner 
on the basis of the firm term of each lease, generally 5 
years.[Footnote 44] The brokers cannot earn commissions for market 
research (market data task orders)--a service associated with acquiring 
leases--but are allowed to earn commissions for: 

* other lease acquisition services, 

* lease expansions, 

* and lease extensions. 

Like GSA, representatives of the vast majority of the large, private 
companies; state agencies; and other federal agencies we interviewed 
that contract for leasing services said they typically use building 
owner commissions to compensate their brokers. The only exception was 
the United States Postal Service, which paid fees directly to its 
brokers for leasing services. Although the Postal Service did not use 
building owner commissions to pay its brokers, it was considering doing 
so in the future. Similarly, representatives from the nine nationwide 
brokers we interviewed told us that they are generally compensated 
through commissions paid by building owners. Brokers are not normally 
paid for their market data but, according to representatives from the 
majority of the 10 public-and private-sector entities we interviewed 
that contract for leasing services, the payment of building owner 
commissions for other leasing services is a common and long-standing 
industry practice.[Footnote 45] 

GSA's Compensation Approach Evolved over Time: 

GSA modified its method of compensating brokers from a public-sector to 
a private-sector approach in 2004 when it switched its source of 
compensation from appropriated funds to building owner commissions. 
According to GSA's 2003 analysis for entering into the NBS contracts, 
the revised compensation approach is the "most sensible and cost 
effective option" for securing additional realty resources in view of 
GSA's expanding workload and diminishing in-house capacity.[Footnote 
46] The revised approach differs from the approach GSA used under its 
previous contracts for leasing services. Under its prior contracts, GSA 
(1) paid real estate brokers a fee from appropriated funds in exchange 
for a variety of lease acquisition and other services and (2) 
prohibited brokers from receiving compensation related to GSA's leasing 
transactions from any other sources.[Footnote 47] To minimize the legal 
issues involved if, for example, the government tried to collect 
commissions itself, GSA instructed the brokers to ensure that building 
owners reduced their rental rates by the value of the uncollected 
commissions. However, this approach was not considered effective 
because of the perception that some building owners were continuing to 
factor the cost of unpaid commissions into the rent charged to GSA's 
tenants. This concern led GSA to ask its General Counsel how it could 
recover and retain commissions paid by building owners. In a May 1999 
opinion, GSA's General Counsel concluded that "GSA may modify the 
contract[s] to provide that any commission offered to the broker should 
be accepted and rebated to GSA. GSA should then credit the 
appropriation used to pay the broker[s] under the contract[s]." GSA 
implemented the advice in 2000 when it modified the contracts and 
instructed the brokers to recapture commission fees on behalf of GSA. 

GSA's payment approach evolved further in 2003 when the agency 
contemplated using "no-cost" contracts for the NBS contracts.[Footnote 
48] Under the proposed contracts (and as awarded), brokers would 
represent GSA's interests in lease acquisition and related services and 
receive commissions from building owners, in accordance with industry 
practices, instead of direct payments from GSA. To ensure that such a 
compensation approach would not improperly augment GSA's 
appropriation,[Footnote 49] GSA asked the Comptroller General of the 
United States for a formal legal opinion on this matter.[Footnote 50] 
The General Counsel of GAO, who responded for the Comptroller General, 
concluded that GSA could enter into the proposed contracts with real 
estate brokers without augmenting its appropriations, since the 
proposed contracts did not contemplate the government receiving funds 
from the brokers.[Footnote 51] 

GSA Requires Commissions Payments in Certain Circumstances: 

In signing their contracts with GSA, the four brokers agreed to provide 
real estate services and to represent GSA in specific task orders 
issued by GSA. The brokers further agreed to be compensated by 
collecting commissions typically paid by building owners in the private 
sector. To assist its brokers in collecting commissions, on July 3, 
2006, GSA issued a policy directive requiring building owners to pay a 
commission to GSA's broker if the owners were paying a commission to 
their listing agent or broker.[Footnote 52] According to the directive, 
if a building owner intends to pay its broker a commission or fee and 
submits its final offer without offering a commission to GSA's broker, 
the offer must be rejected as technically unacceptable. However, if a 
building owner does not include a commission to the broker on either 
side of the transaction, the offer would be acceptable, unless other 
issues preclude GSA from accepting the offer. GSA will not pay its 
brokers under any circumstance, even if a building owner does not offer 
a commission to either broker. For its part, GSA has agreed not to 
issue task orders to brokers when GSA knows that they will not result 
in a commission. Consequently, GSA performs leasing transactions 
involving Indian tribes; airport authorities; and government entities 
(state, city, or local municipalities) in-house because these entities 
do not pay broker commissions. Furthermore, because building owners in 
rural markets are considered less likely to pay commissions, according 
to GSA's November 2005 guide for administering the contracts, GSA may 
elect not to issue task orders for particular rural markets if, through 
experience, it establishes a history of unpaid commission in those 
markets. 

Too Few Task Orders Have Been Completed to Determine the Extent of 
Unpaid Commissions, but the Risk Appears to Be Limited: 

According to the four NBS brokers, they were aware that commissions 
might not always be paid when they competed for their contracts. Such 
risk, they said, is a common feature of their large corporate accounts. 
The brokers explained that they accepted the risk of unpaid commissions 
because they anticipated that (1) these situations would be rare and 
(2) the volume of government business would compensate them for any 
isolated losses. Furthermore, while the brokers knew that building 
owners would not always offer a commission--particularly for leased 
space in rural markets--their past payment experience indicated that 
they usually collected commissions regardless of the market involved. 
The brokers' experience together with GSA's July 2006 requirement that 
building owners pay GSA's brokers if they intend to pay their own, 
suggests that the brokers' risk of financial loss is limited. 

Because the vast majority of the task orders issued through March 31, 
2006, had not been completed, GSA and the four brokers had little 
actual experience for estimating how many task orders would not result 
in commission payments. Typically, it takes at least 1 year from the 
initiation of a task order to the final agreement on the terms of a 
lease, including agreement on the final amount of any commission that 
will be paid.[Footnote 53] As of March 31, 2006, 11 of the 479 task 
orders issued by GSA and eligible for a commission had been completed. 
According to the National Contracting Officer, the building owner did 
not offer a commission on 1 of the 11 task orders--an expedited lease 
extension--because it required minimal effort to complete. The 
remaining 10 completed tasks, involving about 460,000 square feet of 
leased space, resulted in about $1.2 million in commission payments 
from building owners. However, as discussed in more detail later in 
this report, the brokers are entitled to only a portion of this amount-
-about $960,000, while the government is to receive the remainder in 
the form of commission credits. Table 1 provides a breakdown of issued 
task orders, including the number that resulted in a commission as of 
March 31, 2006. Table 2 provides data on the total amount of 
commissions accrued by the NBS brokers as of that date.[Footnote 54] 

Table 1: Number of Task Orders Issued and Completed, Including Those 
Eligible for a Commission Payment, as of March 31, 2006: 

Description: Number of task orders issued[A]; 
Number of task orders: 544. 

Description: Commission-eligible task orders issued[B]; 
Number of task orders: 479. 

Description: Completed task orders; 
Number of task orders: 76. 

Description: Completed commission-eligible task orders[B]; 
Number of task orders: 11. 

Description: Completed commission-eligible task orders that resulted in 
a commission payment; 
Number of task orders: 10. 

Source: GAO analysis of GSA data. 

[A] Represents all task orders issued, regardless of type. 

[B] Excludes 65 task orders for market data, all of which had been 
completed as of March 31, 2006. However, as previously discussed, 
brokers do not earn commissions for these services. 

[End of table] 

Table 2: Total Commission Payments Accrued by Each NBS Broker, as of 
March 31, 2006: 

Broker: Broker A; 
Commissions accrued[A]: $0.00. 

Broker: Broker B (2 task orders); 
Commissions accrued[A]: 575,111.62. 

Broker: Broker C (4 task orders); 
Commissions accrued[A]: 374,038.91. 

Broker: Broker D (4 task orders); 
Commissions accrued[A]: 11,113.60. 

Total; 
Commissions accrued[A]: $960,264.13. 

Source: GAO analysis of GSA data. 

[A] The commission data provided by GSA officials were taken from the 
brokers' monthly reports of commissions accrued, but not necessarily 
paid, as of March 31, 2006. 

[End of table] 

GSA Has Controls That May Help, but Are Not Sufficient, to Prevent 
Brokers from Favoring Building Owners Who Offer Excessive Commissions: 

NBS program officials recognize that the brokers' interest in receiving 
higher commission rates conflict with the government's interest in 
acquiring the most suitable leased space. As a result, GSA has 
developed controls to help prevent the brokers from favoring building 
owners who offer higher commissions. These controls include oversight 
by GSA's contracting officer's technical representatives (COTR), the 
establishment of a commission review board, and a contracted study on 
commission rates in major markets. Although these controls may help to 
prevent the brokers from promoting and negotiating offers that include 
excessive commission payments, they do not altogether preclude improper 
actions. 

GSA requires its COTRs to oversee all of the activities the brokers 
perform on behalf of GSA, from developing the solicitation for lease 
offers to negotiating a lease. One important activity is determining 
the commission rate appropriate to each leasing transaction. Early in 
each task order, the broker provides the COTR with a set of negotiating 
objectives, including the broker's assessment of the typical commission 
rate appropriate to the particular task and market. Using market 
knowledge and commercial data sources on applicable market commissions, 
the COTR approves or disapproves the commission rate (and the other 
negotiation objectives) proposed by the broker. Each broker must 
include the approved commission rate in its commission agreement, which 
is included in GSA's solicitation for offers. The broker then provides 
the solicitation to building owners who may be able to meet the 
government's needs and negotiates a lease agreement with the building 
owner. According to NBS program officials, offers with excessive 
commission rates may be rejected. Ultimately, GSA signs the lease, and 
both the broker and the building owner are required to report to GSA 
all commissions paid. 

At the conclusion of our review, GSA was establishing a board of GSA 
subject matter experts to function as a resource to, among other 
things, help ensure that the brokers' commission rates are reasonable. 
According to NBS program officials, this resource is currently 
available to GSA's COTRs through the National Program Manager who, upon 
request, consults with senior GSA regional real estate experts on the 
appropriate commission rate for a particular market. In addition, GSA 
contracted for a study of applicable commission rates in major markets 
to provide additional information for assessing the reasonableness of 
its brokers' commissions. 

These three controls may help to prevent the NBS brokers from 
improperly favoring building owners who are willing to pay higher 
commissions; however, in our view, these controls are not sufficient. 
Specifically, although excessive commissions are subject to 
negotiation, according to NBS program officials, including the 
Assistant Commissioner of GSA's Office of National Customer Services 
Management, the NBS brokers are allowed to negotiate commissions in 
excess of those specified in GSA's solicitations for offers. According 
to these officials, GSA does not want to influence commercial real 
estate markets by specifying a maximum commission rate in its 
solicitations to building owners. 

Although GSA does not want to influence commercial real estate markets, 
as previously discussed, the FAR requires each agency to avoid or 
mitigate any conflict of interest, or even the potential of a conflict, 
in its business relationships. Allowing the NBS brokers to represent 
the government while negotiating their commissions, creates, by design, 
an inherent conflict between the brokers' interest in promoting and 
negotiating higher commissions and their responsibility to effectively 
represent GSA's interest in selecting properties that best meet the 
government's needs, including its cost needs.[Footnote 55] Although GSA 
describes the NBS contracts as "no-cost" contracts because the brokers 
are not paid directly by the government, the brokers' commissions are 
factored into the rent the government will eventually pay. Thus, by 
leaving the brokers free to negotiate their commissions with building 
owners, GSA empowers them to favor owners who will pay the highest 
commissions, thereby potentially increasing the government's cost. If 
GSA chooses not to specify maximum commission rates on the basis of 
local market conditions in its solicitations for offers, GSA must find 
an alternative approach to mitigate this inherent conflict of interest. 
One possible approach would be to prohibit the brokers from accepting a 
commission in excess of the rate approved by the applicable COTR and 
included in GSA's solicitation for offers. Such an approach would 
remove the NBS brokers from the negotiation process and, thus, mitigate 
the existing conflict. 

Other Entities Generally Did Not Require or Pay Commissions and Had 
Controls on Commission Rates, but Some Variation Existed: 

The majority of the 10 public-and private-sector entities we 
interviewed that contract for leasing services did not require building 
owners to pay commissions. The Postal Service negotiated and paid fees 
directly to its brokers, regardless of whether a building owner would 
have paid. Two of the remaining 9 entities--New York and Michigan-- 
required building owners to pay commissions to their brokers; the 
remaining 7 did not. Four of the 7 entities that neither paid their 
brokers directly nor required building owners to pay--the Department of 
Veterans Affairs; California; Florida; and 1 large, private company 
(company #1)--also did not compensate their broker if the building 
owner did not pay a commission.[Footnote 56] Officials from the 3 
remaining entities--the Federal Deposit Insurance Corporation (FDIC) 
and 2 large, private companies (companies #2 and #3)--noted that 
building owners generally paid commissions, but that if they did not, 
their entities would be willing to pay or had paid their 
brokers.[Footnote 57] Table 3 identifies each entity's payment 
approach. 

Table 3: Payment Approach Used by the 10 Public-and Private-Sector 
Entities That Contracted for Leasing Services: 

Federal entity. 

Entity that contracted for leasing services: United States Postal 
Service; 
Paid fees directly to its broker: x; 
Paid brokers through commissions from building owners: [Empty]; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: Department of Veterans 
Affairs; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: x; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: Federal Deposit Insurance 
Corporation; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: x. 

State entity. 

Entity that contracted for leasing services: California; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: x; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: Florida; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: x; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: Michigan; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: x; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: New York; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: x; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Private company. 

Entity that contracted for leasing services: Private company #1; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: x; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: [Empty]. 

Entity that contracted for leasing services: Private company #2; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: x. 

Entity that contracted for leasing services: Private company #3; 
Paid fees directly to its broker: [Empty]; 
Paid brokers through commissions from building owners: x; 
Required building owners to pay commissions: [Empty]; 
Did not pay their broker if the building owner did not provide a 
commission: [Empty]; 
Would be willing to pay or had paid their broker if the building owner 
did not provide a commission: x. 

Source: GAO. 

[End of table] 

Finally, excluding the Postal Service, which negotiated and paid fees 
directly to its brokers,[Footnote 58] 7 of the remaining 9 entities had 
controls to prevent their brokers from favoring building owners that 
offer higher commissions. Four of the 7 entities--California, Florida, 
Michigan, and New York--specified commission rates or maximum 
commission rates in their contracts with their brokers, while officials 
from the FDIC said that they were directly involved in negotiations 
between their brokers and building owners to protect their financial 
interests. Officials from 1 entity--the Department of Veterans Affairs-
-said that the department is directly involved in negotiations, and 
that it specifies a maximum commission rate in its contracts with its 
brokers. One large, private company required its broker to obtain 
approval of the commission rate before starting work on a transaction. 
By contrast, officials from the remaining 2 entities--both large, 
private companies--did not identify any specific controls in this area. 

GSA Does Not Know What, If Any, Savings Have Resulted Largely Because 
It Has Not Developed Processes for Quantifying Most of the Anticipated 
Savings: 

In 2003, GSA developed its business analysis for entering into the NBS 
contracts and concluded that the contracts represented the best option 
available to GSA, in part, because of the variety of savings that it 
expected to accrue from the contracts.[Footnote 59] In particular, GSA 
expected reductions in rent from commission credits, which apply to 
most, but not all of the services rendered by the brokers, and from the 
brokers' greater knowledge of the commercial real estate market. In 
addition, GSA expected to reduce its payments for contract fees and 
administration costs associated with its previous contracts for leasing 
services and to avoid personnel costs by shifting its leasing workload 
to the NBS brokers instead of hiring additional staff (realty 
specialists) to perform these leasing tasks in-house. GSA subsequently 
identified further tasks for its realty specialists, however, and now 
believes that it must maintain an adequate (but unspecified) number of 
these personnel to oversee the NBS brokers. It is unclear how GSA's 
change in view will affect its future personnel levels and long-term 
costs. As of October 31, 2006--except for savings related to commission 
credits--GSA had not developed processes for quantifying the savings. 
Until such time as it does, GSA will not know whether, or to what 
extent, savings have resulted. 

GSA Expected Reductions in Rent from Commission Credits: 

In responding to GSA's solicitation, each broker was required to 
specify the percentage of its commissions from building owners that it 
would forgo to do business with the government. Such credits apply to 
most, but not all, of the services rendered by the brokers. For 
example, the government does not receive commission credits for tasks 
related to market data, since the brokers are not paid for these 
services. In addition, the brokers do not provide commission credits 
for expedited lease transactions if the transactions are completed 
within specified time frames.[Footnote 60] Finally, commission credits 
are not applicable if a building owner does not pay broker commissions. 

GSA required the NBS brokers to specify the percentage of their 
commission that they would credit to the government for each year of 
the contract. For the first year of the contract--the base year--the 
four brokers agreed to forgo between 26.0 percent and 51.5 percent of 
any commissions offered by building owners for applicable leasing 
transactions. Two of the brokers specified constant rates, while the 
other two offered to increase the percentage of their commission credit 
over time if GSA elected to extend its contracts with them. Table 4 
identifies the percentage of commission credit offered by each of the 
four NBS brokers, by contract period. 

Table 4: Percentage of Commission Credit, by NBS Broker and Contract 
Period: 

Jones Lang Lasalle: [Empty]. 

NBS broker: Jones Lang Lasalle; 
Percentage of commission credit, by contract period: Base year of 
contract--: Year 1[A]: 26.0%; 
Percentage of commission credit, by contract period: Year 2[B]: 28.0%; 
Percentage of commission credit, by contract period: Year 3[C]: 30.0%; 
Percentage of commission credit, by contract period: Year 4[D]: 32.0%; 
Percentage of commission credit, by contract period: Year 5[E]: 34.0%. 

NBS broker: The Staubach Company-Northeast; 
Percentage of commission credit, by contract period: Base year of 
contract--: Year 1[A]: 31.0; 
Percentage of commission credit, by contract period: Year 2[B]: 31.0; 
Percentage of commission credit, by contract period: Year 3[C]: 31.0; 
Percentage of commission credit, by contract period: Year 4[D]: 31.0; 
Percentage of commission credit, by contract period: Year 5[E]: 31.0. 

NBS broker: Julien J. Studley, Inc; 
Percentage of commission credit, by contract period: Base year of 
contract--: Year 1[A]: 51.5; 
Percentage of commission credit, by contract period: Year 2[B]: 51.5; 
Percentage of commission credit, by contract period: Year 3[C]: 51.5; 
Percentage of commission credit, by contract period: Year 4[D]: 51.5; 
Percentage of commission credit, by contract period: Year 5[E]: 51.5. 

NBS broker: Trammell Crow Services, Inc; 
Percentage of commission credit, by contract period: Base year of 
contract--: Year 1[A]: 37.0; 
Percentage of commission credit, by contract period: Year 2[B]: 37.0; 
Percentage of commission credit, by contract period: Year 3[C]: 38.0; 
Percentage of commission credit, by contract period: Year 4[D]: 39.0; 
Percentage of commission credit, by contract period: Year 5[E]: 40.0. 

Source: GAO analysis of GSA data. 

[A] The base year (year 1) of the contract ran from April 1, 2005, to 
March 31, 2006. 

[B] Year 2 represents an option period for the contract year between 
April 1, 2006, and March 31, 2007. Options allow the government to 
extend the duration of a contract at its discretion. GSA elected to 
extend all of the NBS contracts for this period. 

[C] Year 3 represents an option to extend the contracts between April 
1, 2007, and March 31, 2008. 

[D] Year 4 represents an option to extend the contracts between April 
1, 2008, and March 31, 2009. 

[E] Year 5 represents an option to extend the contracts between April 
1, 2009, and March 31, 2010. 

[End of table] 

The amount of any applicable commission credit is calculated and 
evaluated when a broker, with oversight from GSA, evaluates the lease 
offers received from building owners in response to GSA's solicitation 
for offers. In these offers, building owners are required to specify 
the broker's commission, if any, as well as other information that the 
broker and GSA need for the evaluation, such as the lease term, square 
footage, parking availability, rent, and any allowance for requested 
tenant improvements. Using a worksheet provided by GSA, the broker 
enters information from all of the technically acceptable offers 
received and converts all of the cost information to their present 
value to ensure consistent cost comparisons.[Footnote 61] The broker 
then compares the offers, discusses them with the applicable COTR, and 
negotiates each offer with the appropriate building owner. If a 
building owner changes his or her offer, the broker must edit the 
information in the worksheet and recalculate the offer's present value. 
The broker compares the building owners' final offers and recommends 
what he or she considers to be the most-suitable leased space to GSA. 
If GSA accepts an offer that specifies a commission payment to GSA's 
broker,[Footnote 62] the tenant agency's rent is reduced by the amount 
of the commission credit--the percentage of the commission that each 
broker agreed to forgo. The commission credit is applied in the first 
month of the lease, or if the credit exceeds the tenant's monthly rent, 
it is applied in the early stages of the tenant's rental payments. 

Table 5 illustrates how commissions and commission credits are 
calculated. This example relates to the acquisition of about 378,000 
square feet of leased space during the first year of the NBS contracts. 
The basic rent for this transaction totaled about $49 million over the 
firm term of the lease and the commission rate negotiated between the 
broker and the building owner was 1.5 percent of the total basic 
rent.[Footnote 63] Thus, the building owner is required to pay about 
$730,400 in commissions. In entering into its contract with GSA; 
however, the broker who completed this task order agreed to return 26 
percent of its commission on each applicable task order (during the 
first year of its contract) in the form of a commission credit to the 
government, which, in this case, equals about $189,900. As previously 
discussed, commission credits are applied in the early stage of the 
tenant agency's monthly rent. Thus, approximately $189,900 is to be 
used to offset the tenant's first month's rent of about $811,600. After 
deducting the commission credit from the total commission payable by 
the building owner, this broker accrued a commission of about $540,500. 

Table 5: Example of How Commissions and Commission Credits Are 
Calculated: 

A: Basic rent for the firm term: $48,696,180; 
B: Monthly rent: $811,603; 
C: Commission rate: 1.5%; 
D: Total commission payable by the building owner: (A x C): 
$730,443[A]; 
E: Percentage of commission that the broker agreed to credit to the 
government: 26.0%; 
F: Commission credit payment: (D x E): $189,915[A]; 
G: Commission payable to the broker: (D - F): $540,528[A]. 

Source: GAO analysis of GSA data. 

[A] Calculations are rounded to the nearest dollar. 

[End of table] 

On the basis of information we obtained from representatives of the 9 
nationwide brokers and 10 public-and private-sector entities we 
interviewed that contract for real estate services, commission credits 
are common in the commercial real estate industry. For example, 2 of 
the 10 public-and private-sector entities--California and New York-- 
either required or had required their brokers to forgo a portion of 
their commissions for use as commission credits. Two other entities-- 
both large, private companies--required commission credits after their 
broker had completed a specified volume of leasing transactions. In 
addition, although the FDIC, the Department of Veterans Affairs, and 
Michigan did not require credits, they had accepted them in the past. 
The only exceptions to these practices involved a large, private 
company; Florida; and the Postal Service, which did not accept 
commission credits and had not accepted them in the past. 

GSA Has Processes in Place to Quantify and Verify Savings from 
Commission Credits, but Data on These Savings Are Limited: 

GSA has processes in place to quantify savings from commission credits 
and to verify that the credits are properly calculated and applied. 
First, as previously discussed, GSA requires the NBS brokers, using a 
worksheet supplied by GSA, to calculate the (1) present value of all 
technically acceptable offers received (all initial and subsequent 
offers) as well as (2) any associated commission credit applicable to 
the offers. Each of these calculations must be verified and approved by 
two GSA employees, including the COTR. Once GSA accepts an offer, the 
broker includes the amount of any approved commission credit in GSA's 
leasing agreements with the successful building owner. Such agreements 
specify, among other things, the amount of any applicable commission 
payable; the terms of payment by the building owner; including the 
amount of the rent reduction resulting from the credit, and any other 
applicable terms and conditions. Second, a regional contracting 
official enters the commission and the amount of the approved 
commission credit into GSA's e-Lease system for tracking. Third, the 
brokers are required to submit monthly reports to GSA's National 
Contracting Officer that, among other things, specify the percentage 
and dollar amount of the commission credited to the government in the 
form of a rental reduction. According to the National Contracting 
Officer, the brokers' reports are used to cross-check the accuracy of 
GSA's information. Finally, GSA has begun conducting random file checks 
as part of its peer reviews to, among other things, further ensure that 
the commission credit calculations are accurate and that tenant rents 
are reduced by the proper amounts. 

Although GSA quantifies savings from commission credits, little 
information is available on the amount of these savings because work on 
the vast number of task orders issued in the first year of the 
contracts had not progressed far enough for the commissions to be paid. 
As discussed, the multistep leasing process can take between 1 and 4 
years to complete, and it is not until the end of the process that the 
broker finalizes the amount of any applicable commission and commission 
credit in GSA's lease agreement with a building owner. As previously 
discussed, the brokers had completed 11 task orders with the potential 
for a commission payment as of March 31, 2006. However, only 7 of these 
11 task orders were for services that are also eligible for a 
commission credit. The 7 completed task orders resulted in about 
$216,000 in reduced rental payments for approximately 417,000 square 
feet of leased space. The remaining 4 task orders involved expedited 
lease transactions that, if completed on time, do not result in a 
commission credit to the government.[Footnote 64] Table 6 provides a 
breakdown of issued task orders, including the number that resulted in 
a commission credit, as of March 31, 2006. 

Table 6: Number of Task Orders Issued and Completed, Including Those 
Eligible for a Commission Credit, as of March 31, 2006: 

Description: Task orders issued[A]; 
Number of task orders: 544. 

Description: Task orders issued and eligible for a commission 
credit[B]; 
Number of task orders: 463. 

Description: Completed task orders[C]; 
Number of task orders: 76. 

Description: Completed task orders that were eligible for a commission 
credit[D]; 
Number of task orders: 7. 

Description: Completed commission-eligible task orders that resulted in 
a commission credit; 
Number of task orders: 7. 

Source: GAO analysis of GSA data. 

[A] Represents all task orders issued, regardless of type. 

[B] Excludes 65 task orders issued for market data, which are performed 
free of charge, and 16 task orders for expedited leasing transactions. 
The government does not earn a commission credit for expedited leasing 
transactions, if the transactions are completed within specified time 
frames. 

[C] Includes 65 completed task orders for market data. 

[D] Excludes 65 completed task orders for market data and 4 completed 
expedited leasing transactions. 

[End of table] 

GSA Also Anticipated Rent Reductions from the Brokers' Greater 
Knowledge of Commercial Real Estate Markets, but Has Not Developed 
Processes for Quantifying These Savings: 

According to NBS program officials, GSA anticipated further rent 
reductions from the brokers' increased knowledge of the commercial real 
estate market, which the officials indicated was greater than that of 
its own realty specialists because the brokers are "in the market" more 
often. NBS program officials explained that commercial brokers have 
greater exposure to real estate markets than that of its realty 
specialists. More specifically, they said that GSA's realty specialists 
see only those offers that are provided in response to its 
solicitations for space offers, whereas commercial brokers seek out 
potential spaces and rates offered by all building owners--not just 
those offered to GSA. NBS program officials expect that the NBS brokers 
will use their greater knowledge and market exposure to expand the list 
of potential offerors and to negotiate more favorable rental rates for 
the government. According to NBS program officials, GSA plans to 
compare the brokers' negotiated rental rates with information available 
from industry data sources to assess the reasonableness of the brokers' 
rates on each NBS task order for lease acquisitions. In addition, GSA 
intends to compare the brokers' negotiated rates with those negotiated 
by its realty specialists to determine whether the NBS brokers are 
achieving lower rental rates. Although GSA has plans to quantify 
expected savings associated with the brokers' greater market knowledge 
and exposure, as of October 31, 2006, it had not developed processes 
for doing so. 

GSA Anticipated Further Savings from Reductions in Agency Costs, but 
Also Has Not Developed Processes for Quantifying the Expected Savings: 

Besides savings from lower rents, GSA's 2003 business analysis for 
entering into the NBS contracts indicated that its costs for (1) fees, 
(2) administration expenses, and (3) personnel would decline because 
its former contracts for leasing services had expired and its leasing 
workload would increasingly be shifting to the NBS contracts. First, 
GSA anticipated reductions in fees associated with the prior contracts. 
According to GSA's analysis, in 2003, it had 29 fixed price contracts 
in place, under which GSA compensated the brokers through fees. 
According to GSA, 20 of these 29 contracts had fees ranging from 1.98 
percent to 5.0 percent of the total lease value.[Footnote 65] According 
to NBS program officials, GSA budgeted $5.0 million in broker fees for 
its contracts in fiscal year 2005 and $5.1 million for fees in fiscal 
year 2006. All of the prior contracts have expired and will not be 
renewed, according to NBS program officials. However, as of July 31, 
2006, an unspecified number of task orders issued before the expiration 
of these contracts were still incomplete due to the lengthy duration of 
some task order projects.[Footnote 66] As of July 31, 2006, according 
to NBS program officials, fees paid totaled about $32.6 million. When 
all of the remaining task orders under the previous contracts are 
completed--expected by about March 31, 2007, NBS program officials told 
us that they intend to assess the amount of expected savings resulting 
from the elimination of these fees. As of October 31, 2006, however, 
GSA had not developed procedures for quantifying these savings. 

Second, GSA expected that using the NBS contracts would significantly 
reduce its administrative expenses. According to GSA, the previous 
contracts had differing terms, conditions, and pricing structures, 
which led to contract administration problems, inconsistencies among 
its regional offices, and customer-relations problems with its tenant 
agencies. GSA also noted that the prior contracts did not provide for 
efficient monitoring and tracking of management and funding data. In 
December 2002, GSA's Inspector General reported that these contracts 
generated a significant administrative burden that was disproportionate 
to the value derived from them. By contrast, according to GSA, the four 
NBS contracts have, among other things, the same terms and 
conditions.[Footnote 67] GSA considers this uniformity a significant 
improvement that will simplify its oversight and administration of the 
contracts. In GSA's 2003 business analysis for entering into the NBS 
contracts, GSA estimated that the improvements gained by moving to the 
NBS contracts would reduce its administrative costs by approximately 75 
percent. The National Program Manager told us that GSA is developing 
processes to quantify these savings, but as of October 31, 2006, it had 
not yet done so. 

Finally, GSA expected to achieve further savings by hiring fewer realty 
specialists over time.[Footnote 68] Had the agency decided to perform 
all of its lease acquisition, management, and administration duties in- 
house, rather than move to the NBS contracts, GSA's 2003 business 
analysis indicated that it would have to (1) increase its staff of 450 
realty specialists by 300 as well as (2) replace those specialists who 
retired or left the agency for other reasons.[Footnote 69] According to 
GSA's 2003 analysis, entering into the NBS contracts would enable GSA 
to acquire needed resources, while avoiding the need to hire additional 
realty specialists. By July 2006, however, NBS program officials, 
including the Assistant Commissioner of GSA's Office of National 
Customer Services Management, no longer held this view. Specifically, 
these officials emphasized that, while the NBS contracts represent a 
"powerful tool to hand off much of their task-oriented transactional 
work to the brokers," GSA will need to maintain an adequate (but 
unspecified) number of realty specialists to oversee the NBS brokers. 
In addition, NBS program officials told us that, subsequent to GSA's 
development of its 2003 analysis, it had identified other, more 
strategic tasks for its realty specialists to perform, such as those 
related to improving its tenant agencies' satisfaction with the leasing 
process. According to these officials, having realty specialists 
perform more strategic tasks will result in agencywide operational 
efficiencies. Furthermore, NBS program officials told us that GSA is 
developing a new workload capacity model to assist senior managers in 
projecting GSA's future staffing requirements for realty specialists. 
Consequently, as of October 31, 2006, it was unclear (1) whether, or to 
what extent, previously expected savings from hiring fewer realty 
specialists would be realized or (2) whether, or when, GSA would be 
able to quantify savings from operational efficiencies associated with 
its use of the NBS contracts. 

GSA Distributed Its Initial Workload Fairly Equally, but Several 
Factors Have Slowed Its Transition to Performance-Based Allocations: 

According to the contracts, GSA is to distribute its initial leasing 
workload as equally as possible, unless a broker is performing 
unsatisfactorily. GSA's program guidance further indicates that the 
brokers are initially to receive equitable square footage distributions 
in each of GSA's 11 regions. Once a record of performance is available, 
the distributions are to be based on the brokers' performance. GSA 
originally expected to have a record of performance available by the 
end of the first contract year, but because of program delays and 
insufficient data, it postponed the transition to performance-based 
distributions. GSA now expects to begin performance-based distributions 
on April 1, 2007, the start of the third contract year, but it has not 
yet defined what constitutes a record of performance or developed 
procedures for performance-based distributions. According to our 
analysis of GSA's year-end data (which was delayed 5 months by problems 
with data reliability that we believe GSA has since addressed 
sufficiently for our reporting purposes), GSA initially distributed its 
task orders fairly equally among the brokers agencywide, but at the 
regional level, its distributions varied. Such variability is 
inconsistent with GSA's contract administration guide, but GSA 
considers the variability inevitable and, on the basis of our analysis, 
plans to modify the guide. We also found that GSA's distributions of 
task orders for market data and expedited leasing transactions varied 
among the brokers, potentially disadvantaging one or more brokers, and 
that GSA was not tracking information on its distribution of task 
orders by similar geographic location (e.g., rural or urban), as it 
would need to do to determine the equitability of its distributions by 
location. 

Workload Is to Be Distributed as Equally as Possible until a Record of 
the Brokers' Performance Is Available: 

Initially, the NBS contracts obligate GSA to distribute task orders to 
the four NBS brokers "as equally as possible," unless their performance 
is unsatisfactory. As specified in the contracts, until a record of 
performance is available, the brokers must be issued "similar size 
projects in similar geographic areas to the maximum extent possible 
within the [GSA's] existing workload available." The contracts further 
indicate that the brokers "should assume that the Government intends to 
have each awardee performing projects on a nationwide basis in both 
rural and urban areas," as long as performance is acceptable. In 
addition, GSA's November 2005 contract administration guide indicates 
that, until a performance record is established, distribution is to be 
based on square footage "with each firm receiving equal distribution in 
all eleven GSA regions and in all markets." Equal distribution of 
square footage is important because task orders for large projects are 
generally more profitable for the brokers than task orders for small 
projects. The requirement for equitable distribution applies to all 
task orders, including those for expedited leasing transactions and 
market data. For example, according to GSA's November 2005 
administration guide, task orders for market data "should be evenly 
distributed" among the brokers. Finally, once a record of performance 
is available, the contracts specify that GSA will distribute work among 
the brokers in accordance with their performance. 

Other contractual requirements also apply to GSA's distribution 
decisions, both initially and after the transition to performance-based 
distributions. First, the contracts allow GSA, when assigning work to 
the brokers, to consider the existence of a conflict of interest and a 
broker's specialized experience or knowledge. Second, under the terms 
of the contracts, GSA may consider the timeliness and quality of the 
brokers' work and can stop issuing task orders to a broker if the 
quality or timeliness of the broker's work "is endangering performance 
of any task order." Third, as discussed, the contracts specify that GSA 
will not assign a task order to a broker if it knows that a commission 
will not be paid. Fourth, the contracts allow the NBS brokers to 
initiate a complaint if they have concerns about GSA's distribution of 
task orders among the brokers.[Footnote 70] Finally, while not 
discussed in the contracts, the amount of the commission credit offered 
by a broker is not considered when GSA distributes work among the 
brokers, according to NBS program officials. 

GSA Plans to Develop Guidance and Procedures for Performance-Based 
Distributions before Altering Its Current Distribution Approach: 

GSA initially expected to start performance-based task order 
distributions after the first contract year, which ended on March 31, 
2006, anticipating that the brokers would have completed a sufficient 
number and variety of commission-eligible task orders to establish a 
record of their performance. However, apart from task orders for market 
data, which are not eligible for a commission payment, the brokers had 
completed 11 task orders by the end of the first year. Lacking what it 
considered a sufficient record of their performance, GSA elected to 
continue allocating work among the brokers as equally as possible 
during the second contract year. 

As of October 31, 2006, NBS program officials expected to begin 
performance-based task order distributions by April 1, 2007--the start 
of the third contract year. Before GSA can move to performance-based 
distributions, however, it must, according to the National Program 
Manager, (1) ensure that it has sufficient data on each broker's 
performance and (2) develop clearly defined guidance and processes-- 
which GSA describes as a top priority--for allocating additional future 
work to those brokers who excel relative to the others. GSA has not 
determined how many or what types of completed task orders are needed 
to provide sufficient data on a broker's performance. Without this 
information, GSA cannot demonstrate that it has established a record of 
performance and is ready to move to performance-based distributions. 
NBS program officials indicated that they might need 50 to 100 
completed task orders and that, in reviewing task order evaluations, 
they would look for clearly discernible patterns of performance, 
including those related to a broker's customer service and the rental 
rates negotiated by the brokers. Clearly defined guidance and processes 
will be particularly important for allocating future work if 
differences between the brokers' performance are marginal or if GSA's 
ratings of the brokers vary by region. According to NBS program 
officials, if regional variations exist, GSA will need to develop a 
process for evaluating the accuracy of the ratings by, among other 
actions, assessing whether the preparers of the regional ratings are 
exhibiting "rating bias." 

GSA's Process for Distributing Its Leasing Workload: 

GSA embarked on the NBS contracts without establishing how it intended 
to meet its goal of distributing 50 percent of its workload to the NBS 
brokers during the first contract year, including the number and size 
(square footage) of task orders.[Footnote 71] However, in October 2005-
-6 months later--GSA established two programwide goals for the first 
contract year--to issue 630 commission-eligible task orders to the four 
brokers covering 6.8 million square feet of leased space by March 31, 
2006.[Footnote 72] According to NBS program officials, these goals-- 
which are not contractual obligations--represented about 50 percent of 
the total expiring leasing workload that GSA expected to accomplish 
(using in-house and contractor personnel) during the first contract 
year.[Footnote 73] NBS program officials then used the overall goals to 
develop and allocate first-year goals for each of its regions.[Footnote 
74] After receiving their goals, according to NBS program officials, 
personnel from each region prepared a list of leases expected to expire 
during the first contract year and preliminarily identified a broker 
for each of the expected task orders. The regional personnel then sent 
the list of potential task orders to the National Program Manager, who 
reviewed and revised them, in coordination with the GSA regional 
program managers, to help ensure that each contractor would be assigned 
an equitable portion of the expected work.[Footnote 75] 

To monitor GSA's actual distributions, the National Contracting Officer 
compares information received from the regional contracting officers 
with monthly information from the brokers and, in coordination with 
other NBS national program officials, redistributes task orders to 
correct workload imbalances. The brokers' monthly reports summarize, 
among other things, the status of their activities under the contracts, 
including the number and size of the task orders issued to them during 
the month. 

While GSA strives to distribute its work equitably, according to the 
National Program Manager, perfectly equal distribution is nearly 
impossible to achieve because of, among other factors, the uncertain 
timing and nature of the space requests submitted by GSA's customer 
agencies. According to NBS program officials, such factors can create 
temporary workload imbalances among the brokers at any point in time 
and for a variety of reasons. For example, because 80 percent of GSA's 
task orders involve less than 20,000 square feet of leased space, the 
issuance of a very large task order, such as one involving about 1 
million square feet, can create an imbalance among the brokers and, 
according to the National Program Manager, increase the "challenge" of 
equalizing work among the brokers during the remainder of the contract 
year.[Footnote 76] Task order reassignments resulting from broker 
conflicts of interest also create temporary workload 
imbalances.[Footnote 77] Other factors that did not influence task 
order distributions during the first contract year, such as a broker's 
specialized knowledge or poor performance warranting the 
discontinuation of a broker's work on a task order, could also affect 
future distributions. 

Data Reliability Issues Delayed Issuance of GSA's First Year-end Report 
for the NBS Program: 

At several points in our review, we identified errors, inconsistencies, 
and missing data in GSA's monthly and year-end reports for the first 
contract year as well as in other sources of NBS program-related data. 
For example, over the 2-month period between late April and late June 
2006, we identified errors in six of GSA's evolving "year-end" reports, 
including the omission in an April report of a task order involving 
nearly 1 million square feet of leased space--about 10 percent of the 
total square footage of task orders issued to the brokers during the 
first contract year. The omission was caused by a computer programming 
error and incorrectly indicated a significant imbalance in the workload 
allocated to the brokers. Unaware that the report was inaccurate, on 
April 28, 2006, the National Program Manager issued a memorandum to 
various NBS program officials, citing concerns about the 
disproportionately low square footage issued to one broker relative to 
the others and alerting the officials to the possible need to stop 
issuing task orders to two of the three remaining NBS brokers with much 
larger square footage allocations until the affected broker was brought 
into "parity" with the others. 

We discussed GSA's various data reports, including issues related to 
data reliability, with NBS program officials. The officials 
acknowledged the errors, inconsistencies, and missing data, indicating 
that these problems had occurred for a variety of reasons. For example, 
because the regions were not specifically prohibited from creating a 
new task order for a modification to an existing task order--rather 
than revising the existing task order--GSA's reports frequently 
overstated the number of task orders actually issued to the NBS 
brokers. In addition, information on the "useable" square footage 
related to the lease was sometimes incorrectly recorded in terms of the 
"rentable" square footage, which overstated the amount of GSA's square 
footage distributions.[Footnote 78] Finally, inaccuracies occurred 
because, among other reasons, (1) inaccurate codes were used to record 
the type of task order issued (miscoding errors) and (2) the regions 
were late in submitting documentation needed by the National 
Contracting Officer to record task orders in the NBS database "as of" 
March 31, 2006. According to GSA, while it learned many lessons in the 
first contract year, the hardest lesson learned was that its data 
collection processes, as specified in the contracts and administration 
guide, were unclear and incomplete. 

GSA took a variety of actions to address these and other issues related 
to the reliability of its data, including the computer programming 
error that resulted in the omission of nearly 1 million square feet of 
leased space. In particular, between April 1, 2006, and July 31, 2006, 
GSA implemented new processes for accounting for the NBS task orders. 
The new processes include the establishment of both electronic and 
physical systems for recording and filing documentation of GSA's task 
orders in headquarters--rather than solely in the National Contracting 
Officer's office in Vancouver, Washington. According to the National 
Program Manager, all of the source documentation for the first contract 
year has been scanned and filed--both physically and electronically. In 
addition, documentation related to the second contract year is being 
scanned and filed in headquarters as the task orders are 
signed.[Footnote 79] A variety of data validation procedures have also 
been instituted. For example, a program analyst in headquarters now 
receives documentation related to the regions' task orders and audits 
the data to help ensure that the required data elements have been 
accurately reported in GSA's database. Moreover, a senior program 
manager must now randomly review and test the data and, at the end of 
each month, validate the accuracy of the data against information 
supplied by the brokers and GSA's regions. GSA also has (1) assigned 
additional personnel to the NBS program, including a program analyst in 
headquarters, to help implement its new processes and (2) provided 
guidance to its regions clarifying, among other matters, the 
appropriate use of task order modifications, the need to report 
useable--not rentable--square footage related to a particular task 
order, and the need for timely submissions of documentation related to 
the regions' task orders. More specifically, with respect to the last 
action, the National Contracting Officer recently directed all of the 
regions to immediately send electronic documentation of each leasing 
transaction to him and other NBS program staff when the regions sign a 
task order. 

After completing these and other remedial actions, on September 1, 
2006--about 5 months after the completion of the first contract year-- 
GSA provided us with its "final and correct" year-end report for the 
NBS program. According to the National Program Manager, the revised 
report "accurately reflects exactly what GSA accomplished" through the 
NBS program in the first contract year. Accurate and timely data are 
essential because, under the terms of its contracts, GSA is initially 
obligated to distribute its workload as equally as possible among the 
brokers. While GSA's corrected year-end data were untimely, given GSA's 
efforts to correct problems in its reports, we now believe these data 
are sufficiently reliable for use in reporting aggregate programwide 
and regional information on the number and size of task orders 
distributed to the brokers. 

GSA's Agencywide Distributions among the Brokers Were Fairly Equal for 
the First Contract Year: 

GSA's agencywide distributions of task orders among the brokers during 
the first year of the NBS contracts were fairly equal. According to 
GSA's "final and correct" year-end report, GSA distributed between 114 
and 123 commission-eligible task orders to each broker, with each 
broker receiving from about 2.3 million to about 3.0 million square 
feet. In total, GSA distributed 479 commission-eligible task orders, or 
about 24 percent fewer than its goal of 630 for the contract year. 
However, GSA far exceeded its goal for square footage, distributing 
about 10.4 million square feet to the brokers compared with its goal of 
6.8 million square feet. Table 7 provides GSA's aggregate program data 
for the first contract year. 

Table 7: Distribution of Commission-Eligible Task Orders Agencywide, by 
NBS Broker, as of March 31, 2006: 

Broker: Broker A; 
Number and percentage: of commission-eligible task orders[A]: 123 
(26%); 
Size (square footage) and percentage of square footage[A]: 2,967,000 
(28%). 

Broker: Broker B; 
Number and percentage: of commission-eligible task orders[A]: 114 (24); 
Size (square footage) and percentage of square footage[A]: 2,339,000 
(22). 

Broker: Broker C; 
Number and percentage: of commission-eligible task orders[A]: 123 (26); 
Size (square footage) and percentage of square footage[A]: 2,805,000 
(27). 

Broker: Broker D; 
Number and percentage: of commission-eligible task orders[A]: 119 (25); 
Size (square footage) and percentage of square footage[A]: 2,308,000 
(22). 

Total; 
Number and percentage: of commission-eligible task orders[A]: 479[B]; 
Size (square footage) and percentage of square footage[A]: 10,418,000. 

Source: GAO analysis of GSA data. 

[A] Percentages and square footage totals do not sum because of 
rounding. 

[B] The total includes 16 task orders for expedited services and 
excludes 65 task orders for market data as of March 31, 2006. Task 
orders for market data are not eligible for a commission payment. 

[End of table] 

Our knowledge of the program suggests several possible reasons why GSA 
did not meet its internal goal for the number of task order 
distributions. For example, in the early stages of the contracts, GSA 
experienced difficulties getting its task orders "out the door." The 
slow pace of GSA's initial distributions was partially attributable to 
bid protests, which created uncertainty about when contract performance 
would begin and delayed GSA's early identification of task orders that 
could be distributed to the brokers. In addition, according to the 
National Program Manager, GSA's 4-month delay in setting and allocating 
numeric goals for its regions created confusion among regional 
personnel attempting to implement the contracts. Furthermore, at the 
outset of the contracts, GSA revised its work processes, requiring GSA 
personnel to do more initial work to establish client agencies' needs. 
According to NBS program officials, the revised processes were 
unfamiliar and, thus, slowed the initial pace of its task order 
distributions. 

Regions' Workload Distributions for the First Contract Year Varied: 

GSA's workload data show variations in both the number and square 
footage of the regions' distributions. For example, according to our 
analysis of the data shown in table 8, region 6 distributed about 57 
percent of all of its square footage to broker A, while region 10 
allocated 53 percent of its square footage to broker C. Thus, in both 
regions, a single broker received more square footage than the other 
three brokers combined. Likewise, while brokers C and D each received 
about 25 percent of region 8's square footage, broker B received about 
40 percent of the region's total and over three times the amount 
allocated to broker A (about 11 percent). Similarly, in region 2, 
brokers B and C received about 72 percent of the region's square 
footage, while the remaining two brokers, combined, received about 28 
percent. Data for region 11, which distributed about 48 percent of all 
the square footage issued by GSA in the first contract year, also 
showed variability in its square footage distributions.[Footnote 80] 
For example, broker A received task orders involving about 1,889,000 
square feet, while broker C received about 805,000 square feet (about 
38 percent and 16 percent of the region's total, respectively). Table 8 
provides aggregate data on the number of task orders issued to the 
brokers, by region, as of March 31, 2006. 

Table 8: Distribution of Square Footage, by Region and Broker, as of 
March 31, 2006: 

Region: 1; 
Broker A: 33,000; 
Broker B: 33,000; 
Broker C: 75,000; 
Broker D: 41,000; 
Total[A]: 181,000. 

Region: 2; 
Broker A: 51,000; 
Broker B: 131,000; 
Broker C: 118,000; 
Broker D: 48,000; 
Total[A]: 348,000. 

Region: 3; 
Broker A: 113,000; 
Broker B: 82,000; 
Broker C: 911,000; 
Broker D: 80,000; 
Total[A]: 1,187,000. 

Region: 4; 
Broker A: 179,000; 
Broker B: 211,000; 
Broker C: 168,000; 
Broker D: 195,000; 
Total[A]: 753,000. 

Region: 5; 
Broker A: 196,000; 
Broker B: 193,000; 
Broker C: 211,000; 
Broker D: 201,000; 
Total[A]: 802,000. 

Region: 6; 
Broker A: 97,000; 
Broker B: 23,000; 
Broker C: 27,000; 
Broker D: 23,000; 
Total[A]: 169,000. 

Region: 7; 
Broker A: 131,000; 
Broker B: 135,000; 
Broker C: 128,000; 
Broker D: 177,000; 
Total[A]: 572,000. 

Region: 8; 
Broker A: 41,000; 
Broker B: 148,000; 
Broker C: 90,000; 
Broker D: 93,000; 
Total[A]: 372,000. 

Region: 9; 
Broker A: 205,000; 
Broker B: 316,000; 
Broker C: 194,000; 
Broker D: 173,000; 
Total[A]: 889,000. 

Region: 10; 
Broker A: 31,000; 
Broker B: 11,000; 
Broker C: 79,000; 
Broker D: 27,000; 
Total[A]: 149,000. 

Region: 11; 
Broker A: 1,889,000; 
Broker B: 1,054,000; 
Broker C: 805,000; 
Broker D: 1,249,000; 
Total[A]: 4,997,000. 

Total[A]; 
Broker A: 2,967,000; 
Broker B: 2,339,000; 
Broker C: 2,805,000; 
Broker D: 2,308,000; 
Total[A]: 10,418,000. 

Source: GSA data provided to GAO. 

[A] Totals do not always sum because of rounding. 

[End of table] 

Such variation in the regions' workload distributions, particularly 
with respect to square footage, is inconsistent with GSA's 
administrative guidance. As previously discussed, GSA's November 2005 
contract administration guide indicates that, until a record of 
performance is established, distributions are to be based on square 
footage "with each firm receiving equal distribution in all eleven GSA 
regions. . . ." However, the variation in distributions occurred for 
reasons that, at least in the short term, GSA may not be able to 
address. For example, during the first year, a few very large task 
orders caused imbalances, according to the National Program Manager. In 
region 3, for instance, broker C received a task order for about 
900,000 square feet that, by itself, accounted for about 76 percent of 
the square footage the region distributed to the four brokers during 
the year. Similarly, in region 8, broker B received a task order for 
148,000 square feet, representing about 40 percent of the region's 
workload for the year. Imbalances also occurred when task orders had to 
be reassigned to address conflict-of-interest issues. Other reasons for 
imbalances cited by the National Program Manager were changes in 
customer agency requirements, which resulted in the cancellation of 
task orders, and decisions to keep certain projects in-house. Given the 
variations in the size and number of available task orders and the 
uncertainties associated with customer agencies' requirements, NBS 
program officials have concluded that the administration guide's 
requirement for "equal" distribution by region is impracticable and 
have said that GSA plans to revise the guide to require distribution to 
be done "as equally as possible." This revision will have the 
additional benefit of conforming the language in the guide to the 
language in the contracts. 

Several Distribution-Related Matters Warrant Additional Management 
Attention: 

Several matters related to the distributions of GSA's task orders 
warrant additional attention by GSA program managers. For example, like 
GSA's regional distributions of task orders to the brokers, GSA's 
distributions for market data and expedited leasing transactions during 
the first contract year resulted in variations among the brokers. NBS 
program officials confirmed that, during the initial period of the 
contracts, all of GSA's task orders are initially expected to be 
distributed as equally as possible among the brokers. However, with 
respect to task orders for market data and expedited leasing 
transactions, this expectation did not materialize. Specifically, 
according to GSA's final and correct year-end report as of September 1, 
2006, GSA distributed 65 task orders for market data to the NBS brokers 
during the first contract year. The distributions ranged between 12 and 
23 task orders. Broker A received about 35 percent (23) of the task 
orders, while, collectively, brokers C and D received 38 percent (25) 
of the task orders--2 more than the total number of task orders for 
market data distributed to broker A. Table 9 provides GSA's year-end 
information for distributions of task orders for market data, by NBS 
broker. 

Table 9: Distribution of Task Orders for Market Data, by NBS Broker, as 
of March 31, 2006: 

Broker: Broker A; 
Distribution of task orders for market data: 23; 
Percentage that each broker received[A]: 35%. 

Broker: Broker B; 
Distribution of task orders for market data: 17; 
Percentage that each broker received[A]: 26. 

Broker: Broker C; 
Distribution of task orders for market data: 12; 
Percentage that each broker received[A]: 18. 

Broker: Broker D; 
Distribution of task orders for market data: 13; 
Percentage that each broker received[A]: 20. 

Total; 
Distribution of task orders for market data: 65; 
Percentage that each broker received[A]: -. 

Source: GAO analysis of GSA data. 

[A] Percentages do not sum because of rounding. 

[End of table] 

GSA's data for the first contract year also demonstrate variation in 
the number of task orders for expedited leases that GSA distributed 
among the brokers. According to GSA's data, 16 task orders for 
expedited leasing transactions were issued to the four NBS brokers. The 
distributions ranged from 3 task orders (to two brokers) to 6 task 
orders (to one broker). Broker C received 6 of the 16 task orders for 
expedited leasing transactions, or about 38 percent of the total. 
Furthermore, the 6 task orders represented about 64 percent of the 
total square footage allocated to the four brokers. Table 10 provides 
GSA's year-end data on distributions of expedited leasing transactions, 
by NBS broker. 

Table 10: Distribution of Expedited Task Orders, by NBS Broker, as of 
March 31, 2006: 

Broker: Broker A; 
Number and percentage of expedited task orders issued[A]: 3 (19%); 
Square footage and percentage of expedited task orders issued[A]: 
22,830 (18%). 

Broker: Broker B; 
Number and percentage of expedited task orders issued[A]: 4 (25); 
Square footage and percentage of expedited task orders issued[A]: 
11,657 (9). 

Broker: Broker C; 
Number and percentage of expedited task orders issued[A]: 6 (38); 
Square footage and percentage of expedited task orders issued[A]: 
82,705 (64). 

Broker: Broker D; 
Number and percentage of expedited task orders issued[A]: 3 (19); 
Square footage and percentage of expedited task orders issued[A]: 
12,635 (10). 

Total; 
Number and percentage of expedited task orders issued[A]: 16; 
Square footage and percentage of expedited task orders issued[A]: 
129,827. 

Source: GAO analysis of GSA data. 

[A] Percentage totals do not sum because of rounding. 

[End of table] 

According to GSA, the differences in its distributions of task orders 
for market data and expedited leases represented about 15 percent (81) 
of the task orders (544) it issued in the first contract year.[Footnote 
81] While these distributions were relatively small compared with GSA's 
overall task order distributions, at a minimum, they suggest 
disparities among the brokers that could--without additional oversight-
-disadvantage a particular broker or brokers relative to the others. 
Such disparities could also cause a broker or brokers to initiate a 
complaint about GSA's task order distributions. Equitable distributions 
of GSA's market data task orders are important because the brokers are 
expected to receive the follow-on work associated with these task 
orders. Thus, disparities in these allocations can create imbalances 
among the brokers--a scenario that has already transpired, according to 
the National Program Manager. Equitable distributions of task orders 
for expedited leasing transactions are equally important because the 
brokers do not provide a commission credit for these services and 
receive the entirety of any commission offered by the building owner. 
During the first contract year, broker C received about $371,645 for 
the four expedited leasing transactions it completed.[Footnote 82] This 
sum represented about 39 percent of the total compensation received by 
the four brokers in the first contract year. 

GSA did not specifically track data on its expedited leasing 
transactions; however, in response to our inquiries, it has decided to 
do so for the second contract year. According to the National Program 
Manager, these data will help GSA measure the amount of the commission 
sharing GSA receives. In addition, she indicated that these data will 
serve as a useful management tool to help ensure that the regions are 
not overusing expedited task orders as a means to overcome inadequate 
planning. Regarding task orders for market data, NBS program officials 
noted that these task orders represent an optional step in GSA's 
planning for leases and, thus, that there is no guarantee that they 
will result in a follow-on, commission-eligible task order. 
Nevertheless, in response to our inquiries, GSA has expanded its 
monthly program reports to track these task orders. According to GSA, 
the expanded reports should help ensure that follow-on, commission- 
eligible task orders are issued whenever possible for the ensuing years 
of the contracts. 

Finally, our analysis of GSA's year-end data showed that although GSA 
collects data on the number and size of the task orders distributed to 
the four NBS brokers, both agencywide and by region, it does not 
collect data on the geographic area (e.g., rural or urban) covered by 
the task orders. As specified in the contracts, until a record of 
performance is available, the brokers must be issued "similar size 
projects in similar geographic areas to the maximum extent possible 
within the [GSA's] existing workload available." The contracts further 
indicate that the brokers "should assume that the Government intends to 
have each awardee performing projects on a nationwide basis in both 
rural and urban areas," as long as performance is acceptable. According 
to NBS program officials, GSA assumes that task orders involving large 
amounts of space are in urban areas. However, according to GSA, more 
than 80 percent of its task orders involve less than 20,000 square feet 
and, therefore, information on square footage appears to be of limited 
value in assessing the equitability of GSA's task order distributions 
by similar geographic area. NBS program officials acknowledged that GSA 
does not collect information on the geographic location of its task 
order distributions. At the conclusion of our review, the officials 
said GSA could collect such information but did not agree to do so. 

GSA Implemented a New Organizational Structure and Numerous Management 
Tools to Help Ensure Consistent Oversight of the NBS Brokers: 

To oversee the NBS brokers, GSA put a new organizational structure in 
place and implemented new management tools. These actions are intended 
to address weaknesses in GSA's administration of its earlier contracts 
for leasing services, including the need to improve its oversight of 
its real estate brokers, and to provide consistent direction to its 
regions. 

Inspector General Identified and GSA Acknowledged Problems with GSA's 
Administration of Prior Contracts: 

GSA's administration of the 29 contracts that preceded the 4 NBS 
contracts was inadequate and inconsistent, according to a December 2002 
report by GSA's Inspector General. For example, the Inspector General 
found that, GSA had not clearly defined the (1) authorities, roles, and 
responsibilities of key contracting personnel or (2) requirements for 
administering specific task orders. The Inspector General recommended, 
among other things, that GSA establish nationwide contract 
administration requirements, specify procurement roles and 
responsibilities, and use standardized templates as guides for 
administering future task orders to brokers. GSA has acknowledged 
problems with its administration of the previous contracts.[Footnote 
83] In its March 2003 plan for implementing the NBS contracts, for 
example, GSA acknowledged that the 29 contracts in place at that time 
had become burdensome and costly to administer because of variations in 
the contracts' terms, conditions, and pricing structures. In addition, 
the contracts did not provide for efficient monitoring and tracking of 
necessary management and funding data. Furthermore, according to GSA, 
variations in the contracts had resulted in inconsistent contract 
administration between its regions and from contract to contract, 
leading to confusion and dissatisfaction among customers. 

GSA Implemented a New Organizational Structure to Help Ensure 
Consistent Oversight of the NBS Brokers: 

GSA's new organizational structure for overseeing the NBS brokers 
includes key national and regional management positions with 
responsibilities for overseeing and administering the contracts. 
According to NBS program officials, the new positions are held by 
personnel with expertise in procurement and in real estate and lease 
acquisitions--two areas of expertise that are critical to properly 
overseeing and administering the NBS contracts. Additionally, since its 
regions are largely autonomous, GSA created national management 
positions to help ensure consistency in its oversight of the NBS 
contracts. Table 11 describes the responsibilities of the key national 
and regional management positions that oversee the NBS brokers. 

Table 11: Responsibilities of Key National and Regional Management 
Positions: 

National. 

Key position: National Program Manager; 
Responsibilities: 
* Provide overall oversight of the NBS contracts, including oversight 
of the 11 GSA regions that manage the contracts; 
* Serve as the National Contracting Officer's representative for all 
technical matters related to federal lease acquisition policies and 
procedures; 
* Serve as the headquarters contact for customers, GSA senior 
management, and the private sector; 
* Develop and maintain NBS contract administration guidance and 
training; 
* Monitor the regions' use of the NBS contracts, budgets, and workload 
data through coordination with the Regional Program Managers; 
* Serve as Chairman of the Performance Evaluation Board; 
* Participate in peer reviews, as needed. 

Key position: National Contracting Officer; 
Responsibilities: 
* Serve as GSA's representative with full authority to award and 
administer the NBS contracts; 
* Take actions on behalf of GSA to amend, modify, or allow deviation 
from, among other things, the contracts' terms, conditions, 
requirements, specifications, details and delivery schedules; 
* Make final decisions on disputed deductions from contract payments 
for unsatisfactory performance; 
* Terminate the contracts for convenience or default; 
* Issue final decisions on contract questions or matters under dispute; 
* Monitor the contractors' subcontracting submissions and reports for 
compliance with the contracts' subcontracting goals; 
* Coordinate the brokers' annual evaluations with other NBS personnel 
and record the ratings in a governmentwide database on contractor 
performance maintained by the National Institutes of Health; 
* Serve as a member of the Performance Evaluation Board; 
* Oversee the Regional Contracting Officers to ensure that they are 
using the NBS contracts effectively; 
* Participate in peer reviews, as needed. 

Regional. 

Key position: Regional Program Manager; 
Responsibilities: 
* Oversee the region's NBS contracts and interface with the National 
Program Manager; 
* Disseminate guidance and reinforce direction and training from the 
National Program Manager to help enhance consistency in contract usage 
within the region; 
* Serve as the region's overall coordinator for budget and workload 
projections and workload distribution; 
* Serve on quarterly evaluation panels and monitor broker performance 
data; 
* Serve as the region's point of contact for the brokers, customers, 
GSA senior management, and the private sector; 
* Take timely action to alert the National Program Manager to potential 
broker performance problems within the region; 
* Serve as a member of the Performance Evaluation Board; 
* Participate in peer reviews, as needed. 

Key position: Regional Contracting Officer; 
Responsibilities: 
* Serve as the region's point of contact for coordinating contract 
issues with the National Contracting Officer; 
* Issue and administer the region's task orders and monitor the task 
orders issued by other officials within their region; 
* Maintain a log of all activity on the region's task orders and 
approve task order issuance; 
* Provide guidance and direction from the National Contracting Officer 
to regional personnel; 
* Serve as a member of the Performance Evaluation Board; 
* Participate in peer reviews, as needed. 

Source: GAO analysis of GSA data. 

[End of table] 

Recognizing the need for redundancy in key positions, GSA also 
designated alternates for its National Program Manager and National 
Contracting Officer positions to help ensure consistent implementation-
-at the national level--when, for example, the principal personnel are 
absent. Some of GSA's regions have also followed suit, designating part-
time alternates for key regional positions. As of December 31, 2005, 6 
of GSA's 11 regions had part-time alternates for their regional program 
managers, while 7 had part-time alternates for their regional 
contracting officers. 

As of December 31, 2005, GSA also had designated 158 of its realty 
specialists as COTRs and redefined their responsibilities, making them 
project managers for task orders issued to the NBS brokers. According 
to NBS program officials, these personnel are among the agency's most- 
qualified realty specialists. To qualify as a COTR, a realty specialist 
must have at least 4 years' experience in this position. The COTRs are 
responsible for, among other things, monitoring the NBS brokers' day- 
to-day performance and ensuring that the brokers comply with the terms 
and conditions of their contracts and adhere to their project 
schedules. When a broker's performance is not adequate, the COTR has 
the authority to request that specific tasks be redone or improved. The 
COTRs also have other responsibilities, including reviewing and 
inspecting deliverables to ensure compliance with contract 
requirements, ensuring that defects or omissions are corrected, 
resolving problems encountered in the performance of the brokers' work, 
reporting performance problems, preparing performance assessments, and 
discussing their assessments with the brokers. 

At the end of 2005, GSA had allocated 323 staff to oversee and 
administer the NBS contracts. Table 12 provides a breakdown of GSA's 
full-time and part-time positions as of December 31, 2005. 

Table 12: Staff Allocated Full Time and Part Time to Oversee and 
Administer the NBS Contracts, as of December 31, 2005: 

Position: National Program Manager; 
Full time: 1; 
Part time: -. 

Position: Alternate National Program Manager; 
Full time: -; 
Part time: 1[A]. 

Position: National Contracting Officer; 
Full time: 1; 
Part time: -. 

Position: Alternate National Contracting Officer; 
Full time: -; 
Part time: 1. 

Position: Regional Program Manager; 
Full time: 4; 
Part time: 7. 

Position: Alternate Regional Program Manager; 
Full time: -; 
Part time: 6. 

Position: Regional Contracting Officer; 
Full time: 3; 
Part time: 8. 

Position: Alternate Regional Contracting Officer; 
Full time: -; 
Part time: 7. 

Position: Regional Ordering Official[B]; 
Full time: -; 
Part time: 3. 

Position: Contracting Officer's Technical Representative; 
Full time: 13; 
Part time: 145. 

Position: Realty Specialist; 
Full time: 1; 
Part time: 112. 

Position: Additional support; 
Full time: -; 
Part time: 10. 

Total; 
Full time: 23; 
Part time: 300. 

Source: GAO analysis of data supplied by the National Program Manager. 

[A] This position has since become full time. 

[B] According to GSA's November 2005 administrative guide, regional 
ordering officials have full authority to issue and administer task 
orders in accordance with normal contracting procedures. Among their 
other responsibilities, regional ordering officials coordinate with the 
applicable Regional Contracting Officer to help ensure consistency in a 
region's issuance and administration of task orders. According to the 
NBS program officials, GSA allowed regional ordering officials in 
certain regions to accommodate variations in its regions' 
organizational structures. 

[End of table] 

GSA's current organizational structure differs substantially from its 
prior organizational structure and is intended to result in enhanced 
and consistent oversight of the NBS brokers and GSA's 11 regions. 
First, as table 13 shows, the current structure is more hierarchical, 
with both full-time and part-time national and regional management 
positions, whereas the former structure had no management positions. 
Second, the current structure includes full-time staff positions, 
whereas the former structure consisted only of part-time positions. 
Finally, of the total staff positions, more than half (174 of 323) have 
at least part-time oversight responsibilities.[Footnote 84] Formerly, 
the vast majority of the staff assigned to GSA's contracts (the realty 
specialists) lacked any oversight authority.[Footnote 85] 

Table 13: GSA's Staffing for the NBS Contracts, as of December 31, 
2005, and for the Prior Contracts, as of December 31, 2003: 

Staffing: National management; 
NBS contracts: Full time: 2; 
NBS contracts: Part time: 2; 
Prior contracts: Full time: 0; 
Prior contracts: Part time: 0. 

Staffing: Regional management; 
NBS contracts: Full time: 7; 
NBS contracts: Part time: 31; 
Prior contracts: Full time: 0; 
Prior contracts: Part time: 0. 

Staffing: Contracting Officer's Technical Representative; 
NBS contracts: Full time: 13; 
NBS contracts: Part time: 145; 
Prior contracts: Full time: -; 
Prior contracts: Part time: -. 

Staffing: Contracting Officer; 
NBS contracts: Full time: 0; 
NBS contracts: Part time: 0; 
Prior contracts: Full time: -; 
Prior contracts: Part time: 13. 

Staffing: Realty Specialist; 
NBS contracts: Full time: 1; 
NBS contracts: Part time: 112; 
Prior contracts: Full time: -; 
Prior contracts: Part time: 378. 

Staffing: Additional support; 
NBS contracts: Full time: -; 
NBS contracts: Part time: 10; 
Prior contracts: Full time: -; 
Prior contracts: Part time: -. 

Staffing: Total; 
NBS contracts: Full time: 23; 
NBS contracts: Part time: 300; 
Prior contracts: Full time: 0; 
Prior contracts: Part time: 391. 

Source: GAO analysis of data supplied by the National Program Manager. 

[End of table] 

Management Tools Are Designed to Address Problems with Prior Contracts 
and Result in More Consistent Contract Administration: 

GSA implemented numerous management tools to improve its management and 
oversight of its leasing program and to avoid the problems that its 
Inspector General identified in its administration of its 29 prior 
contracts. Two of these tools apply to GSA's agencywide leasing 
program, while five are uniquely applicable to GSA's administration of 
the NBS contracts. 

Agencywide Management Tools: 

GSA has developed two new tools for managing its leasing program 
agencywide. The first of these tools is GSA's Transaction Management 
Playbook, which is essentially a handbook, or guide, for helping GSA's 
tenant agency customers determine their space requirements and 
accomplish their leasing goals. The handbook provides standardized 
templates for handling typical interactions between GSA and its 
customers, such as those related to identifying and confirming the 
customers' space requirements and discussing alternative leasing 
(space) options. 

The second agencywide tool is the electronic e-Lease system, which GSA 
introduced to manage all its real estate leasing transactions. E-Lease 
addresses contract administration issues identified by GSA's Inspector 
General and enables personnel throughout the agency to electronically 
manage their lease acquisitions. In addition, the COTRs use e-Lease to 
electronically oversee the tasks performed by the NBS brokers. 
According to GSA, e-Lease automates various GSA business-oriented 
processes, allows seamless data exchange, contains standardized 
business templates, and enforces process efficiencies. One of the goals 
for e-Lease is to guide the COTRs as they make the transition from 
their former responsibilities as realty specialists to their new 
responsibilities as project managers. E-Lease identifies the tasks the 
brokers must perform and submit to the government for approval. Upon 
receiving access to e-Lease,[Footnote 86] the NBS brokers are expected 
to submit their completed tasks through this electronic interface. The 
COTRs are required to examine certain tasks and can accept the tasks or 
reject them until they meet their approval.[Footnote 87] In addition, 
as we discuss later in this report, the COTRs are responsible for 
evaluating certain activities and task orders completed by the brokers 
and for recording their evaluations in e-Lease. E-Lease also allows GSA 
to generate a variety of summary reports to support national and 
regional oversight of the contracts, including reports summarizing the 
brokers' performance. Finally, e-Lease contains links to relevant 
guidance and to GSA's leasing forms and templates that the brokers are 
required to use--consistent with the Inspector General's recommendation 
for standardized templates. 

Management Tools Uniquely Applicable to the NBS Contracts: 

GSA developed and implemented five tools that are uniquely applicable 
to GSA's management and oversight of the NBS brokers. The first tool is 
GSA's National Broker Contract Administration Guide, which--as of 
October 31, 2006--had been last updated in November 2005. The guide is 
designed to provide specific procedures and formats to GSA staff for 
consistently administering task orders to the NBS brokers across GSA's 
11 regions. As the Inspector General recommended, the guide also (1) 
specifies the roles and responsibilities of key national and regional 
personnel responsible for overseeing and managing the NBS contracts and 
(2) provides procedures and standardized templates, including 
checklists, for issuing and managing task orders issued to the NBS 
brokers. 

Second, GSA created a Performance Evaluation Board, which meets 
quarterly, to coordinate information from the regions about the NBS 
brokers' performance. Members of the board include the National and 
Regional Program Managers and the National and Regional Contracting 
Officers. In addition, GSA's small business technical advisor may 
attend if the brokers' performance related to subcontracting issues is 
being evaluated. According to GSA's November 2005 administrative guide, 
the board provides regional input on the contractors' quarterly and 
annual performance and provides its analysis to the National 
Contracting Officer. As of July 31, 2006, the board had held five 
quarterly meetings, during which it discussed, among other topics, the 
brokers' performance, by region; broker conflict-of-interest issues; 
and estimates of the upcoming volume of work expected to be issued to 
the brokers. The results of these meetings are used to provide feedback 
to the NBS brokers and support workload assignments, as well as to 
identify weaknesses and recommend improvements in the regions' use and 
administration of the contracts. 

The third tool--regional peer reviews--is intended to make the lease 
acquisition process more consistent and to strengthen GSA's contract 
administration among GSA's regions. The reviewers include one official 
from the national program office and a regional contracting officer and 
a regional program manager from a region other than the region being 
reviewed. Generally, according to NBS program officials, the reviews, 
which are based on a checklist to help ensure consistency, involve 
verifying whether a region's work satisfies the specifications of the 
contract in such areas as training, task order issuance, file 
management and documentation, quality control, and the reporting of 
commission credits. Peer review personnel also identify regional 
deviations from the approved leasing process and make recommendations 
for improvement. For example, the peer reviewers have recommended, 
among other things, the need for (1) additional regional staff to carry 
out the NBS program, (2) better documentation of regional contracting 
officers' project schedule approvals, and (3) improvement of the 
accuracy of regional workload projections. As of July 31, 2006, GSA had 
either completed or initiated peer reviews at 8 of its 11 regions and 
expected to complete reviews at each of the remaining 3 regions by the 
end of October 2006. 

Fourth, GSA has implemented a voluntary certification program to help 
ensure that its regional personnel have the requisite experience and 
skills for overseeing the NBS brokers. The certification program 
establishes training requirements for regional program managers, 
regional contracting officers, the regional COTRs, and the National 
Program Manager. These requirements are in addition to the general 
qualifications for each of the positions and include the completion of 
one or more contract management courses. 

Finally, under their contracts, GSA required the NBS brokers to attend 
quarterly meetings with the National Contracting Officer and other GSA 
representatives. GSA uses the quarterly meetings to provide feedback on 
the brokers' performance as well as to solicit feedback from the 
brokers regarding GSA's implementation of the contracts. At two 
quarterly meetings that we attended, GSA's feedback emphasized the 
importance of achieving consistent and adequate performance across all 
of GSA's 11 regions to ensure the brokers' future participation in the 
contracts. NBS program officials also provided feedback to each of the 
brokers on their performance as of December 31, 2005, while the brokers 
relayed their thoughts and concerns about GSA's oversight and their 
working relationships with GSA's regions and NBS program officials, as 
of that date. For example, one broker's representative said that her 
firm had established an excellent working relationship with one GSA 
region but had difficulty with other regions where, according to the 
representative, task orders were issued without documentation that 
brokers needed to perform the work. Brokers' representatives were asked 
to document their problems in their required monthly reports to the 
National Contracting Officer.[Footnote 88] 

GSA Has Numerous Measures for Evaluating the Brokers' Performance, but 
Issues Could Result in Inconsistent and Inefficient Evaluations: 

GSA has numerous measures for evaluating the NBS brokers' performance, 
including criteria related to quality, timeliness, responsiveness, and 
long-term performance goals for, among other things, satisfying its 
client agencies and reducing the government's costs. GSA evaluates a 
broker's performance at the completion of certain task order 
activities, at the completion of an entire task order, and annually, 
using evaluation criteria that vary depending on the evaluation stage. 
GSA's first annual evaluations of the NBS brokers indicate that each of 
the brokers met contract requirements. However, the evaluations are 
somewhat limited since, as of March 31, 2006, the brokers had completed 
11 task orders subject to evaluation. During the course of our 
evaluation, we identified numerous issues related to GSA's contracts, 
guidance, and processes for evaluating the NBS brokers' performance, 
including the use of inapplicable evaluation criteria, with NBS program 
officials, which, in our view, could lead to inconsistent and 
inefficient evaluations of the brokers' performance and inconsistent 
contract administration across GSA's 11 regions. NBS officials 
acknowledged inaccuracies and inconsistencies within and among the 
contracts, the administrative guide, and GSA's e-Lease system as well 
as omissions in the guide. However, according to the officials, these 
issues have not adversely affected either GSA's evaluations of the 
brokers or its administration of the contracts. As of October 31, 2006, 
only the issue related to e-Lease had been corrected. 

GSA Has Numerous Measures for Evaluating the NBS Brokers' Performance: 

GSA has numerous measures for evaluating the NBS brokers' performance, 
including criteria related to quality, timeliness, responsiveness, and 
long-term performance goals for, among other things, satisfying its 
client agencies and reducing the government's costs. GSA uses its 
evaluations to, for example, hold performance discussions with the 
brokers. According to NBS program officials, these discussions are 
intended to help maximize the brokers' performance on future task 
orders. Once a history of the brokers' performance is established, GSA 
intends to use the evaluations to allocate work among the brokers. 
Finally, GSA plans to use the evaluations to determine whether to renew 
its contracts with the brokers (i.e., exercise contract options) and to 
document problems that endanger successful performance under the 
contracts. 

Applicability of the Performance Evaluation Criteria Depends on the 
Stage at Which the Evaluation Occurs: 

The performance evaluation criteria that GSA uses, as well as the 
individuals that perform the evaluations, vary depending on the stage 
at which an evaluation occurs. GSA evaluates the brokers on lease 
acquisitions, expansions, and extensions at three stages--at the 
completion of selected activities associated with a task order, at the 
completion of the entire task order, and annually. GSA does not 
evaluate the brokers on their performance of task orders for market 
data. The first stage of an evaluation occurs when a broker completes 
selected activities within a task order. At this stage, the applicable 
COTR rates the broker on five factors--technical quality, document 
quality, timeliness, responsiveness, and quality of assigned personnel-
-using a scale of 0 (for "unsatisfactory" performance) to 5, (for 
"outstanding" performance).[Footnote 89] The COTR records the rating 
scores for each activity sequentially in GSA's electronic e-Lease 
system as the activities are completed. The number of activities that 
are evaluated for a task order depends on the type of task order 
performed. Lease acquisitions require the most work from a broker and, 
therefore, are evaluated most frequently, at six milestones; 
lease expansions require less work and are evaluated at three 
milestones; and lease extensions require the least work and are not 
rated until completion of the entire task order. Table 14 shows the 
frequency of GSA's evaluation, by type of task order performed. 

Table 14: Frequency of Evaluations, by Type of Task Order Performed: 

Activity/Milestone: Broker holds an orientation and develops a schedule 
for the project; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: bold X; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker prepares advertisement, market analysis, and 
survey; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker develops and issues GSA's solicitation for 
offers and amendments, if required; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker evaluates offers; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker prepares lease documents; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker manages postaward services; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker develops a scope of work for build out 
(alteration work); 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: bold X; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker evaluates offers for building alterations; 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: bold X; 
Lease extension: services: [Empty]. 

Activity/Milestone: Broker requests lease extension; 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: X. 

Activity/Milestone: Broker evaluates lease extension offers; 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: X. 

Activity/Milestone: Broker prepares negotiation objectives for the 
lease extension; 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: X. 

Activity/Milestone: Broker prepares supplemental lease agreement for 
the extension; 
Lease acquisition services: [Empty]; 
Lease expansion (alteration) services: [Empty]; 
Lease extension: services: X. 

Activity/Milestone: GSA evaluates completed task order; 
Lease acquisition services: bold X; 
Lease expansion (alteration) services: bold X; 
Lease extension: services: bold X. 

X = Task order includes this activity/milestone. 

Bold X = Activity is evaluated. 

Sources: GAO discussions with NBS program officials and information in 
GSA's November 2005 administrative guide. 

Note: GSA also issues task orders for market data; however, these tasks 
are not evaluated. 

[End of table] 

The second stage of evaluation occurs at the completion of each task 
order for lease acquisitions, expansions, and extensions. The timing of 
these evaluations is not addressed in either GSA's contracts with the 
brokers or its November 2005 guide for administering the contracts. 
However, according to GSA's e-Lease training manual, the evaluations 
are required within 30 days after a broker submits all task order 
deliverables for GSA's final review. At this point--as specified in e- 
Lease's final task order evaluation screen as of July 31, 2006--the 
applicable COTR is required to rate each broker on nine criteria, using 
the same 0 to 5 rating scale. Five of the nine evaluation criteria-- 
technical quality, document quality, timeliness, responsiveness, and 
quality of assigned personnel--are the same as those used to rate task 
order activities. The remaining four evaluation criteria, however, 
assess the extent to which the broker has helped GSA meet certain long- 
term performance goals for its leasing program.[Footnote 90] Table 15 
identifies the four long-term goals applicable to the NBS brokers' 
performance, by fiscal year, as of July 31, 2006. 

Table 15: Long-term Performance Goals Applicable to the NBS Brokers' 
Performance, by Fiscal Year, as of July 31, 2006: 

Long-term performance goals applicable to the brokers' performance: 
Goal #1: Award leases at average rental rates of not less than "x" 
percent (see target percentages at right) below industry averages for 
comparable office space; 
Fiscal year:: 2005: -8.25%; 
Fiscal year:: 2006: -8.5%; 
Fiscal year:: 2007: -8.75%; 
Fiscal year:: 2008: -9.0%; 
Fiscal year:: 2009: -9.35%; 
Fiscal year:: 2010: -9.5%; 
Fiscal year:: 2011: -9.5%. 

Long-term performance goals applicable to the brokers' performance: 
Goal #2: Deliver leased space when the customer needs it--as measured 
by the percentage of tenant agency contacts involved in the leasing 
transaction who, when surveyed, said that their lease space was 
available when needed.[A]; 
Fiscal year:: 2005: 75; 
Fiscal year:: 2006: 82; 
Fiscal year:: 2007: 84; 
Fiscal year:: 2008: 86; 
Fiscal year:: 2009: 88; 
Fiscal year:: 2010: 90; 
Fiscal year:: 2011: 90. 

Long-term performance goals applicable to the brokers' performance: 
Goal #3: Satisfy GSA customers with the leasing transaction--as 
measured by the percentage of tenant agency contacts who, when 
surveyed, rated the overall leasing process as satisfactory.[A]; 
Fiscal year:: 2005: 85; 
Fiscal year:: 2006: 85; 
Fiscal year:: 2007: 85; 
Fiscal year:: 2008: 85; 
Fiscal year:: 2009: 85; 
Fiscal year:: 2010: 85; 
Fiscal year:: 2011: 85. 

Long-term performance goals applicable to the brokers' performance: 
Goal #4: Satisfy GSA's customers with their space--as measured by the 
percentage of tenants surveyed who were satisfied with their leased 
space.[B]; 
Fiscal year:: 2005: 70; 
Fiscal year:: 2006: 72; 
Fiscal year:: 2007: 74; 
Fiscal year:: 2008: 76; 
Fiscal year:: 2009: 78; 
Fiscal year:: 2010: 80; 
Fiscal year:: 2011: 80. 

Source: GAO analysis of GSA data. 

Note: The federal fiscal year begins on October 1st each year and ends 
on September 30th of the following year. Thus, fiscal year 2006 began 
on October 1, 2005, and ended on September 30, 2006. 

[A] Input for this measurement comes from GSA's realty transaction 
survey. We discuss this survey in more detail later in this report. 

[B] Input for this measurement comes from GSA's tenant satisfaction 
survey. We discuss this survey in more detail later in this report. 

[End of table] 

Specifically, at the completion of each task order, the COTR was 
required--through at least July 31, 2006--to rate each broker on four 
additional factors related to the achievement of three of GSA's long- 
term goals in GSA's electronic e-Lease system.[Footnote 91] The four 
additional evaluation factors, as specified in GSA's e-Lease's final 
evaluation screen were as follows: 

* Average lease rate meets GSA's fiscal year target (goal #1). 

* Space delivered within customer time frame (goal #2). 

* Leasing transaction meets GSA's customer satisfaction target (goal 
#3). 

* Is lease rate above market value (goal #1)? 

The third and final stage of evaluation occurs annually and is prepared 
by the National Contracting Officer, with input from others. According 
to the National Contracting Officer, the annual evaluation takes into 
consideration a broker's evaluations on all task orders completed 
during the year; the broker's help in achieving GSA's applicable long- 
term leasing goals; and other factors, such as the broker's compliance 
with subcontracting requirements. Input for GSA's annual ratings comes 
from a variety of sources. For example, GSA analyzes (1) market data to 
compare its lease costs with those for comparable properties in 
applicable markets (long-term leasing goal #1) and (2) the results of 
its realty transaction surveys, which measure the extent to which its 
tenant agency contacts were satisfied with completed leasing 
transactions (long-term leasing goals #2 and #3). Input for the fourth 
long-term goal--the percentage of customers (tenants) satisfied with 
their space--comes from GSA's tenant satisfaction survey, which is 
distributed to employees at one third of GSA's leased and owned 
properties every year.[Footnote 92] 

As specified in both the brokers' contracts and GSA's November 2005 
guide for administering the contracts, at the end of each contract 
year, GSA must enter the results of the brokers' annual performance 
evaluations into the National Institutes of Health's (NIH) Contractor 
Performance System--a nationwide government database used to collect, 
maintain, and disseminate contractor performance evaluation data to 
government agencies.[Footnote 93] The NIH system records annual 
contractor performance information related to eight evaluation factors. 
For four of the eight NIH evaluation factors--quality, cost control, 
timeliness, and business relations--the contractor's performance is 
rated using a scale of 0 (for "unsatisfactory" performance) to 5 (for 
"outstanding" performance).[Footnote 94] To address the remaining four 
evaluation factors, the NIH system asks each agency to record yes or no 
answers to a series of questions related to small business 
subcontracting plans, small disadvantaged business goals, and customer 
satisfaction. The specific questions include: 

* Did the contractor make a good faith effort to comply with its 
subcontracting plan consistent with the goals and objectives, 
reporting, and other aspects of the plan? 

* If this is a bundled contract,[Footnote 95] did the contractor meet 
the goals and objectives for small business participation? 

* Did the contractor make a good faith effort to comply with its 
subcontracting plan consistent with the goals and objectives, for small 
disadvantaged business participation, monetary targets for small 
disadvantaged business, and required notifications? 

* Would you recommend the selection of this firm again? 

The National Contracting Officer entered the brokers' annual 
evaluations into the NIH system on July 19, 2006. According to NBS 
program officials, each of the brokers met requirements for the first 
year of their contract. However, the ratings are limited, since as of 
March 31, 2006, the four brokers had completed 11 task orders subject 
to evaluation.[Footnote 96] 

Issues with GSA's Contracts, Guidance, and e-Lease Related to the 
Brokers' Performance Could Hamper Consistent Contract Administration: 

We identified numerous inaccuracies, inconsistencies, and omissions 
among and within GSA's contracts, guidance, and e-Lease system for 
evaluating the NBS brokers' performance, which could hamper achievement 
of one overall NBS program goal--consistent contract administration 
across GSA's 11 regions. Without clear, written, and unambiguous 
direction, including criteria and procedures for evaluating the 
brokers, it is unclear how GSA will ensure consistency in its regions' 
evaluations of the brokers' performance. The following are some of the 
issues we identified. 

First, GSA's contracts with the brokers and GSA's November 2005 
administrative guide for the program both include one long-term goal 
that is not applicable to the brokers' performance--regardless of the 
stage of GSA's evaluation. Specifically, both the contracts and the 
guide indicate that the brokers will be evaluated on the extent to 
which they assist GSA in reducing the amount of vacant space in GSA's 
inventory. According to the National Program Manager, GSA included the 
long-term measures in its contracts at the suggestion of the Office of 
Management and Budget, which wanted to ensure that the brokers would be 
held accountable for helping GSA meet its long-term leasing goals. 
However, because the brokers cannot influence GSA's progress in 
achieving this goal; GSA does not evaluate them on this measure. 

Second, during the course of our review, GSA's e-Lease system and its 
November 2005 administrative guide each specified one or more 
inapplicable measures for evaluating the brokers' completed task 
orders. As discussed, through at least July 31, 2006, the COTRs were 
required to rate the brokers' assistance in achieving three of GSA's 
long-term performance measures in e-Lease's final evaluation 
screen.[Footnote 97] Measuring a broker's assistance in these areas, 
however, relies on data that generally are not available when the COTRs 
complete their final task order evaluation. For example, while GSA uses 
market data to compare its lease costs with those for comparable 
properties in applicable markets,[Footnote 98] these data are retrieved 
semiannually and, thus, the results--even if provided to the COTRs-- 
generally would not be available when a COTR evaluates a completed task 
order. Likewise, the results of GSA's realty transaction surveys--which 
are used to determine whether the tenant agency (1) received its leased 
space when it was needed and (2) is satisfied with the overall leasing 
transaction--are not available until about 60 days after the COTR 
prepares the required final evaluation in e-Lease.[Footnote 99] GSA's 
November 2005 administrative guide also identifies an inapplicable 
measure--"the negotiated rate"--for assessing a broker's performance at 
the completion of each task order. According to NBS program officials, 
this measure refers to GSA's long-term goal of achieving rental rates 
below industry averages for commercial office space. While GSA analyzes 
these data semiannually for all its completed leasing actions 
agencywide, according to NBS program managers, such data (1) are always 
available and (2) are supposed to be used by the COTR to determine that 
the rental rate is reasonable for a particular market before signing a 
lease with a building owner. 

Third, as shown in appendix III, the evaluation criteria specified in 
GSA's relevant program sources, including the NBS contracts and GSA's 
administrative guide varies and, in our view, could create confusion 
among those responsible for overseeing and evaluating the brokers' 
performance. For example, while GSA's November 2005 administrative 
guide for the NBS contracts notes that the brokers' performance 
criteria and requirements are contained in section C.9 of the 
contracts, the guide specifically indicates that the brokers' 
performance on completed task orders will be evaluated for technical 
quality, documentation quality, timeliness, responsiveness, quality of 
assigned personnel, and the negotiated rental rate. As shown in 
appendix III, this represents only a portion of the numerous evaluation 
factors specified in the contracts for completed task orders and 
includes a measure--the negotiated rate--that cannot, in our view, be 
adequately assessed at the completion of a task order due to the 
unavailability of complete data. Similarly, referring to the NIH 
evaluations, GSA's guide for administering the contracts indicates that 
GSA will enter annual ratings related to three measures--the brokers' 
(1) technical performance, (2) compliance on subcontracting plans, and 
(3) help in achieving GSA's long-term leasing goals--but is silent 
about the other five measures for which GSA's contracts indicate 
ratings will be entered into NIH's system. 

Finally, although GSA's contracts with the brokers specify the 
applicable NIH criteria, including those related to "customer 
satisfaction" and "business relations," the performance-related 
terminology used elsewhere in the contracts does not conform to the 
terminology used for the NIH evaluations. This makes it difficult to 
determine how the various terms align and, consequently, how GSA will 
collect required information for the annual NIH evaluations. The lack 
of conformity in evaluation terminology is further exacerbated by the 
fact that neither the contracts nor GSA's administrative guide discuss 
how any of the performance measures specified in the contracts will be 
used as input for the NIH annual evaluations. Consequently, it is 
unclear how GSA intends to collect information needed to assess, among 
other things, NIH's measures. 

Throughout the course of our evaluation, we discussed these and other 
issues within and among GSA's (1) NBS contracts, (2) administration 
guidance, and (3) e-Lease evaluation screen for completed task orders 
with NBS program officials. The officials acknowledged the 
inaccuracies, inconsistencies, and omissions; however, according to the 
officials, these matters have not adversely affected GSA's 
administration of the contracts. The officials noted that any conflict 
between the contracts and the administrative guide is unintentional, 
and that the requirements in the contracts take precedence over GSA's 
program guidance. NBS program officials acknowledged that GSA will need 
to conform the contracts and the guide before proceeding with GSA's 
performance-based work allocations. However, as of October 31, 2006, 
neither the contracts nor GSA's guidance had been revised in any of the 
areas previously identified. 

Regarding e-Lease, NBS program managers explained that when they 
requested that e-Lease be modified for the NBS program, their vision 
was to construct it as a reflection of the NIH Contractor Performance 
System, including the NIH annual evaluation criteria. However, over 
time, they said that e-Lease had lost the "reporting intent originally 
envisioned," and that it had not evolved sufficiently to be fully used 
by NBS managers for assessing the brokers' performance. Thus, while e- 
Lease can be used by regional personnel to aggregate each region's 
rating information, the National Contracting Officer, with input from 
others, must then consider performance related to a variety of other 
evaluation criteria to develop an annual rating of each broker's 
performance. While additional actions would be needed to reflect GSA's 
original vision for e-Lease, GSA recently revised e-Lease to eliminate 
factors that the COTRs cannot assess when they complete their 
evaluations of completed task orders. 

Conclusions: 

GSA has implemented controls to prevent conflicts of interest in its 
NBS leasing program and appears to have resolved the conflicts that 
have been disclosed thus far. However, GSA has not (1) assessed the 
effectiveness of its controls; (2) modified the NBS contracts to 
require additional recommended controls; or (3) as applicable, ensured 
compliance with FISMA's requirements. GSA's lack of action in these 
areas raises questions about the adequacy of its efforts to address 
potential conflict-of-interest issues and to protect its procurement- 
sensitive information. More specifically: 

* Because GSA's initial (October 2005) and follow-up (August 2006) 
visits to the two dual-agency brokers were limited in scope, GSA does 
not know, more than 1-1/2 years after beginning work under the NBS 
contracts, whether the brokers' internal controls are adequate to 
preclude unauthorized disclosures. GSA's October 2005 recommendations 
for additional controls, which GSA based on visual inspections and 
interviews alone, suggest that, in GSA's view, the controls were not 
sufficient to protect GSA's proprietary information. Until GSA performs 
a complete evaluation of the dual-agency brokers' controls, it cannot 
be sure that it has identified, and made recommendations to address, 
any remaining weaknesses. 

* Because GSA has not revised its contracts with the tenant-only firms 
to include, at a minimum, the three controls that currently apply only 
to dual-agency firms but address situations also faced by tenant-only 
firms,[Footnote 100] these firms may not be aware of all requirements 
applicable to their disclosure of potential or actual conflicts of 
interest. 

* GSA has not complied with FISMA's requirements for safeguarding 
information and information systems used on behalf of GSA--requirements 
that have been applicable since April 2005, when work began on the NBS 
contracts. Until GSA complies with these requirements--including (1) 
fully assessing the risk and magnitude of harm that could result from 
the misuse of information and information systems used on behalf of 
GSA; (2) requiring the establishment of controls appropriate to the 
assessed risk for each of the four brokers and their subcontractors; 
and (3) as needed, testing the effectiveness of the controls--it cannot 
ensure that the information and information systems used by the brokers 
on its behalf are being safeguarded appropriately. Moreover, until GSA 
conducts the required FISMA risk assessments, it cannot modify the NBS 
contracts to establish appropriate, risk-based controls. 

Because so few commission-eligible task orders have been completed, GSA 
has little information on the extent to which broker commissions will 
not be paid. However, the risk of nonpayment appears to be limited, in 
part, because of the requirement that building owners pay GSA's broker 
if they intend to pay their own. As the program continues, it will be 
important for GSA to monitor commission payments to ensure that the 
brokers are being compensated for their services, where required. Such 
monitoring will be even more important to test the efficacy of GSA's 
controls for preventing the brokers from favoring building owners who 
offer them excessive commissions. Actions such as the board of subject 
matter experts that GSA is establishing and its contract to determine 
applicable commission rates in major markets should be useful in 
assessing the reasonableness of the brokers' negotiated commission 
rates. However, in our view, additional controls still will be needed 
to ensure that the brokers do not improperly increase the government's 
rental costs. Specifically, until such time as GSA establishes 
effective controls to mitigate the brokers' inherent conflict of 
interest by, among other possible actions, precluding them from 
accepting commissions in excess of the rate approved by the COTR and 
included in GSA's solicitation for offers, there will remain at least 
the perception that the brokers might favor--at the government's 
expense--building owners who pay higher commissions. 

Although GSA expected savings to accrue to the government from the use 
of the NBS contracts, both from reductions in (1) rent attributable to 
commission credits and the brokers' greater knowledge of the commercial 
real estate market and (2) agency costs (for fees, administrative 
expenses, and personnel), as of October 31, 2006, GSA had not developed 
processes to quantify most of the expected savings. Until such time as 
it does, GSA will not know whether, or to what extent, using the NBS 
contracts has resulted in savings and will not be able to set targets 
for future savings, including those related to improvements in 
agencywide operational efficiencies that GSA now expects will result 
from the use of the NBS contracts. 

GSA has taken numerous actions to improve the reliability of its data 
for the NBS program. These actions should assist GSA in its efforts to 
distribute its initial workload as equally as possible among the 
brokers. Furthermore, recognizing that variations in its regional 
distributions among the brokers are unavoidable, GSA has agreed to 
modify the language of its administration guide to conform to the 
contracts, specifying that its initial distributions of task orders 
will be done "as equally as possible," rather than "equal," across its 
regions. GSA also has agreed to provide greater management attention of 
its distributions of task orders for market data and expedited leasing 
transactions, which should help ensure that its distribution of these 
task orders do not disproportionately advantage one or more of the 
brokers. However, as of October 31, 2006, GSA had not agreed to collect 
data needed to assess the extent to which its distributions to the 
brokers were for similar geographic areas (e.g., rural or urban)--a 
distribution criterion specified for the initial period of the 
contracts. Finally, while GSA intends to develop guidance and 
procedures for implementing performance-based distributions before 
altering its current distribution approach, as of October 31, 2006, it 
had not committed to clarify the number and types of task orders needed 
to establish a record of the brokers' performance before embarking on 
performance-based distributions. 

With just over 1 year of experience under the NBS contracts, it is too 
early to assess the effectiveness of GSA's new organizational structure 
and management tools for overseeing the NBS program. Such an 
assessment, however, will be essential for a variety of reasons. For 
example, given diminishing in-house resources, the NBS contracts are 
critical to the success of GSA's overall leasing program. GSA expects 
to use the NBS contracts to accomplish 90 percent of its workload by 
2010. Furthermore, over 55 percent of federal employees rely on GSA to 
provide workspace at a cost of about $3.6 billion annually. Thus, as 
acknowledged in GSA's 2003 analysis for entering into the NBS 
contracts, "no part of day-to-day operations has a greater financial 
consequence than the acquisition of real estate by lease." While both 
the new organizational structure and the management tools hold promise 
of stronger, more consistent contract management and oversight than GSA 
formerly provided, no program evaluations or audits have yet 
demonstrated their effectiveness. Given the magnitude of the program 
and its importance to GSA's entire leasing program, it will be critical 
to continually assess whether the changes GSA has implemented have 
improved its oversight of its brokers and its regions, as intended. 

Finally, inaccuracies, inconsistencies, and omissions among and within 
its contracts, the administrative guidance, and the e-Lease system, 
raise questions about how GSA will ensure consistency in its regions' 
evaluations of the brokers' performance. Various problems--such as 
inapplicable evaluation criteria; variability in the criteria 
identified for use at different evaluation stages by the contracts, 
GSA's administrative guide, and e-Lease; inconsistencies between GSA's 
and NIH's performance-related terminology; and omissions in GSA's 
administrative guide--make it difficult for GSA to clearly demonstrate 
to the brokers and others what it is evaluating at the various rating 
stages and how its evaluations align with NIH's annual governmentwide 
evaluations. Moreover, despite GSA's position that these issues have 
not adversely affected its management of the contracts, at a minimum, 
they create unnecessary obstacles for personnel conducting the 
evaluations. Avoiding unnecessary obstacles is particularly important 
because GSA is relying on realty specialists, many of whom have little 
previous experience in contract administration, including evaluating 
the quality of services provided by the brokers. Moreover, the 
administrative guide prescribes procedures and formats for them to 
follow to promote consistent task order administration among GSA's 11 
regional offices. Thus, it is essential that the NBS contracts, 
administrative guide, and e-Lease system conform, and that each 
provides an accurate and a consistent and clear approach to performance 
evaluation. While issues involving the implementation of an evaluation 
approach for a program of this size are not surprising, as of October 
31, 2006, with one exception involving the final e-Lease evaluation 
screen, GSA had not taken action on the issues we identified. 

Recommendations for Executive Action: 

To improve GSA's overall management of the NBS program, we recommend 
that the Administrator of GSA take the following 11 actions: 

1. Assess the adequacy of the two dual-agencies' conflict wall controls 
and recommend actions, if applicable, to correct any identified 
weaknesses. 

2. Modify the two dual-agency contracts to ensure that GSA can enforce 
recommendations resulting from its conflict wall inspections. 

3. Establish consistent dual-agency and tenant-only conflict-of- 
interest contract requirements, including, at a minimum, the three 
conflict-of-interest requirements that address situations also faced by 
the two tenant-only firms. 

4. Assess the risk and magnitude of harm that could result from 
unauthorized access to, or use, disclosure, disruption, modification, 
or destruction of, GSA information collected or maintained by the four 
brokers (and their subcontractors) and the information systems used by 
the brokers on behalf of GSA. 

5. Modify the four NBS brokers' contracts to include controls 
appropriate to the assessed risk to ensure that the brokers and their 
subcontractors safeguard information and information systems in 
accordance with FISMA. 

6. Test the effectiveness of federal information security policies, 
procedures, and practices related to the NBS program, including, as 
appropriate, broker controls for safeguarding GSA's information. 

7. Establish additional controls to mitigate the inherent conflict of 
interest created by allowing the brokers to represent the government, 
while also negotiating their commissions with building owners. 

8. Develop processes for quantifying expected savings from (1) rent 
reductions attributable to the brokers' greater knowledge of the 
commercial real estate market and (2) agency savings associated with 
reduced fees, administration expenses, personnel costs, and operational 
efficiencies associated with using the NBS contracts. 

9. As part of GSA's effort to prepare for performance-based 
distribution decisions, clarify the number and types of completed task 
orders needed to establish a record of the brokers' performance. 

10. Begin collecting data on GSA's distributions of task orders for 
rural and urban areas (i.e., similar geographic areas) during the 
initial period of the contracts. 

11. Clarify the NBS contracts and the administrative guide to ensure 
that the evaluation measures used are applicable to the brokers' 
performance at each stage of evaluation. Regarding the brokers' 
required annual performance evaluations, revise the terminology in 
GSA's contracts and administrative guide, as appropriate, to conform to 
NIH's required evaluation factors. In addition, ensure that the various 
evaluation stages and processes are properly and adequately described 
in GSA's administrative guide. 

Agency Comments: 

We provided a draft of this report to GSA for its review and comment. 
In its written comments, GSA stated that it is pleased with the results 
of the first year of the NBS program. However, GSA noted that the 
agency had experienced challenges in implementation due to the 
magnitude and impact of the program. GSA stated that it had already 
initiated a number of actions to address issues identified in this 
report and agreed to "work on the implementation" of our 
recommendations. GSA's comments are reprinted in appendix IV. GSA also 
provided technical comments, which we incorporated as appropriate. 

As arranged with your offices, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days from the report date. At that time, we will send copies to 
interested congressional committees, the Administrator of GSA, the four 
NBS brokers, and each of the other entities that we interviewed. Copies 
will also be made available to other interested parties on request. In 
addition, the report will be available at no charge on GAO's Web site 
at [Hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-2834 or GoldsteinM@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix V. 

Signed by: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to determine (1) how the General Services 
Administration (GSA) is attempting to prevent conflicts of interest in 
its national broker services (NBS) program and to safeguard information 
and information systems used by the brokers on GSA's behalf; (2) how 
the brokers will be compensated for their services and what, if any, 
controls exist to minimize the government's rental costs; (3) what, if 
any, savings have accrued to the government; (4) how GSA is 
distributing its leasing workload among the brokers; (5) how GSA is 
overseeing the brokers; and (6) how GSA is measuring the brokers' 
performance. 

To address our overall reporting objectives, we obtained, among other 
materials, information on (1) GSA's leasing practices, including data 
on the volume and cost of GSA's annual leasing; (2) time frames for 
completing GSA's leasing transactions (task orders); (3) the number and 
identity of the NBS contract bidders; (4) the bid protests resulting 
from GSA's contract awards, including information about the protests' 
resolution; and (5) GSA's organizational structure and programmatic 
responsibilities. Specific to each of our objectives, we also reviewed 
and analyzed, among other things, GSA's NBS contracts; contract 
amendments through March 31, 2006--the end of the first contract year; 
GSA's September 2005 guide for administering the contracts, as well as 
its updated November 2005 guide;[Footnote 101] and previous reports by 
GSA's Office of the Inspector General and our Office of General Counsel 
related to GSA's contracting for leasing services. In addition, we 
identified and analyzed GSA's policies, procedures, and controls 
related to our six reporting objectives and discussed the policies, 
procedures, and controls with cognizant GSA officials, particularly 
those responsible for managing the NBS program and for ensuring 
compliance with requirements in the Federal Information Security 
Management Act of 2002 (FISMA). We also interviewed officials from 10 
public-and private-sector entities--3 large, private companies; 
4 state agencies; and 3 other federal agencies--that contract for 
leasing services to determine, among other things, how these parties 
address conflict-of-interest issues and compensate their brokers. To 
gain the views and understand the experiences of industry 
representatives related to our objectives, we interviewed 
representatives from nine large nationwide brokerage firms, including 
the four NBS brokers, and from six commercial real estate trade 
associations. Furthermore, to obtain information about how localities 
regulate conflict-of-interest and broker compensation issues, we 
interviewed regulatory officials from four states and the District of 
Columbia. We performed our work between November 2004 and December 2006 
in accordance with generally accepted government auditing standards. A 
detailed description of our scope and methodology for assessing each of 
our reporting objectives and for selecting other entities for 
interviews follows. 

Scope and Methodology for Assessing Our Reporting Objectives: 

First, to determine how GSA is attempting to prevent conflicts of 
interest in its NBS program and to safeguard information and 
information systems used by the brokers on GSA's behalf, we reviewed 
and analyzed, among other things, federal conflict-of-interest 
requirements contained in the Federal Acquisition Regulation; GSA's 
internal request to deviate from these requirements, as well as GSA's 
November 11, 2003, approval of the waiver request; GSA's NBS program 
guidance; GSA's contracts with the NBS brokers; and GSA's contract 
amendments through March 31, 2006. Our analysis focused on the 
policies, procedures, and controls GSA established for both the two 
dual-agency NBS firms and the two tenant-only NBS firms. We interviewed 
NBS program officials about GSA's policies, procedures, controls, and 
contractual remedies in the event that the NBS brokers do not disclose 
actual or potential conflicts and queried the officials about the 
number, nature, and disposition of conflicts of interest identified 
through March 31, 2006. In addition, we interviewed representatives 
from 10 public-and private-sector entities (3 large, private companies; 
4 state agencies; and 3 other federal agencies) that also contract for 
leasing services and regulators in 4 states and the District of 
Columbia to compare their conflict-of-interest controls with those used 
by GSA. We also interviewed the four NBS brokers to obtain their 
perspectives on GSA's conflict wall requirements. We included 
information obtained from these entities, where relevant and 
applicable, in the body of this report. Through discussions with GSA's 
Public Buildings Services Information Security Manager, we also 
obtained and reviewed the results of GSA's October 2005 site compliance 
(inspection) reports of the two dual-agency brokers' conflict walls and 
discussed, among other matters, (1) information related to the scope of 
the inspections, (2) GSA's recommendations for broker improvements, (3) 
the status of GSA's efforts to ensure that the brokers adopt its 
recommendations, and (4) the timing of GSA's future conflict wall 
inspections. With NBS program officials, we also discussed information 
related to GSA's August 2006 follow-up site visits to the two dual- 
agency brokers. In addition, we visited the dual-agency firms and 
observed their physical and electronic access controls; however, we did 
not test the adequacy of these controls. To assess GSA's compliance 
with requirements for protecting information and information systems 
used by the brokers on GSA's behalf, we reviewed and analyzed FISMA and 
discussed, among other matters, the status of broker interfaces with 
GSA's electronic e-Lease system; recommendations resulting from GSA's 
October 2005 conflict wall inspections; the results of GSA's annual 
FISMA review, dated October 11, 2005; and the status of action to 
incorporate appropriate FISMA controls into GSA contracts with the 
brokers. 

Second, to ascertain how the four NBS brokers will be compensated for 
their services and what, if any, controls exist to minimize the 
government's rental costs, we reviewed and analyzed, among other 
materials, the NBS contracts; contract amendments through March 31, 
2006; GSA's administration guidance; a December 2002 GSA Inspector 
General report on GSA's prior use of 29 contracts for leasing 
services;[Footnote 102] a May 1999 opinion from GSA's General Counsel 
concerning the process for rebating broker commissions under GSA's 
prior contracts; and two GAO legal opinions related to GSA's proposal 
to enter into the NBS contracts.[Footnote 103] We also reviewed GSA's 
2003 business analysis for entering into the NBS contracts,[Footnote 
104] including GSA's description of private sector compensation 
practices. However, we did not evaluate GSA's analysis. In addition, we 
assessed GSA's policies, procedures, and controls related to the terms 
of payment for broker services and, through discussions with NBS 
program officials, obtained data on the number and amount of 
commissions accrued by the NBS brokers as of March 31, 2006, as well as 
the reason why a commission was not paid. Through discussions with NBS 
program officials, we also ascertained how GSA intends to ensure that 
its (1) leasing rates under the NBS program are reasonable and (2) 
brokers do not improperly increase the government's rental costs by 
favoring building owners who may offer them higher commissions. To 
obtain broker views on the risk of unpaid commissions, we interviewed 
representatives from nine nationwide brokerage firms, including the 
four NBS brokers. In addition, to compare, among other matters, the 
compensation method used under the NBS contracts with those used by 
other entities as well as the controls others use to help ensure that 
their brokers do not favor building owners who offer higher 
commissions, we interviewed representatives from 10 other public-and 
private-sector entities that contract for real estate services. 
Finally, to obtain information on the views and experiences of others 
related to commercial real estate compensation practices, we 
interviewed representatives from nine nationwide commercial real estate 
brokerage companies, including the four NBS brokers; six national 
commercial real estate associations; and regulators from four states 
and the District of Columbia. We included information obtained from 
these entities, where relevant and applicable, in the body of this 
report. 

Third, to determine what, if any, savings have accrued to the 
government from GSA's use of the NBS contracts, we reviewed and 
analyzed, among other materials, GSA's 2003 business analysis for 
entering into the NBS contracts, including its description of various 
expected savings; the brokers' response to GSA's request for contract 
proposals, particularly the brokers' offers related to the amount 
(percentage) of their commission they agreed to forgo and, instead, 
credit to the government--in the form of a commission credit--for 
commission-eligible task orders; and GSA's policies, administration 
guidance, procedures, and controls related to commission credits. We 
discussed GSA's policies, procedures, and controls for, among other 
things, tracking savings from commission credits as well as the status 
of GSA's efforts to quantify savings from other sources with NBS 
program officials. In addition, we obtained data on commission credits 
as of March 31, 2006, and--through discussions with NBS program 
officials--attempted to obtain similar information on GSA's other 
expected savings. However, as discussed in the body of this report, 
such information was not available. To ascertain whether other entities 
require commission credits and experience savings from using contracts 
for leasing services, we interviewed, among other parties, 
representatives from 10 public-and private-sector entities that 
contract for real estate services. In addition, through interviews with 
officials from nine nationwide brokers, including the four NBS brokers, 
we ascertained their views on the extent to which commission credits 
are used in the commercial real estate industry. We included 
information obtained from these entities, where relevant and 
applicable, in the body of this report. 

Fourth, to ascertain how GSA is distributing its leasing workload among 
the NBS brokers, we reviewed and analyzed, among other materials, the 
contracts and amendments through March 31, 2006; GSA's November 2005 
guide for administering the NBS program; and GSA's monthly and year-end 
data reports on its distribution of task orders among brokers. With NBS 
program officials, we discussed among other matters, GSA's policies, 
procedures, controls, processes, and first-year goals for distributing 
its workload; GSA's plans to transition to performance-based workload 
allocations; and the results of GSA's year-end distributions, including 
the challenges associated with attempting equal distributions and the 
possible reasons for the variability in GSA's regional distributions 
among the brokers as of March 31, 2006. At several points throughout 
our review, we identified errors, inconsistencies, and missing data in 
GSA's monthly and various year-end data reports for the first year of 
the contracts as well as other sources of NBS program-related data. We 
discussed GSA's various data reports, including issues related to data 
reliability, with NBS program officials. We also discussed why these 
problems had occurred and the scope and status of GSA's actions to 
correct them. On the basis of GSA's efforts to correct its data, we 
believe the data provided to us on September 1, 2006, are sufficiently 
reliable for use in reporting aggregate programwide and regional 
information on the number and size of task orders distributed to the 
brokers. Finally, through interviews with representatives from 10 
public-and private-sector entities that contract for leasing services, 
we determined how others distribute their leasing workload among 
brokers. We included information obtained from these entities, where 
relevant and applicable, in the body of this report. 

Fifth, to determine how GSA is overseeing the four NBS brokers, we 
reviewed and analyzed, among other materials, the NBS contracts and 
amendments through March 31, 2006; GSA's November 2005 guide for 
administering the NBS program, including its descriptions of the 
authorities, roles, and responsibilities of key national and regional 
NBS program officials; relevant training material, such as briefing 
slides related to GSA's NBS certification program and e-Lease system; 
GSA's March 2003 plan for implementing the NBS contracts; GSA's 
December 2002 Inspector General's report on GSA's administration of its 
29 prior contracts for leasing services; information about the evolving 
role of GSA's realty specialists; and GSA's policies, procedures, and 
controls for overseeing the NBS brokers. We discussed with NBS program 
officials, among other matters, GSA's actions to address issues 
identified in the December 2002 Inspector General report, including 
GSA's implementation of new management tools intended to enhance its 
oversight of the brokers; the evolving role of GSA's realty 
specialists; and GSA's new organizational structure for overseeing the 
NBS brokers. To identify changes in GSA's contract oversight, we 
obtained, among other documentation, information on the number of GSA 
staff assigned, by position, to oversee its brokers over time. 

Finally, to ascertain how GSA is measuring the brokers' performance, we 
reviewed and analyzed GSA's contracts with the NBS brokers; the 
contracts' amendments as of March 31, 2006; printouts of GSA's e-Lease 
evaluation screens as of July 31, 2006; GSA's administrative guide for 
the NBS program; relevant training material, such as manuals and 
briefing slides related to GSA's e-Lease evaluation screens; the long- 
term performance goals established for GSA by the Office of Management 
and Budget, including information on the surveys that GSA uses to 
measure its progress in meeting these goals; information about the 
National Institutes of Health's Contractor Performance System--the 
nationwide government database used to collect, maintain, and 
disseminate contractor performance evaluation data to government 
agencies; and the four brokers' first annual ratings for the period 
ending March 31, 2006. During the course of our review, we identified 
and discussed inconsistencies among and within (1) the NBS contracts, 
(2) GSA's administrative guide, and (3) GSA's e-Lease evaluation 
screens related to the applicability of various evaluation criteria 
with NBS program officials and, through discussions with them, 
ascertained the status of GSA's actions to correct the inconsistencies. 
We also discussed, among other matters, GSA's evaluation processes and 
information about the brokers' performance for the first year of the 
NBS contracts. In addition, to obtain, among other things, information 
on the extent of feedback provided to the brokers by GSA we attended 
two quarterly meetings held between GSA and each of its brokers to 
discuss, among other matters, each broker's interim performance, as of 
December 31, 2005. We also interviewed representatives from 9 
nationwide brokerage firms, including the 4 NBS brokers, and 
representatives from 10 other public-and private-sector entities that 
contract for leasing services to obtain their views about GSA's 
performance measures. We included information obtained from these 
entities, where relevant and applicable, in the body of this report. 

Methodology for Selecting Other Entities for Interviews: 

To obtain the views of other entities that contract for leasing 
services, including information on how they (1) compensate their 
brokers and (2) identify and manage their brokers' actual or potential 
conflicts of interest, we interviewed officials from 10 public-and 
private-sector entities--3 large, private companies; 4 state agencies; 
and 3 other federal agencies. While each of these entities contracts 
for leasing services, none of them are directly comparable to the 
volume of GSA's annual leasing transactions. In addition, we 
interviewed industry representatives at 9 nationwide brokerage firms 
and 6 real estate associations and contacted officials from 5 local 
real estate regulators. We included information obtained from these 
parties, as relevant and appropriate, in the body of the report. We 
attempted to interview officials from other large, private companies 
and nationwide brokerage firms; however, our requests for interviews 
were unsuccessful. While additional interviews may have provided more 
information, it is unclear whether that information would have been 
materially different from information obtained during our interviews of 
the officials previously described. Therefore, given our scope and 
reporting objectives and the number and range of relevant parties we 
successfully interviewed, we concluded that the absence of information 
from these additional sources did not materially affect our findings, 
conclusions, and recommendations. Our method for selecting entities for 
interviews follows. 

Selection of Entities That Contract for Leasing Services: 

To obtain the views of other entities that also contract for leasing 
services, we interviewed officials from 10 private-and public-sector 
entities. First, to identify large, private companies that contract for 
real estate services, we reviewed the client lists of the 16 nationwide 
brokerage firms that bid on GSA's NBS contracts and identified 83 
private sector clients.[Footnote 105] We then sorted the brokers' 
corporate clients on the basis of the volume (square footage) of lease 
transactions reported to GSA. From the volume, we developed a list of 
the brokers' top 10 corporate clients and attempted to interview 3 to 5 
of them--starting with those with the greatest volume. In total, we 
contacted 7 of the 10 large, private companies, but only 3--Ford Motor 
Land, Tyco International, and SBC Telecom--granted us interviews. The 3 
large, private companies ranked third, fourth, and sixth, respectively, 
on our list of 10 large, private companies with the greatest volume of 
leasing transaction, with transactions ranging from 48 million to 189 
million square feet in the preceding 3-year period. 

Second, to obtain the perspectives of state agencies that contract for 
leasing services, we--once again--reviewed the client lists of the 16 
nationwide brokerage firms that bid on GSA's NBS contracts and, on the 
basis of these lists, identified 13 states that contract for leasing 
services. However, these lists did not contain complete information on 
the volume (size, number of transactions, or dollar value) of the 
states' contracted leasing services. Since we could not rank the states 
on the basis of the volume of their transactions, we selected 4 states 
on the basis of their geographic location and interviewed the 
appropriate officials from each of these states--California (West), 
Florida (South), Michigan (North), and New York (East). 

Finally, absent a single source of information for identifying and 
selecting other federal agencies that also contract for leasing 
services, we used multiple methods. For example, we reviewed and 
analyzed (1) GSA's Federal Real Property Profile, Overview of the 
United States Government's Owned and Leased Real Property, as of 
September 30, 2004, report; (2) GSA's database on federal 
procurements;[Footnote 106] (3) the client lists of the 16 nationwide 
brokerage firms that bid on the NBS contracts; and (4) discussions with 
GAO colleagues and agency contacts familiar with federal real property, 
including the director of the Federal Facilities Council,[Footnote 107] 
a member of the Federal Real Property Council Committee,[Footnote 108] 
and GSA's previous NBS National Program Manager. However, each of these 
sources had limitations, particularly with regard to whether the 
federal agency actually contracted for its leasing services and, if so, 
the volume of its leasing transactions. Consequently, based on our 
discussions and analyses of available sources, we developed a list of 
federal agencies that may contract for a portion of their leasing 
services and contacted officials from 3 agencies--the Department of 
Veterans Affairs, the United States Postal Service, and the Federal 
Deposit Insurance Corporation--that we could confirm had contracts for 
leasing services. 

Selection of Industry Representatives: 

To gain the views and understand the experiences of industry 
representatives related to our objectives, we interviewed 
representatives from 9 nationwide brokerage firms and 6 national 
commercial real estate associations. Four of the 9 nationwide brokerage 
firms were awarded NBS contracts,[Footnote 109] while the remaining 5 
were unsuccessful bidders.[Footnote 110] To identify the 5 unsuccessful 
nationwide brokers, we reviewed GSA's list of 16 nationwide brokers 
that submitted proposals for the NBS contracts and eliminated the 4 
successful NBS bidders that we otherwise intended to interview. To 
prevent any bias in our selection method, we randomized the remaining 
list of 12 nationwide brokers and categorized them--in the same random 
order--according to whether, as a result of our research, they appeared 
to be dual-agency or tenant-only firms. Starting at the top of each 
randomized list, we contacted each broker in turn. Our goal was to hold 
between three to five interviews with the 12 unsuccessful nationwide 
bidders. In total, we were granted interviews with representatives of 5 
of these 12 firms--4 dual-agency firms and 1 tenant-only firm. To gain 
a fuller understanding of the possible differences between dual-agency 
and tenant-only broker views, we attempted to interview at least one 
more tenant-only broker from the randomized list of unsuccessful, 
nationwide bidders, but our multiple requests for an interview were not 
successful. Similarly, while we attempted to obtain the views of 
representatives from 3 nationwide brokerage firms that did not bid on 
the NBS contracts, our requests for interviews were also unsuccessful. 
Finally, to obtain the views of representatives of national 
associations that promote the real estate industry, we identified 
relevant real estate associations, using the Internet, and identified 
12 possible real estate associations.[Footnote 111] From discussions 
with GAO colleagues familiar with the real estate industry, we narrowed 
the list from 12 to 6 associations that, in our collective view, were 
most likely to have relevant information for our reporting objectives. 
We interviewed officials from each of these six associations--(1) 
Building Owners and Managers Association International, (2) CoreNet 
Global, (3) the Institute of Real Estate Management, (4) the National 
Association of Industrial and Office Properties, (5) the Society of 
Industrial and Office REALTORS®, and (6) the Real Estate Roundtable. 
However, with the exception of the Institute of Real Estate Management, 
the associations' representatives were unable to supply relevant 
information related to our reporting objectives. 

Selection of Local Real Estate Regulators: 

To obtain the perspectives on how localities regulate broker conflict- 
of-interest and compensation issues, we reviewed and analyzed GSA's 
2004 federal real property profile and identified the top five 
jurisdictions--California, the District of Columbia, Maryland, Texas, 
and Virginia--with the most square footage of federally leased space 
and interviewed representatives from these jurisdictions.[Footnote 112] 
According to GSA's 2004 federal real property profile, about 35 percent 
of all federally leased space is located within these five local 
jurisdictions. 

[End of section] 

Appendix II: Potential Conflicts Identified and GSA's Resolution of the 
Potential Conflicts, as of March 31, 2006: 

1; 
Date potential conflict identified: 5/25/05; 
Broker and square footage involved: Broker A; 
5,000 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA canceled the task order 
because the customer agency changed its space requirements. 

2; 
Date potential conflict identified: 7/13/05; 
Broker and square footage involved: Broker A; 
2,800 square feet; 
Description of potential conflict: The broker disclosed that it managed 
at least one building with space that might meet GSA's needs; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

3; 
Date potential conflict identified: 7/25/05; 
Broker and square footage involved: Broker A; 
200,000 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

4; 
Date potential conflict identified: 7/29/05; 
Broker and square footage involved: Broker B; 
4,700 square feet; 
Description of potential conflict: The broker disclosed that it managed 
at least one building with space that might meet GSA's needs; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

5; 
Date potential conflict identified: 8/1/05; 
Broker and square footage involved: Broker A; 
10,000 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

6; 
Date potential conflict identified: 8/8/05; 
Broker and square footage involved: Broker A; 
400,000 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

7; 
Date potential conflict identified: 8/10/05; 
Broker and square footage involved: Broker B; 
14,566 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

8; 
Date potential conflict identified: 8/17/05; 
Broker and square footage involved: Broker C; 
N/A[A]; 
Description of potential conflict: The broker requested advice on 
whether its work on another type of contract for another agency 
represented a conflict of interest; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

9; 
Date potential conflict identified: 9/9/05; 
Broker and square footage involved: Broker A; 
8,598 square feet; 
Description of potential conflict: The broker disclosed that its 
subcontractor represented at least one building owner with space that 
might meet GSA's needs; 
GSA's resolution of potential conflict: GSA required the subcontractor 
to sign a nondisclosure agreement and agree not to negotiate on behalf 
of a property owner on a GSA transaction in the same market for the 
term of the contract and subcontract. 

10; 
Date potential conflict identified: 10/20/05; 
Broker and square footage involved: Broker A; 
80,000 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

11; 
Date potential conflict identified: 10/26/05; 
Broker and square footage involved: Broker B; 
26,851 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA determined that there was 
no conflict. 

12; 
Date potential conflict identified: 11/14/05; 
Broker and square footage involved: Broker B; 
6,500 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

13; 
Date potential conflict identified: 12/08/05; 
Broker and square footage involved: Broker C; 
12,000 square feet; 
Description of potential conflict: The broker disclosed that it could 
not find a subcontractor who could meet the conflict wall requirements 
and wanted to decline the task order; 
GSA's resolution of potential conflict: GSA advised the broker that it 
could not decline the task order. The broker subsequently identified a 
subcontractor without a conflict. 

14; 
Date potential conflict identified: 12/14/05; 
Broker and square footage involved: Broker A; 
2,664 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

15; 
Date potential conflict identified: 12/15/05; 
Broker and square footage involved: Broker C; 
1,999 square feet; 
Description of potential conflict: The broker disclosed that it wanted 
to use a subcontractor that represented at least one building owner 
with space that might meet GSA's needs, although not as an exclusive 
agent; 
GSA's resolution of potential conflict: GSA determined that this was 
not a conflict, but required the subcontractor to confirm that it had a 
conflict wall in place. 

16; 
Date potential conflict identified: 12/20/05; 
Broker and square footage involved: Broker B; 
80,000 square feet; 
Description of potential conflict: After initiation of the task order, 
the broker disclosed that it might have a future conflict due to a 
possible merger; 
GSA's resolution of potential conflict: GSA determined that there 
currently was no conflict; 
but advised the broker to report a potential conflict, if one 
materialized. 

17; 
Date potential conflict identified: 1/11/06; 
Broker and square footage involved: Broker B; 
6,500 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

18; 
Date potential conflict identified: 1/12/06; 
Broker and square footage involved: Broker B; 
5,115 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

19; 
Date potential conflict identified: 2/16/06; 
Broker and square footage involved: Broker A; 
192,050 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

20; 
Date potential conflict identified: 3/01/06; 
Broker and square footage involved: Broker A; 
10,699 square feet; 
Description of potential conflict: The broker disclosed that it 
represented at least one building owner with space that might meet 
GSA's needs; 
GSA's resolution of potential conflict: GSA reassigned the task order 
to another broker without a conflict. 

Source: GAO analysis of GSA data. 

Note: As of March 31, 2006, GSA's conflict log listed 22 potential 
conflicts of interest. However, 2 of the entries involved GSA regional 
inquiries requesting general advice from the National Contracting 
Officer. NBS officials agreed that the 2 entries should be omitted as 
potential conflicts of interest. 

[A] According to the National Contracting Officer, the potential 
conflict did not relate to a specific task order; therefore, the amount 
of square footage is not applicable. 

[End of table] 

[End of section] 

Appendix III: Applicable Performance Evaluation Criteria by Stage of 
Evaluation, as Specified by Various Sources: 

Completion of activities within each task order. 

Evaluation stage/criterion specified for evaluation: Technical quality; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Document quality-
-quality of documentation submitted to the Contracting Officer's 
Technical Representative; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Timeliness; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Responsiveness on 
activity--keeping appropriate parties informed of project status; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Quality of 
personnel assigned; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: The negotiated 
rate; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e- Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Completion of each task order. 

Evaluation stage/criterion specified for evaluation: All criteria 
specified above for completed task order activities; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Extent to which 
the brokers helped GSA meet its long-term performance goals 
(specifically, as follows A-D): A: Average lease rate meets GSA's 
fiscal year target; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X[A]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Extent to which 
the brokers helped GSA meet its long-term performance goals 
(specifically, as follows A-D): B: Leasing transaction meets GSA's 
tenant satisfaction target; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X[A]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Extent to which 
the brokers helped GSA meet its long-term performance goals 
(specifically, as follows A-D): C: Space delivered within client time 
frame; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X[A]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Extent to which 
the brokers helped GSA meet its long-term performance goals 
(specifically, as follows A-D): D: Percentage of nonrevenue producing 
(vacant) space in GSA's leasing inventory; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Is lease rate 
above market value?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: X[A]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Overall 
responsiveness on task order--coordination with GSA, tenant agencies, 
city and state officials, offerors, and others; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Quality of 
personnel assigned; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Quality of 
documents submitted to the Contracting Officer and others; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Compliance with 
subcontracting plans; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Annual evaluation. 

Evaluation stage/criterion specified for evaluation: All criteria 
specified above for completed task orders; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: X; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Extent to which 
broker has helped GSA meet its long-term performance goals; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Compliance with 
subcontracting plans; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Technical 
performance of services; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: X; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: [Empty]. 

Evaluation stage/criterion specified for evaluation: Quality of product 
or service; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X. 

Evaluation stage/criterion specified for evaluation: Cost control; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X[A]. 

Evaluation stage/criterion specified for evaluation: Timeliness of 
performance; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X[A]. 

Evaluation stage/criterion specified for evaluation: Business 
relations; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X[A]. 

Evaluation stage/criterion specified for evaluation: Did the contractor 
make a good faith effort to comply with its subcontracting plan?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X. 

Evaluation stage/criterion specified for evaluation: Did the contractor 
meet the goals and objectives for small business participation?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X. 

Evaluation stage/criterion specified for evaluation: Did the contractor 
make a good faith effort to comply with its subcontracting plan 
consistent with the goals and objectives, for small disadvantaged 
business participation?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X. 

Evaluation stage/criterion specified for evaluation: Is/Was the 
contractor committed to customer satisfaction?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X[A]. 

Evaluation stage/criterion specified for evaluation: Would you 
recommend the selection of this firm again?; 
GSA's contracts with the NBS brokers: Completion of activities within 
each task order: [Empty]; 
GSA's November 2005 administration guide: Completion of activities 
within each task order: [Empty]; 
GSA's e-Lease electronic evaluation screens as of July 31, 2006: 
Completion of activities within each task order: [Empty]; 
National Institutes of Health's Contractor Performance System: 
Completion of activities within each task order: X[A]. 

Source: GAO analysis of GSA contracts and guidance and GSA and National 
Institutes of Health information systems. 

[A] This measure relates to one or more of GSA's long-term goals for 
its leasing program. 

[End of table] 

[End of section] 

Appendix IV: Comments from the General Services Administration: 

GSA Administrator: 

January 8, 2007: 

Mr. Mark Goldstein: 
Director, Physical Infrastructure Team: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Goldstein: 

The U.S. General Services Administration (GSA) appreciates the 
opportunity to comment on GAO Draft Report GAO-07-17, "GSA Leasing: 
Initial Implementation of the National Broker Services Contracts 
Demonstrates Need for Improvements." 

In October 2004, GSA awarded the National Broker Services (NBS) 
contract for commercial real estate leasing services, the largest 
contract of this type in the history of the Public Buildings Service 
(PBS). By awarding a limited number of broker services contracts under 
one national contract, our goal was to provide consistent, high-quality 
services nationwide to Federal agencies that rely on GSA for lease 
acquisition. With one contract year complete, we are pleased with the 
contract performance, understand that there are areas that can be 
improved upon and remain confident that this contract will yield value 
for Federal customer agencies and the American taxpayer. As is expected 
in the initial stages of a program of this magnitude and impact, we 
have experienced challenges in implementation. The GAO report confirms 
many findings of our own, and GSA already has launched a number of 
improvement actions to address identified issues. 

The report cited a number of findings and 11 recommendations directed 
towards GSA's administration of NBS contracts. GSA agrees to work on 
the implementation of GAO's recommendations. I have also included 
additional comments and changes for GAO's consideration prior to 
issuing its final report in an enclosure to this letter. 

Again, thank you for the opportunity to comment on the draft report. 
Should you have any questions, please contact me or Mr. David L. 
Winstead, Commissioner, Public Buildings Service, on (202) 501-1100. 
Staff inquiries may be directed to Mr. Anthony E. Costa, Deputy 
Commissioner, Public Buildings Service, at the same number. 

Cordially, 

Signed by: 

Lurita Doan: 
Administrator: 

Enclosure: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Mark L. Goldstein (202) 512-2834 or at goldsteinm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Kathleen Turner, Assistant 
Director; Nancy Boardman; Derrick Collins; Dwayne Curry; Elizabeth 
Eisenstadt; Brandon Haller; Bert Japikse; Anjalique Lawrence; and Edith 
Sohna made key contributions to this report. 

(543117): 

FOOTNOTES 

[1] Twenty-five of these contracts were regional, while 4 covered 
larger geographic areas (zones). Figure 1 displays GSA's 11 regions. 

[2] GSA refers to the four nationwide broker contracts and its program 
for administering the contracts as the "National Broker Contracts" and 
the "National Broker Contract Program," respectively. Since the 
contracts specify that they are for "national broker services," we use 
the acronym "NBS" throughout this report to refer to both the contracts 
and GSA's program for administering them. 

[3] The starting date was delayed by bid protests. 

[4] In a legal opinion that we provided at the GSA Administrator's 
request, we concluded that the proposed NBS contracts would not result 
in an improper augmentation of GSA's appropriations. See General 
Services Administration: Real Estate Brokers' Commissions, B-291947 
(Aug. 15, 2003). 

[5] Federal Information Security Management Act of 2002, Title III, E- 
Government Act of 2002, Pub. L. No. 107-347 (Dec. 17, 2002). 

[6] In this opinion, we found, among other things, that (1) the 
services that GSA proposed to acquire under the contracts are among 
those commonly offered by brokers in commercial leasing transactions 
and (2) brokers are commonly paid for their services through 
commissions paid by building owners. See General Services 
Administration and Real Estate Brokers' Commissions, B-302811 (July 12, 
2004). 

[7] In total, GSA issued 544 task orders during the first contract 
year, but 65 of these task orders were for market data. Task orders for 
market data are not eligible for commissions. 

[8] Under the contracts, the remaining $216,000 represents commission 
credits that are used to offset the initial rental costs of GSA's 
tenant agencies. We discuss commission credits in the next section of 
this report. 

[9] A commission agreement is included in each solicitation for offers. 

[10] For another example of an inherent conflict created by design, 
see, for example, Goldstein v. Johnson & Johnson, 251 F.3d 433, 442 
(3RD Cir., 2001), where the court dealt with the fiduciary duty of a 
retirement plan administrator, which depended, in part, on whether "the 
plan, by its very design, create[d] a special danger of a conflict of 
interest." 

[11] While the potential exists for brokers to favor building owners 
who pay excessive commissions, we have no evidence that this has 
occurred. 

[12] Essentially a volume discount, a commission credit is applicable 
to some, but not all, of the services that the NBS brokers perform for 
GSA. The commission credits on GSA's NBS contracts ranged from 26.0 
percent to 51.5 percent for applicable services in the first year. 

[13] Sixty-five of the 76 task orders were for market data, which are 
not eligible for a commission credit. A commission credit does not 
accrue to the government when brokers do not receive a commission. In 
addition, the government does not receive a credit for expedited 
leasing transactions, if these transactions are completed on time. 

[14] We identify the four NBS brokers as brokers A through D, as 
needed, throughout this report to protect their proprietary 
information. 

[15] GSA's National Office of Realty Services has been replaced by the 
Solutions Development Division. This division develops national policy 
on solutions development processes, protocols, standards, and measures 
of performance. The division falls under GSA's Office of National 
Customer Services Management, which is responsible for coordinating the 
Public Buildings Service's customer relationships and creating and 
implementing services to GSA's customers. 

[16] GSA, Business Analysis and Case for National Contracts for 
Brokerage Services in GSA (Aug. 25, 2003). 

[17] In addition to its other responsibilities, GAO resolves disputes 
(bid protests) concerning the award of federal contracts. 

[18] A lease expansion requires a change or modification to an existing 
lease. 

[19] A lease extension is a continuation of the original lease, usually 
for a short term, with substantially the same terms and conditions. 

[20] Each of the five local real estate regulators (four states and the 
District of Columbia) that we contacted oversee broker conflict-of- 
interest issues through their licensing process, and each had an 
enforcement process for responding to complaints. Regulatory penalties 
included fines and suspension or revocation of a broker's real estate 
license. In addition, each of the regulatory entities required brokers 
to adhere to a code of ethics or standards of conduct, including a 
requirement for brokers to act as a fiduciary agent for their clients, 
meaning that each broker is required to act in the best interest of 
each of its clients. Penalties for violations include fines and loss, 
or suspension, of a broker's real estate license. 

[21] All of the local regulatory entities we contacted told us they 
allowed brokers to operate as "full-service" real estate firms within 
their jurisdictions, meaning that the firms may represent both tenants 
and building owners, although not necessarily on the same leasing 
transaction. Three of the five regulatory entities--California, the 
District of Columbia, and Virginia--allowed the same broker employee in 
a firm to represent both sides of a commercial leasing transaction, if 
the employee disclosed that he or she was doing so. These entities also 
required the brokers to maintain the confidentiality of their clients' 
information. Texas allowed commercial dual-agency brokerage firms to 
serve as intermediaries. However, it did not allow the same employee in 
a firm to represent both sides of a commercial transaction and 
restricted firms from providing advice that may favor one party over 
the other. Finally, while Maryland regulated brokers who perform 
residential transactions, its regulations did not apply to commercial 
transactions. 

[22] Related to the disclosure of potential conflicts of interest, 
under the terms of their contracts with GSA, both types of firms also 
must ensure that (1) none of their personnel (including employees, 
consultants, and subcontractors) performing work under an NBS contract 
will participate, in any capacity, in providing any advice or 
representation to a building owner, representative, lessor, or other 
third party in connection with any government leasing transaction 
during the term of the contract and for another 6 months after the 
conclusion of the broker's work under the contract and (2) all 
personnel performing services under a NBS contract will treat any and 
all information generated and received in connection with their work as 
proprietary and confidential, continue to do so in perpetuity, and 
disclose and use such information only in connection with their work 
under the contract. 

[23] GSA uses a log to record identified conflicts of interest. As of 
March 31, 2006, the log contained 22 entries. Two of the 22 entries 
provided information on general advice sought from regional personnel 
related to GSA's conflict-of-interest requirements. Since the 2 entries 
did not relate to a potential or actual conflict on a specific leasing 
transaction, we omitted these entries for our reporting purposes. NBS 
program officials agreed that the entries should not be construed as 
relating to potential or actual conflicts of interest. 

[24] GSA also issued 65 task orders for market data during the first 
year of the contracts. We excluded these task orders from the universe 
of those with the potential for a conflict of interest because, as 
discussed in more detail later in this report, they involve limited 
work and the brokers are not paid for market data. 

[25] Beginning in June 2005, responsibility for dealing with potential 
or actual conflicts of interest shifted from regional personnel to the 
National Contracting Officer and legal counsel in GSA headquarters. As 
shown in appendix II, one potential conflict was identified before June 
2005. The circumstances of this potential conflict were investigated 
and resolved by the Regional Contracting Officer in conjunction with 
legal counsel in the applicable region. 

[26] We reviewed information about the circumstances associated with 
each of the 20 potential conflicts of interest and GSA's resolution of 
the disclosures. However, we did not test the universe of commission- 
eligible task orders issued to the brokers during the first contract 
year to determine whether other potential conflicts of interest may 
have existed. 

[27] The 13 actual conflicts represented about 3 percent of the 479 
commission-eligible task orders distributed among the brokers in the 
first year. 

[28] GSA's organizational conflict-of-interest disclosure statement, 
requires the brokers to, among other things, certify that a conflict 
wall is in place, and that personnel involved in carrying out a GSA 
task order have been advised of all of the conflict-of-interest 
restrictions contained in their contracts. 

[29] Debarment places a potential offeror on a list of firms that are 
ineligible for government contracts. See 48 C.F.R. § 2.101 and subpart 
9.4. 

[30] See 31 U.S.C. § 3729, et seq., and their criminal counterparts, 
including 18 U.S.C. §§ 286 and 287, concerning the submission of false 
claims or conspiracy to obtain payment of any false, fictitious, or 
fraudulent claims against the United States. 

[31] The identity of the parties involved in a leasing transaction 
would be disclosed in documentation related to the transaction. Thus, 
as long as individuals are not overtly disguising their involvement in 
the transaction, their identify would be apparent before completion of 
the transaction. 

[32] Representatives from GSA, commercial brokerage firms, and others 
we interviewed indicated that brokers have a fiduciary responsibility 
to their clients and, as such, are subject to substantial fines and the 
revocation or loss of their licenses for ethical violations--penalties 
that they believe are strong incentives to properly disclose conflicts 
of interest. While we did not specifically inquire, five of the nine 
nationwide commercial brokerage firms we interviewed volunteered that 
they would not put their reputations at stake, lose their business, or 
risk being reported for ethical violations by their competitors. 

[33] Other variations exist between GSA's dual-agency and tenant-only 
conflict-of-interest requirements. For example, GSA's contracts with 
the dual-agency firms identified several remedies, including the right 
to terminate work, that GSA could apply if a dual-agency firm failed to 
identify a conflict of interest. While not specifically applied to the 
tenant-only firms, these remedies exist elsewhere in the contracts. As 
a consequence, we are not emphasizing these contractual variations. 
Nevertheless, NBS program officials agreed to conform all of GSA's 
conflict-of-interest contractual requirements for both types of 
brokerage firms. 

[34] Procurement-sensitive information includes information about the 
identity of offerors and the details of their offers. 

[35] We also visited the two dual-agency firms and observed their 
physical and electronic access controls; 
however, like GSA, we also did not test the adequacy of these controls. 
We observed that both firms have physical access controls, including 
separate office space, locks on file cabinets, and access badges, which 
help ensure control of the firms' physical space. In addition, both 
firms have electronic controls to limit access to the shared drives 
they use to store and access GSA information. According to the brokers' 
information technology personnel, only those staff members who are 
dedicated to the GSA contract have access to the shared computer 
drives. 

[36] GSA did not identify which federal standards it viewed as 
applicable. 

[37] For example, if an e-mail must be shared among users, GSA 
recommended that the brokers establish controls to ensure that a user 
cannot perform an e-mail function without fully accounting for his or 
her identify. 

[38] In a discussion of GSA's technical comments on a draft of this 
report, GSA officials told us that the agency's inspections were 
performed to assess the brokers' adherence to conflict wall 
requirements. The officials explained that GSA performed the site 
visits to verify that the brokers had created the required conflict 
walls and that the physical and electronic controls were being 
maintained, as required by the contracts. While GSA has confirmed that 
conflict walls exist, it had not assessed whether the physical and 
electronic controls established by the brokers are adequate. 

[39] Federal agencies are required to test the management, operational, 
and technical controls for their applicable information systems. 
Management controls, such as those related to the assessment of risk, 
are normally addressed by an agency's information security program 
management. Operational controls include controls that are executed by 
people (as opposed to systems). Technical controls include security 
controls that electronic information systems execute. 

[40] The frequency of the testing depends on the risk level assigned, 
but must be performed at least annually. 

[41] GSA officials further acknowledged that they did not know how the 
four firms are using GSA-supplied information. Such information, the 
officials said, may be provided as either an attachment to an e-mail or 
in hard-copy form. For example, the officials said they did not know 
whether the brokers electronically scan GSA's hard-copy information to 
create electronic files. 

[42] As of July 31, 2006, 9 NBS broker employees had gained access to e-
Lease and the sensitive information it contains, while 3 others--who 
had also completed the security verification process--were in the 
process of obtaining access. Another 42 NBS broker employees were still 
completing the security verification process and, thus, also did not 
yet have access to e-Lease. 

[43] Building owners typically factor the cost of the commission into 
the rent charged to a tenant. Tenants indirectly pay the commission 
through their rental payments. 

[44] The "firm term" of a government lease is the noncancelable portion 
(term) of the lease--the portion of the lease that the government 
guarantees to pay, regardless of whether the space is occupied. 
Commissions cannot be earned for any "option" periods associated with a 
lease. Options allow the government to extend the duration of a lease 
at its discretion. 

[45] None of the five local real estate regulators that we interviewed 
(four states and the District of Columbia) oversee the method of 
compensating brokers or the amount of broker commissions. However, 
representatives from one regulatory entity (Virginia) volunteered that 
brokers are typically paid through commissions paid by building owners. 

[46] As previously discussed, we did not evaluate GSA's analysis to 
determine if awarding the NBS contracts represented the best option 
available to the government. 

[47] GSA began awarding contracts for leasing services in 1997. 
Initially, GSA awarded 8 contracts--2 contracts for each of four broad 
U.S. geographic areas. By August 2003, when GSA developed its analysis 
for entering into the NBS contracts, the number of contracts had 
increased from 8 to 29. 

[48] The term "no cost" is somewhat of a misnomer, since there would be 
no valid contract without mutual consideration by each party. In this 
case, the consideration benefiting the broker stems from its right to 
collect a share of the lease brokerage fees (commission payments) paid 
by prospective building owners. 

[49] Government agencies are prohibited from augmenting their 
appropriations from outside sources without specific statutory 
authority. 

[50] The Comptroller General is head of the U.S. Government 
Accountability Office (GAO). 

[51] The opinion further concluded that the services rendered under a 
formal contract at no cost to the United States would not constitute an 
acceptance of voluntary services under 31 U.S.C. § 1342. That statute 
prohibits federal officers and employees from accepting voluntary 
services except in certain emergencies, and is intended to prevent 
agencies from forcing the Congress to appropriate funds to pay 
volunteers who later submit claims for payment. The opinion held that 
the services that GSA anticipated obtaining under the NBS contracts 
were not voluntary "since the brokers' services would be rendered under 
a formal contract that would presumably specify the no-cost nature of 
the contract and contain mutually binding rights and obligations on the 
parties including the exact services to be delivered thereunder in 
return for the right to represent GSA in their respective markets." See 
B-291947 (Aug. 15, 2003). 

[52] GSA's guidance on commission payments has evolved over time. GSA's 
initial solicitation for offers advised potential building owners that 
"[t]he contractor [broker] will pursue any commission in connection 
with this lease transaction that it normally would be entitled to 
pursuant to local business practices." The NBS brokers believed the 
language in the solicitation did not adequately protect their interests 
because it did not clearly express the government's expectation that 
they would be paid. Responding to the brokers' concerns, in August 
2005, GSA revised the solicitation for offers to state that "[t]he 
Government expects that its contractors [brokers] will be paid a fair 
market commission on any specific transaction on the same basis as any 
local business brokerage custom and practice…." According to NBS 
program officials, the solicitation was revised because they realized 
that for the contracts to be successful, the brokers must be successful 
as well. The brokers were not, however, completely satisfied and 
pursued additional revisions. In considering the additional revisions, 
GSA reviewed program data indicating, according to the National Program 
Manager, that lower-than-market commissions were being offered on some 
task orders. As a result, in July 2006, GSA further revised its 
solicitation for offers to state that "[b]y submitting an offer, the 
building owner agrees that if they are paying a commission to a listing 
agent/broker, then it will pay a commission to the [GSA's] broker that 
it normally would be entitled to pursuant to local business practices." 

[53] According to GSA officials, task orders often take from 1 to 4 
years to complete, depending on the complexity of the task order. 

[54] The brokers receive 50 percent of their commission when the lease 
is signed. The remaining commission is paid when the tenant occupies 
the space or by the commencement date of the lease, whichever occurs 
first. 

[55] For another example of an inherent conflict created by design, 
see, for example, Goldstein v. Johnson & Johnson, 251 F. 3 d 433, 442 
(3RD Cir., 2001), where the court dealt with the fiduciary duty of a 
retirement plan administrator that depended, in part, on whether "the 
plan, by its very design, create[d] a special danger of a conflict of 
interest." 

[56] Officials from 3 of the 4 entities told us that they expect their 
brokers to absorb the financial loss because of the large volume of 
business they do with their brokers. Florida, however, allowed its 
broker to excuse itself from a deal if, before starting any work, it 
found that a building owner was unwilling to pay a commission. 

[57] FDIC officials said the agency has paid its broker because of the 
time, effort, and resources its broker invested to complete a leasing 
transaction and because the FDIC wanted to maintain a good, long-term 
relationship with the broker. An official of 1 large, private company 
told us that his company routinely pays its broker a reduced fee 
because it does not expect a broker to work for free; 
while officials from another large company told us that their company 
generally compensates a broker because it is unfair and unprofitable 
for the broker not to be paid. 

[58] The need for controls to prevent a broker from favoring building 
owners who pay higher commissions diminishes when an entity pays 
directly for the services it receives. 

[59] Business Analysis and Case for National Contracts. As previously 
discussed, we did not evaluate GSA's analysis. 

[60] Expedited transactions for lease acquisitions, expansions, and 
extensions have an occupancy date of 120 days or less. If a broker 
completes these transactions within this time frame, the broker is 
allowed to retain the entire amount of any commission paid. 

[61] The "present value" is the value of a future cash stream in terms 
of money paid immediately (or at some designated date). 

[62] As previously discussed, a commission credit is not due if a 
building owner does not pay broker commissions. 

[63] The firm term of a government lease is the noncancelable portion 
(term) of the lease--the portion of the lease that the government 
guarantees to pay, regardless of whether the space is occupied. The 
firm term of a lease is generally 5 years. Commissions are not earned 
for any "option" periods associated with a lease. Options allow the 
government to extend the duration of a lease at its discretion. 

[64] The brokers received commissions for 3 of the 4 completed 
expedited leasing transactions. The building owner did not pay a 
commission on the other task order--which was also eligible for a 
commission--because, according to the National Contracting Officer, the 
lease extension, required only minimal effort to complete. 

[65] GSA was unable to provide the fees for the remaining 9 contracts. 

[66] NBS program officials were unable to provide the number of open 
task orders under the prior contracts. 

[67] While the contracts are substantially the same, as previously 
discussed, some requirements vary. 

[68] As previously discussed, GSA planned to have the NBS brokers 
perform at least 50 percent of its expiring leases in the first 
contract year--with increases of 10 percent annually, culminating in 90 
percent utilization by 2010. 

[69] According to NBS program officials, in April 2006, GSA had 509 
realty specialists, with 54 of these employees eligible to retire by 
December 2006. 

[70] The brokers did not exercise this right during the first contract 
year. 

[71] As discussed, in 2004, GSA expected that the NBS brokers would 
need to perform at least 50 percent of its expiring lease workload in 
the first year of the contract, with 10 percent increases annually, 
culminating in the performance of 90 percent of GSA's workload by 2010-
-the fifth and final contract year. These goals are not contractual 
obligations but, rather, internal goals set by senior GSA management to 
address GSA's capacity issues. 

[72] In October 2005, GSA expected to accomplish 1,259 leasing 
transactions covering about 13.6 million square feet--with either in- 
house or contractor resources--during the first contract year. GSA 
divided these totals in half to arrive at its first-year goals for the 
NBS contracts (i.e., 630 task orders involving 6.8 million square feet 
of leased space). 

[73] We attempted to ascertain the total number of leasing transactions 
completed by GSA and GSA's brokers as of March 31, 2006. However, 
according to the National Program Manager, such information was not 
available. The National Program Manager explained that while GSA had 
been aware of the need for such an analysis, it did not have adequate 
resources to prepare it. According to the manager, GSA recently hired 
one analyst to assist the NBS team and another analyst was recently 
provided to the team on a "shared basis" to, among other things, 
prepare such an analysis. 

[74] GSA used the same process to develop and allocate goals for the 
second contract year. For year 2, GSA hopes to award 658 task orders 
involving about 8,476,000 square feet of leased space. These goals 
represent about 60 percent of the leasing workload that GSA anticipates 
will expire through March 31, 2007--the end of the second contract 
year. 

[75] GSA's process for distributing its workload differs from that of 
most of the private-and public-sector organizations we contacted that 
contract for leasing services. Most of these organizations either 
acquired leased space through (1) a single broker or (2) multiple 
brokers who each performed all of the organization's leasing in a given 
geographic area. Thus, the organizations had no need to allocate work 
among multiple brokers. The Department of Veterans Affairs, which 
modeled its contracts after GSA's contracts, also requires equitable 
distribution until a history of performance is available. 

[76] In the first contract year, 8 of the task orders GSA distributed 
were for more than 200,000 square feet of leased space. 

[77] As previously discussed, GSA reassigned 9 task orders involving 
about 900,000 square feet of leased space to address conflict-of- 
interest issues. The vast majority of the reassignments, particularly 
with respect to square footage, affected one of the two dual-agency 
firms. 

[78] The "useable" square footage of a lease relates to the amount of 
space actually occupied by a tenant agency. However, tenant agencies' 
rent payments are based on the "rentable" square footage within a 
building. The rentable square footage includes the space the agency 
occupies (useable) as well as the agency's portion of a building's 
common space (i.e., its access to elevator lobbies; 
building corridors; 
restrooms; 
and support areas, such as telephone and electrical closets). 

[79] Regional personnel sign the task order just prior to its issuance 
to a broker. 

[80] Region 11 is the National Capital Region. 

[81] This information includes 65 task orders for market data as well 
as the 479 commission-eligible task orders GSA distributed to the 
brokers in the first contract year. Sixteen of the 479 task orders were 
expedited. 

[82] None of the other NBS brokers completed task orders for expedited 
leasing transactions during the first contract year. 

[83] GSA began awarding contracts for leasing services in 1997, when it 
no longer had the resources to carry out all of its leasing 
responsibilities in-house. 

[84] The positions with part-time oversight responsibility as of 
December 31, 2005, were as follows: the Alternate National Program 
Manager, 28 regional contracting officials, and 145 COTRs. 

[85] We did not determine whether the NBS staffing levels were 
adequate. 

[86] As previously discussed, as of July 31, 2006, 12 NBS broker 
employees had completed the federal security verification process 
required for contractors that have access to federal facilities and 
information systems. Nine of the 12 brokers had access to e-Lease, 
while 3 were in the process of obtaining access. Another 42 broker 
employees, according to NBS program officials, were still completing 
the verification process. NBS program officials were unsure when the 
remaining brokers' would complete the process and gain access to e- 
Lease. 

[87] An e-mail message will be automatically sent to the broker once a 
task is accepted or rejected. 

[88] The monthly reports summarize, among other things, the status of 
the brokers' activities under the contracts. 

[89] The qualitative descriptors for scores 0 to 5 are as follows: 
unsatisfactory, poor, fair, good, excellent, and outstanding, 
respectively. 

[90] Federal agencies are required to develop long-term goals for, 
among other things, reducing costs and increasing satisfaction with 
their programs. The Office of Management and Budget oversees executive 
branch agencies, such as GSA, and evaluates the agencies on their 
progress in achieving their long-term goals. GSA has numerous long-term 
goals for its leasing program, but only four of these goals can be 
affected by the brokers' performance under the NBS contracts. 

[91] The fourth long-term goal applicable to the brokers' performance-
-the percentage of tenants satisfied with their leased space--is 
evaluated annually, not at the completion of a task order. 

[92] According to GSA officials, employees of all tenant agencies are 
surveyed once every 3 years. 

[93] Data from this system are transmitted to NIH's Past Performance 
Information Retrieval System. This system is accessible to federal 
contracting officers and can be used to review a contractor's past 
performance before awarding a new contract. 

[94] This is the same rating scale used in GSA's electronic e-Lease 
system. As a result, the qualitative descriptors for scores 0 to 5 are 
also unsatisfactory, poor, fair, good, excellent, and outstanding, 
respectively. 

[95] A bundled contract consolidates requirements for goods or 
services. See, for example, 48 C.F.R. § 2.101. 

[96] As previously discussed, the brokers also completed 65 task orders 
for market data as of March 31, 2006. However, these task orders were 
not evaluated because they involved minimal work and the brokers are 
not compensated for these services. 

[97] GSA revised the final e-Lease evaluation screen on July 31, 2006. 
However, the revisions had not been implemented (i.e., "rolled-out" to 
GSA staff) as of that date. 

[98] GSA retrieves market data from commercial real estate 
associations, such as the Society for Industrial and Office Realtors. 
This society is one of several commercial real estate associations with 
a retrievable database on market data. 

[99] According to GSA officials, the realty transaction survey is 
typically conducted 90 days after the lease is signed and is 
distributed to GSA's point of contact at tenant agencies--which is the 
individual most familiar with the particular leasing transaction. This 
survey uses a 1-to 5-point rating scale. A score of 1 means that the 
individual surveyed was "very dissatisfied," while 5 means that the 
individual was "very satisfied." The survey instrument does not provide 
survey recipients with any qualitative descriptors for scores 2 through 
4. However, GSA views scores of 4 and 5 as indicative of a customer's 
satisfaction with the overall leasing transaction. 

[100] These three controls require brokers to (1) execute additional 
agreements to safeguard proprietary information, (2) notify GSA of any 
conflicts of interest discovered during the performance of work, and 
(3) include a conflict-of-interest clause in all of their subcontracts. 

[101] As of October 31, 2006, GSA's most recent version of the National 
Broker Contract Administration Guide was issued in November 2005. 

[102] GSA, Review of PBS' [Public Buildings Services'] Use of Brokerage 
Contracts for Lease Acquisition Services, Report Number A020135/P/W/ 
R03003 (Dec. 11, 2002). 

[103] See General Services Administration and Real Estate Broker's 
Commissions, B-302811 (July 12, 2004). See also B-291947 (Aug. 15, 
2003). As discussed in the body of this report, GAO did not render an 
opinion about the contracts' terms or the advisability of entering into 
the NBS contracts. 

[104] GSA, Business Analysis and Case for National Contracts for 
Brokerage Services in GSA (Aug. 25, 2003). 

[105] GSA required bidders to supply information on their clients as 
part of its solicitation for the contracts, including the volume of 
their business in the 3 years preceding the solicitation. Eighteen 
brokerage firms bid on the NBS contracts; 
however, 2 of the 18 did not meet GSA's requirement for being national 
in scope. To meet this criterion, each broker was required to 
demonstrate that it had provided leasing services, over the prior 3-
year period, on behalf of at least two tenants with nationwide 
geographic and volume requirements similar to those required by GSA. 

[106] GSA's Federal Procurement Data System tracks information about 
federal contracts. 

[107] The Federal Facilities Council is an association of 25 federal 
agencies with responsibilities related to, among other things, the 
acquisition, maintenance, operation, management, and disposition of 
federal real property. 

[108] Pursuant to Executive Order 13327, the Administrator of General 
Services, in consultation with the Federal Real Property Council, is 
responsible for maintaining a database on real property owned and 
leased by federal agencies. 

[109] Jones Lang LaSalle; 
Julien J. Studley, Inc; 
The Staubach Company-Northeast; 
and Trammell Crow Services, Inc. As discussed in the body of this 
report, two of these firms are dual-agency brokers, while the remaining 
two represent only tenants. 

[110] These five unsuccessful bidders were CB Richard Ellis, the Equis 
Corporation, Grubb and Ellis, NAI Global, and Spaulding and Slye 
Colliers. The Equis Corporation is a tenant-only firm, while the four 
others are dual-agency firms. 

[111] The 12 associations serve as a resource to a variety of parties, 
including real estate brokers, managers, and building owners. 

[112] Specifically, we spoke to the Assistant Chief Counsel for the 
California Department of Real Estate; 
the Program Liaison for the District of Columbia's Board of Real 
Estate; 
the Assistant Attorney General, Counsel to the Maryland Real Estate 
Commission; 
the Chief Executive Officer of the Texas Real Estate Commission; 
and the Executive Director of the Virginia Real Estate Board. 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site (www.gao.gov). Each weekday, GAO posts 
newly released reports, testimony, and correspondence on its Web site. 
To have GAO e-mail you a list of newly posted products every afternoon, 
go to www.gao.gov and select "Subscribe to Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office 441 G Street NW, Room LM 
Washington, D.C. 20548: 

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202) 
512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 U.S. 
Government Accountability Office, 441 G Street NW, Room 7125 
Washington, D.C. 20548: 

Public Affairs: 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, D.C. 20548: