Costs and Budgetary Impact of the General Services Administration's Purchase Contract Program

LCD-80-7: Published: Oct 17, 1979. Publicly Released: Oct 29, 1979.

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A report compared purchase contracting with funding by appropriations (direct federal construction) and leasing as a means for the General Services Administration (GSA) to finance the acquisition of space for federal departments and agencies. Specifically, the report compared financial benefits and costs, budgetary impact, and secondary impact on local tax structure, and examined options to and possible pitfalls of the General Services 1972 purchase-contract program.

In recent years, GSA has relied on leasing to meet increased space needs because of limited appropriations to the General Services Buildings Fund. Since the establishment of the fund in 1972, approximately $65 million less per year has been available for new building construction than was available under direct appropriation. Purchase-contracting also helped to fill the growing need for federal office and agency space. Since purchase-contracting permitted GSA to borrow construction funds, it avoided the need for large single-year appropriations by Congress to fund new construction outlays and, by accelerating building construction, helped avoid some of the inflationary cost pressures on the approved projects. Through direct loans from private investors and the Federal Financing Bank, GSA was able to obtain financing for limited direct federal construction of buildings. The analysis showed that, from the standpoint of the fund, direct federal construction is the most advantageous alternative for financing space acquisition. However, assuming only limited funds are available for direct federal construction, it was suggested that purchase-contracting may be the most practicable alternative. Although purchase-contracting requires several more years than direct federal construction before generating a budget surplus for the fund and requires the fund to bear the cost of local real estate taxes, it was found to have more favorable long-range budgetary impact than leasing.

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