General Services Administration:

Comparison of Space Acquisition Alternatives--Leasing to Lease-Purchase and Leasing to Construction

GGD-99-49R: Published: Mar 12, 1999. Publicly Released: Mar 12, 1999.

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Pursuant to a legislative requirement, GAO reviewed the: (1) economic analyses done by the General Services Administration (GSA) for leases and new construction it proposed for fiscal years (FY) 1994 through 1999; and (2) results of analyses comparing leasing with construction and lease-purchase alternatives.

GAO noted that: (1) although construction was almost always estimated by GSA to be the least costly approach for meeting long-term space needs, it was not always the approach proposed; (2) GAO's review of the economic analyses of 24 lease and construction acquisitions submitted by GSA for approval in the budget cycles for FY 1994 through FY 1999 showed that, given the assumptions used, construction was estimated to be less costly than leasing in all but one case; (3) GSA proposed leases for nine acquisitions, but leasing was the alternative estimated to be the least costly in only one case; (4) in contrast, for all 15 of the proposed construction acquisitions, construction was less costly than leasing; (5) to show the effect of location on the results of an economic analysis, GSA prepared, at GAO's request, analyses for a hypothetical building at one location in each of its 11 regions; (6) these analyses showed that, while estimated costs varied among the locations, location had little effect on the end result of the analyses; (7) in all cases, construction was estimated to be less costly than leasing; (8) at one location, the analysis showed that leasing would have been less costly than a lease-purchase acquisition, but not than construction; (9) the major noneconomic factor identified that affected the acquisition decision was the budget scorekeeping rules that require the budget authority for the entire cost of acquiring an asset by construction, lease-purchase, or capital-lease to be recorded in the budget when the acquisition is approved; and (10) other noneconomic factors identified that could affect decisions included unique mission or security requirements, anticipated changes in the federal presence in a city or geographic area, and the delineation of the geographic area of consideration for the proposed acquisition.

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