Federal Office Space: Increased Ownership Would Result in Significant Savings

Highlights

Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) efforts to reduce office space leasing costs by increasing government-owned office space.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
Congress should: (1) remove restrictions on rent paid to GSA by tenant agencies; and (2) not mandate future restrictions.	Closed – Implemented	Congress and the Office of Management and Budget agreed to remove restrictions on rent paid to GSA by tenant agencies. Subsequently, most rent restrictions have been eliminated.
Congress should stop directing GSA to use alternative financing techniques, such as lease-purchase agreements, and instead: (1) substitute less costly capital financing techniques, such as borrowing through the Federal Financing Bank; or (2) provide direct appropriations to FBF.	Closed – Implemented	Congress allowed GSA to use $1.9 billion that FBF borrowed from the Federal Financing Bank in 1990 and supplemented FBF with a $1.6-billion appropriation in 1991. This money was used to finance direct federal construction of several new federal buildings.
Congress should direct GSA to submit a long-range plan in support of its annual budget requests and for meeting long-term federal office space needs economically.	Closed – Implemented	Legislation was introduced in both the 102nd and 103rd Congresses and is pending in the 104th Congress that would require GSA to biennially provide Congress with comprehensive data on building capital investment and leasing needs up front for that 2-year period, including return on investment and other supporting economic analyses. GAO has continued to encourage key congressional committees to seek such a legislative requirement. In response to another recommendation, GSA has prepared several iterations of a 5-year capital plan and submitted them to OMB for review and approval. However, OMB has not yet approved GSA's capital plan, and it has not yet been used to directly support GSA's annual budget requests, facilitate congressional oversight of building capital investment needs, or guide capital spending decisions to help ensure that the government's return on investments is maximized.
Congress should direct GSA to provide a model on the benefits of capital budgeting to the federal government.	Closed – Not Implemented	GSA initiated a capital budget presentation in the 1991 budget without being directed to do so by Congress. GSA indicated its plans to continue the presentation and improve it when new accounting systems are in place.
When Congress decides to approve building acquisition projects, it should use the most cost-effective methods of financing.	Closed – Not Implemented	Congress allowed GSA to use $1.9 billion that FBF borrowed from the Federal Financing Bank in 1990 and appropriated $1.6 billion to supplement FBF in 1991. This money was used to finance direct federal construction of several new buildings.

See All 5 Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status Sort descending
General Services Administration	The Administrator of General Services should prepare and periodically update a long-range plan using individual economic analyses to show the facilities for which federal ownership would be the most economical way of meeting long-term federal office space needs.	Closed – Implemented GSA has prepared several iterations of a 5-year plan laying out its desired facility ownership goals and various projects it believes should be completed. GSA continues to develop a 5-year capital plan, but OMB has not yet approved GSA's 5-year capital plan, and the plan has not been used to directly support GSA's annual budget requests, facilitate congressional oversight of building capital investment needs, or guide building capital spending decisions to help ensure that the government's return on investment is maximized.
General Services Administration	The Administrator of General Services should initiate plans for a capital budget by separating the activities in the FBF budget into categories of operating expenses and capital investment, in compliance with Office of Management and Budget Circular A-11.	Closed – Implemented Beginning in fiscal year 1991, GSA modified the format of its FBF budgets to include elements of capital budgeting; expenditures were split into capital and operating components.
General Services Administration	The Administrator of General Services should take a leadership role in demonstrating the benefits of capital budgeting for the federal government by preparing a capital budget which would: (1) match expenses and revenues for capital and operating programs; and (2) include a charge for depreciation to represent the consumption of physical assets for each year.	Closed – Implemented GSA cannot yet separate Federal Building Fund (FBF) revenues into operating and capital components. GSA does not expect to have the ability to do this until 1996, when it expects to complete efforts to upgrade its management information system. GSA, however, lacks the necessary OMB and congressional support and legislative authority to move to a capital budget. GSA requested support from OMB in July 1992, but such support has not been received. The Vice President's National Performance Review is exploring the feasibility and desirability of moving to a capital budget, and several key congressional committees have recently expressed interest in capital budgeting.
General Services Administration	Where practical, the Administrator of General Services should seek approval and funding for constructing or purchasing buildings that represent cost-effective alternatives to continued leasing of equivalent office space.	Closed – Implemented GSA is using the supplemental FBF revenues--$1.9 billion borrowed and $1.6 billion in supplemental appropriations--in ways that indicate it is seeking the most cost-effective alternatives to continued leasing of office space. However, GSA lacks authority to purchase commercially available buildings.

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Topics

Government Operations

CapitalCost controlCost effectiveness analysisFederal fund accountsFederal office buildingsGovernment facility constructionLeasing policiesLife cycle costsReal estate leasesReal estate purchases