General Services Administration's Practices for Altering Leased Buildings Should Be Improved

LCD-78-338: Published: Sep 14, 1978. Publicly Released: Sep 14, 1978.

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The General Services Administration (GSA) leases about 91.3 million square feet of space to accommodate federal departments and agencies at annual rents of $455 million. In fiscal year (FY) 1977, obligations for alterations to leased buildings were in excess of $36 million.

The following deficiencies in GSA contracting practices for altering leased buildings were identified: (1) excessive use of sole-source contracting with the building owners for alterations; (2) not preparing independent government estimates to aid in negotiating contract prices; (3) a single organizational unit responsible for preparing estimates, negotiating contracts, approving payments, and inspecting work; (4) performing major alterations before lease expiration without attempting to renegotiate the lease period or the rent; (5) failure to adequately consider purchase for construction of alternate space; (6) paying rent while space was not available for occupancy; and (7) failure to document inspections of alteration work. As a result of reviews and investigations, GSA instituted a new policy requiring competitive procurement and issued new procedures for inspecting alteration work. If properly implemented, these actions may correct some of the deficiencies. The Economy Act limits the amount that may be expended on alterations in a leased building, but it has not been effective in accomplishing this. Requiring specific congressional authorization of alterations would be more effective. GSA funding practices for alteration work have not always been sound, and year-end obligations for FY 1977 may be invalid or misclassified.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Administrator, GSA, should: (1) obtain certificates of current cost and pricing data for lessors for negotiated lease alteration contracts over $100,000; (2) ensure that independent cost estimates are prepared and prices negotiated for contracts and change orders before work starts; (3) establish a procedure to ensure that consideration is given to renegotiating the rent and lease period prior to contracting for major alterations; (4) require a cost comparison of alternatives before investing large sums in alterations; (5) limit the use of letter contracts as a means of obligating year-end fund balances; and (6) take steps to ensure that accelerated year-end spending is avoided, year-end obligations are valid, and budgetary controls and contracting procedures are followed. Congress should amend the Public Buildings Act of 1959 to require congressional authorization of alterations which involve a total expenditure in excess of $500,000 and amend the Economy Act to eliminate provisions relating to the 25-percent limitation on alterations to rented buildings.

    Agency Affected:


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