Facilities Location: Agencies Should Pay More Attention to Costs
and Rural Development Act (31-JUL-01, GAO-01-805).
This report reviews the types of federal functions that lend
themselves to being performed at locations other than Washington,
D.C., and federal regional cities. There are concerns that
federal agencies may not have been considering locating
facilities in rural areas, as required by the Rural Development
Act of 1972 (RDA), particularly in light of recent advances in
telecommunications technology. GAO found that since its 1990
report (GGD-90-109) on this issue, federal agencies continue to
locate for the most part in higher cost, urban areas. Eight of
the 13 cabinet agencies surveyed had no formal RDA siting policy,
and there was little evidence that agencies considered RDA's
requirements when siting new federal facilities. Further, GSA has
not developed for congressional consideration a cost-conscious,
governmentwide location policy, as recommended by GAO in 1990. In
GAO's survey, the sites that involved relocated operations still
largely remained in urban areas, while the sites that involved
newly established operations were more evenly spread over the
rural and urban areas. Federal agencies' mission requirements,
such as the need to be near clients or other organizations,
apparently have led them to select urban areas. GAO found that
government functions, such as research and development, data
processing, accounting and finance, and teleservice centers, can
be located in rural areas. Although it is not clear from the
information GAO collected whether any of the federal agencies
that located sites in urban areas could have located them in
rural areas, one matter that is clear is that RDA has not had the
influence on federal siting practices that Congress appears to
have intended when RDA was enacted. Many agencies had no RDA
policy, as required by the act, and many agency personnel in
GAO's survey either did not consider RDA or did not know whether
the act was used in making their site selection.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-805
ACCNO: A01498
TITLE: Facilities Location: Agencies Should Pay More Attention
to Costs and Rural Development Act
DATE: 07/31/2001
SUBJECT: Cost effectiveness analysis
Federal facility relocation
Rural economic development
Site selection
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GAO-01-805
A
Report to Senator Byron L. Dorgan U. S. Senate
July 2001 FACILITIES LOCATION
Agencies Should Pay More Attention to Costs and Rural Development Act
GAO- 01- 805
Letter 3 Results in Brief 5 Background 10 Recently Selected Federal Sites
Were Mostly in Urban Areas 13 The Rural Development Act and Other Federal
Policies on Location 21 Lessons From Private Sector Relocations That Relate
to the Federal
Government 26 Some Functions Can Potentially Locate in Rural Areas 31
Conclusions 35 Matters for Congressional Consideration 37 Recommendations
for Executive Action 37 Agency Comments and Our Evaluation 37
Appendixes Appendix I: Objectives, Scope, and Methodology 44 Appendix II:
List of Surveyed Federal Agencies That Recently Selected Site Locations 51
Appendix III: Location of the 32 Rural Sites (Areas With Populations of
25,000 or Less) in Our Survey 53
Appendix IV: Location Factors Considered by Private Sector Organizations 54
Appendix V: Federal Executive Branch Agencies With Some Level of Independent
Authority to Acquire Real Property, Calendar Year 2000 55 Appendix VI:
Survey of Federal Facilities? Locations 57 Appendix VII: Comments From the
General Services Administration 66 Appendix VIII: Comments From the
Department of the Interior 70 Appendix IX: Comments From the U. S. Customs
Service 72 Appendix X: GAO Contacts and Staff Acknowledgments 74
Tables Table 1: Commercial Rental Rates for Washington, D. C., and the 10
Federal Cities, Calendar Year 1999 11 Table 2: Federal Executive Branch
Full- Time Employees in MSAs
and Non- MSAs 12 Table 3: Established Locations for Sites in Survey: Urban
or Rural 14 Table 4: Factors Agencies Used to Select the Delineated Area for
Federal Facilities in the Survey 16
Table 5: List of Primary Functions Performed at the Sites in the Survey 20
Table 6: Definitions of Rural Used by Federal Agencies and Selected
Private Sector Organizations 25 Table 7: Functions That Might be Located in
Rural Areas 31 Table 8: Benefits and Challenges Associated With Rural Areas
for Nine
Functions 32 Table 9: Executive Branch Agencies With Some Level of
Independent
Authority to Acquire Real Property 55
Abbreviations
APHIS Animal and Plant Health Inspection Service CBA Central Business Area
CICA Competition in Contracting Act of 1984 DOD Department of Defense GSA
General Services Administration MSA Metropolitan Statistical Area NARA
National Archives and Records Administration NCR National Capital Region OMB
Office of Management and Budget OPM Office of Personnel Management RDA Rural
Development Act of 1972 USDA United States Department of Agriculture USMS
United States Marshals Service USPS United States Postal Service
Lett er
July 31, 2001 The Honorable Byron L. Dorgan United States Senate
Dear Senator Dorgan: This report responds to your request that we develop
information on the types of federal functions that lend themselves to being
performed at locations other than Washington, D. C., and federal regional
cities. 1 You
were concerned that federal agencies may not have been considering locating
facilities in rural areas, as required by the Rural Development Act of 1972
(RDA), 2 particularly in light of recent advances in telecommunication
technology. You specifically asked that we report on (1) What executive
branch civilian non- Department of Defense functions
have recently selected urban locations other than Washington, D. C., and the
federal cities, compared to rural locations, and what factors, benefits, and
problems were associated with such site selections?
(2) What federal laws and policies govern facility location and to what
extent have agencies implemented this guidance? (3) What lessons can be
learned from private sector site selections? (4) What functions lend
themselves to being located in rural areas?
1 Prior to 1995, the Office of Management and Budget (OMB) established in
Circular A- 105 the following 10 cities as the standard federal cities for
federal regional headquarters: Atlanta, Boston, Chicago, Dallas, Denver,
Kansas City, New York, Philadelphia, San Francisco, and Seattle. On June 8,
1995, OMB rescinded the Circular, stating that the way the federal
government manages resources, agency efforts to reduce duplicative levels of
oversight, and the expanded use of technology made a strict regional
structure inefficient and unnecessary.
2 7 U. S. C. sect. 2204b- 1.
To answer the first question, we used a questionnaire and follow- up
interviews to survey agency officials regarding 115 sites acquired during
fiscal years 1998 though 2000 by the General Services Administration (GSA)
or other agencies that exercised their independent statutory
authority to acquire sites. At your request, we excluded moves to
Washington, D. C., and the 10 federal cities. We chose space of 25,000
square feet or larger in order to review decisions with more significant
economic importance. 3 To determine what federal laws and policies govern
facility location, we interviewed GSA and other agency officials and
reviewed relevant laws and policies. We contracted with a consultant 4 who
surveyed 52 private sector companies and reviewed real estate- related
literature discussing private sector site selections to determine what
lessons the public sector could learn from private sector site selections.
To determine which functions lend themselves to locations in rural areas, we
used results from our questionnaire survey, interviews with real estate and
other officials at 13 cabinet agencies, and observations from the
consultant?s survey.
3 By using a threshold of 25, 000 square feet, we started with 166 sites
that were acquired by federal agencies with the assistance of GSA in fiscal
years 1998 through 2000. If we had used a threshold of 10, 000 square feet,
we would have initially considered 430 sites. The inclusion of sites under a
smaller threshold size may have led to more rural sites being included in
our survey, but the acquisitions of smaller sites probably would have been
less important for considerations of economic impact. 4 John D. Dorchester
Jr., of The Dorchester Group, L. L. C., Scottsdale, AZ. The study was
entitled Office Location Considerations of Large U. S. Corporations: U. S.
Government Potentials, March 31, 2001. Mr. Dorchester has an M. A
(Economics), Specialization in Urban
and Regional Planning and Land Economics. In 1990, Mr. Dorchester also did
contract work for us on private sector locations, which was included in our
1990 report that dealt with location policies , Facilities Location Policy:
GSA Should Propose a More Consistent and Businesslike Approach (GAO/ GGD-
90- 109, Sept. 28, 1990).
For this survey, we defined rural area as an area having a population of 25,
000 and under. We had to select a threshold because RDA is unclear as to
which population size to use for facility siting. The prior threshold, which
was eliminated in 1996, used a population threshold of 50, 000 and included
a population density requirement. Population density data were not readily
available; therefore, it was not feasible for us to use this definition. 5
We chose 25, 000 or less because it was used to define rural
areas by several federal agencies for purposes other than federal siting
under RDA and private sector organizations that we identified. The 25, 000
population threshold resulted in the identification of 32 of the 115 sites
in our survey as rural sites. 6 We did our work from August 2000 to May 2001
in accordance with generally accepted government auditing standards.
Although we obtained GSA?s and other agencies? comments on factors they
considered for site
selections, we did not attempt to determine the appropriateness of agencies?
siting decisions. A more complete description of our scope and methodology
is included in appendix I.
Results in Brief Since our 1990 study on this issue, federal agencies
continue to locate for the most part in higher cost, urban areas. Eight of
the 13 cabinet agencies surveyed had no formal RDA siting policy, and there
was little evidence
that agencies considered RDA?s requirements when siting new federal
facilities. Further, GSA has not developed for congressional consideration a
cost- conscious, governmentwide location policy, as we recommended in 1990.
Agencies chose urban areas for the majority (72 percent) of the 115 recently
acquired federal sites in our survey. Agencies said they selected urban
areas primarily because of the need to be near agency clients and
5 The information on population density for areas outside of cities was not
readily available and is subject to change, pending the results of the 2000
census. Additionally, when the U. S. Department of Agriculture needs to
determine whether a city that has applied for a grant is rural or not, and
may have a population of close to 50, 000, it has experts who survey the
population density of the city?s surrounding area to determine whether the
density meets the criteria for rural area. We did not use 50, 000 as a
population threshold because many of the
definitions of rural used by federal agencies for purposes other than
federal siting under RDA and private sector organizations we identified used
thresholds of 25, 000 or less. 6 See appendix III for a listing of the 32
rural sites.
related government and private sector facilities to accomplish their
missions. Agencies that selected rural areas (areas with a population of 25,
000 or less) said they did so primarily to be close to existing support
facilities and because of lower real estate costs. Agencies that relocated
operations tended to relocate within the same areas where they were
originally located, which were mainly in urban areas, while newly
established locations were almost equally divided among urban and rural
sites. The private sector companies our consultant surveyed reported that
they select urban areas over rural areas largely because of the need to be
near a skilled labor force.
The functions that were recently located predominately at urban sites were
loans/ grants/ benefits administration processing, inspection and auditing,
and health and medical services. The functions that were recently located
predominately in rural areas were research and development, supply and
storage, automatic data processing, and finance and accounting. Some
functions were placed in both urban and rural areas, such as law
enforcement, which was the most prevalent function located in both areas,
although it was located more often at urban sites.
Agencies said the benefits experienced by sites in urban areas were
efficiency in agency performance due to the ability to share existing
facilities, close proximity to other agency facilities and employees, and
accessibility to public transportation for both employees and clients.
Agencies that chose rural sites said that benefits included close proximity
to agency support facilities, improved building and data security, and
better access to major transportation arteries. Among the problems reported
for urban sites were lack of building security and expansion space. For
rural sites, problems included the lack of public transportation, location
far from other agency facilities, and insufficient infrastructure for high-
speed telecommunications.
RDA and the Competition in Contracting Act of 1984 (CICA), 7 a federal
procurement law, as well as executive orders, provide guidance on site
location decisions. When considering the areas in which to locate, RDA
requires all executive departments and agencies to establish policies and
procedures giving first priority to the location of new offices and other
facilities in rural areas. However, we also observed that the definition of
"rural" used in RDA for federal facilities siting is unclear because the
7 41 U. S. C. sect.253.
previous definition used by RDA for locating federal facilities was
eliminated by amendment in 1996. Furthermore, only 5 of the 13 cabinet
departments we contacted had a policy to implement RDA. Also, our survey of
federal facilities showed that for about 73 percent of 113 responding sites,
respondents said either they did not use RDA in site acquisitions or they
did not know whether it was used. We recognize that consideration of RDA may
not have led agencies to make different location
decisions. Once agencies have selected their respective geographic areas for
possible locations, CICA generally requires agencies to obtain full and open
competition for the facility acquisitions within the areas selected.
Moreover, when agency mission requirements lead agencies to urban areas,
other federal policies apply. These are (1) Executive Order 12072, which
requires that central business areas (CBA) be given first preference for the
location of federal facilities that need to be in urban areas and (2)
Executive Order 13006, 8 which requires the federal government to utilize
historic properties and districts to the extent possible, especially those
located in CBAs.
Lessons that the public sector can learn from the private sector in locating
facilities involve factors that contribute to minimizing acquisition costs.
These factors are (1) taking advantage, where possible, of certain
incentives offered by localities to attract new employers, such as free
land,
and (2) the lower real estate and labor costs available in some areas. The
private sector cited these two factors as having influenced their decisions
more frequently than did the federal agencies in our survey. We recognize
that federal agencies? missions and socioeconomic goals associated with the
government?s siting policy may sometimes preclude them from taking advantage
of the potential savings represented by these factors; however, those
agencies that have flexibility in determining the location of a function
may be able to take advantage of one or both of these factors so long as
they are not offset by other higher operations costs. Existing policy, as
stated in Executive Order 12072 or RDA, which emphasizes locating federal
facilities in either urban or rural areas to promote economic development,
does not recognize costs to the government as a factor to be considered in 8
The National Historic Preservation Act Amendments of 2000 (P. L. 106- 208,
114 Stat- 318 (2000), amends section 110( a)( 1) of the National Historic
Preservation Act, 16 U. S. C.sect. 470h2, to codify Executive Order 13006,
issued May 21, 1996, which encourages federal agencies to use historic
properties prior to acquiring, constructing or leasing buildings for offices
and facilities.
the selection of geographic areas for sites. In our survey of 115 sites
acquired by federal agencies, agencies reported that for only 15 sites did
any agency perform cost analyses of alternative geographical areas, to
compare costs of different areas in which a site could ultimately be
selected. In 1990, we recommended that GSA develop for congressional
consideration a more cost- conscious, governmentwide location policy. In
1991, GSA required agencies to consider real estate and labor costs as part
of a temporary regulation that subsequently expired; however, its 1997
replacement did not contain the requirement. In 2001, GSA officials could
not explain to us why the requirement was deleted.
According to our review and the study done by our consultant, certain
functions have potential for rural area locations. In fact, some are already
in rural areas, such as research and development, finance and accounting,
law enforcement, and data processing. Other potential functions for rural
areas include records archiving and teleservicing. 9 Locating offices in
rural areas depends primarily on the following factors: (1) whether the
agency has flexibility in determining the location of a function (i. e., the
function?s mission does not require close proximity to a specified
population); (2) whether the function can be efficiently and effectively
performed in a location remote from the agency?s main offices; and (3)
whether the
function can be performed without a large, technical workforce often
associated with urban areas.
We are suggesting, as matters for consideration, that Congress (1) enact
legislation to require agencies to consider, along with their missions and
program requirements, real estate, labor, and other operational costs and
applicable local incentives when deciding whether to relocate or establish a
new site in a rural area or urban area and (2) amend RDA to clarify the
definition of ?rural area? for facility siting purposes to facilitate its
implementation.
We are recommending that the Administrator of GSA, in GSA?s role as the
federal government?s central property management agency, revise its guidance
on federal facility siting to (1) advise customer agencies that they should
consider, along with their missions and program requirements, real estate,
labor, and other operational costs and applicable local incentives
9 As an example of teleservicing, the American Teleservices Association
represents call centers, trainers, and consultants that facilitate
telephone, Internet, and E- mail service and support.
when deciding whether to relocate or establish a new site in a rural or
urban area; (2) require that each federal agency subject to GSA?s authority
provide a written statement to GSA demonstrating that, in selecting a new
facility location, the agency, as required by RDA, had given first priority
to locating in a rural area, and if a rural area was not selected, the
agency?s justification for the decision; and (3) define the term ?rural
area? to provide
its customer agencies with a single definition for purposes of federal
siting under RDA until Congress amends RDA to define the term.
Seventeen of the 21 agencies commenting on a draft of this report responded
that they either had no comments, agreed with the information in the report,
or suggested technical changes, which we considered and incorporated within
this report where appropriate. GSA, the Department of the Interior, the
Internal Revenue Service, and the U. S. Customs Service had more extensive
comments.
In response to our recommendation that GSA provide agencies with a single
definition of a rural area for the purpose of RDA until Congress, as we
suggested, defines the term, GSA agreed to develop a definition for
agencies subject to its authority. Also, while GSA agreed to issue a
bulletin to make other agencies aware of the definition of rural, it
responded that it had no authority to establish or require the use of a
definition for all federal agencies. The Internal Revenue Service (IRS)
responded that the definition should be based on terms other than population
alone. We clarified our report to reflect GSA?s authority to develop a
definition only for its customer agencies and noted that Congress may want
to consider factors in addition to population in defining a rural area.
Regarding our recommendation that GSA require agencies to submit a written
statement demonstrating the agency had given first priority to locating in a
rural area and if a rural area was not selected, to include a justification,
GSA agreed to require the written statement but said that requiring a
justification would put GSA in the position of second- guessing
the agencies. IRS also questioned the need for the justification. The
Department of the Interior commented that the requirement should be limited
to a minimum dollar threshold, exempt operations that are being
expanded in the same local area, and be required only if the agency does not
select a rural area. We emphasized in the report that we are not
recommending that GSA evaluate the justifications, but we remain convinced
that a justification is needed to help document that agencies gave first
priority to rural areas, but only when a rural area was not selected. We
also believe that expansions of existing operations should be
subject to this requirement if they might involve a relocation. Although we
agree that a minimum dollar threshold may be reasonable conceptually, we
noted that RDA does not include a dollar threshold.
In response to our recommendation that agencies be required to consider
certain cost factors along with agency mission when determining whether to
locate a site in a rural or urban area, the Department of the Interior said
that the recommendation should be limited to the establishment of new
offices. The Internal Revenue Service commented that if Congress supports a
location policy that is economically based rather than socially based,
Congress should repeal and replace the RDA. We clarified our recommendation
to consider only relocations and new offices. Also, we noted that we are not
suggesting that Congress establish a location policy
based solely on economics but rather that cost should be one of the factors
considered in siting decisions.
The U. S. Customs Services responded that it generally agreed with the
information in the report and provided additional information on the
uniqueness of its facilities.
Background GSA is the central management agency for acquiring real estate
for federal agencies. According to a GSA policy official, GSA is responsible
for managing the acquisition of about 40 percent of the federal government?s
office space and 10 percent of all government space. Other agencies, such as
DOD, have their own authority to acquire space. To acquire real estate, an
agency must either go through GSA using GSA?s statutory authority, use its
own statutory authority, or obtain delegated authority from GSA. If it is
using GSA, the agency must provide GSA with a "delineated area," the
geographic area where the agency wants to be located. GSA?s policy requires
its staff to review each delineated area to confirm its compliance with all
applicable laws and regulations. Once an agency has selected a delineated
area, GSA, under CICA, is to acquire the site within the selected area
through the use of full and open competitive procedures. If an agency
acquires property independently of GSA using its own statutory authority, it
is responsible for compliance with all relevant laws and regulations but is
not subject to GSA regulations.
In 1990, we were asked by Senator Kent Conrad to look at policies that guide
civilian agencies in selecting facility locations and determine whether any
changes in federal location policies were warranted. We reported that GSA
needed to develop a more consistent and cost- conscious
governmentwide location policy that required agencies, in meeting their
needs, to maximize competition and select sites that offer the best overall
value, considering such factors as real estate and labor costs. Since 1990,
at least two matters raised in that report have remained unchanged. First,
GSA has not developed for congressional consideration the cost- conscious
and consistent governmentwide location policy that we recommended. The
second item that remains unchanged is that rents in the CBAs of federal
regional cities and Washington, D. C., are generally higher than the rents
in non- CBA sections of those same cities- an average of $4. 03 per square
foot higher within calendar year 1999, as shown in table 1. Table 1:
Commercial Rental Rates for Washington, D. C., and the 10 Federal Cities,
Calendar Year 1999 Average commercial rents for class A buildings ($/ sq.
ft) a
Central business Noncentral business
Difference (Non- CBA City b area area compared to CBA
Atlanta $22.36 $23. 45 (1.09) Boston 40.50 31. 20 9. 30 Chicago 33.23 26. 00
7. 23 Dallas 23.07 24. 10 (1.03) Denver 24. 58 c 23. 98 c .60 Kansas City
20.00 20. 50 (0.50) New York 47.90 39. 05 8. 85 Philadelphia 24.22 22. 24 1.
98 San Francisco 47.76 36. 36 11.40 Seattle 33.27 27. 74 5. 53 Washington,
D. C. 36. 57 c 34. 51 c 2.06 Average $32.13 $28. 10 $4.03 a Class A
buildings are in excellent locations and are either new buildings or old
buildings that are competitive with new buildings. b Population for these
cities ranged from 402,000 to 7,381,000.
c Data obtained from Trammell Crow Company, a commercial real estate firm.
All other rental rates were obtained from the Society of Industrial and
Office Realtors. Source: Society of Industrial and Office Realtors, the
Bureau of the Census, and Trammell Crow Company.
According to an April 2001 GSA congressional testimony, high rents for class
A commercial space in San Francisco, CA, caused three federal
agencies to move from leased space in San Francisco to leased space in
Oakland, CA, where rates were 25 percent to 30 percent lower.
One change that occurred since our 1990 report that affected the workplace
is the surge in telecommunications services, including widespread access to
the Internet. One result of telecommunications services is the practice of
?telecommuting,? whereby employees can work from home or remote offices for
all or part of their work week. Telecommuting increased significantly,
rising from a level of 4 million U. S.
workers in 1992, according to the Department of Transportation, to 16.5
million in 2000, according to the International Telework Association and
Council. 10
Despite the continuing relative higher cost of urban commercial rents,
federal employment generally remains focused in Metropolitan Statistical
Areas (MSA), 11 as shown in table 2.
Table 2: Federal Executive Branch Full- Time Employees in MSAs and Non- MSAs
Number and percent of federal full- time employees in fiscal years 1990 and
2000
1990 2000 Location Number Percent Number Percent
MSA 1, 686, 959 85 1,371, 381 85 Non- MSA 295, 556 15 191, 057 12 Total 1,
982, 515 100 1, 619, 914 a 97 b Note: Numbers include DOD civilian
employees, but not DOD uniformed personnel, Postal Service employees, or
intelligence agency employees. a Total includes 57,476 employees for whom
there were no MSA/ Non- MSA data.
b For about 4 percent of federal employees, there were no MSA/ Non- MSA
data. Total does not add to 100 percent because of rounding. Source: Office
of Personnel Management.
10 The International Telework Association and Council is a nonprofit
organization specializing in telework. 11 An MSA is an area having 1 or more
counties containing a city of 50, 000 or more or a Census Bureau- defined
urbanized area and a total population of at least 100, 000 (or 75, 000 in
New England).
Recently Selected During fiscal years 1998 through 2000, agencies chose
urban areas for
about 72 percent of the 115 12 acquired federal sites in our survey and
Federal Sites Were
selected rural areas (those with a population of 25, 000 or less) 13 for
about Mostly in Urban Areas
28 percent of the sites. Agencies reported that mission was the primary
factor used to determine the location for over one- half of the sites and
that the mission dictated the need to be in close proximity to clients,
other agency facilities, and related organizations. GSA conducted the
acquisitions for 79 of the sites using GSA authority, and agencies using
their own statutory authority conducted the acquisitions for the other 36
sites. Agencies selecting urban sites reported that close proximity to other
agency facilities and organizations contributed to cost savings resulting
from less travel, more prompt on- site support, and ease in technology
sharing. Other benefits reported for urban sites included the availability
of a skilled labor pool and accessibility to public transportation for both
employees and agency clients. Agencies that chose rural sites reported some
similar benefits, stating that close proximity to related or support agency
facilities and proximity to industries with which the agency is connected
resulted in more efficient use of agency resources and less travel. Other
benefits reported for rural sites included better building and
data security and improved access to major transportation arteries.
Officials reporting for about 66 percent of the sites either said no
problems existed at the sites (45 percent), or they did not respond to the
survey question (21 percent). For the remaining sites, agencies selecting
urban
areas reported problems such as lack of secure buildings, lack of expandable
space, and high rental rates. Agencies selecting rural areas reported
problems such as lack of infrastructure for high- speed telecommunications
and a lack of access to public transportation.
Functions performed at the sites varied, and some functions were performed
in both urban and rural areas.
12 The 115 sites involved 32 different agencies (25 of which were either
components of cabinet departments or the cabinet departments themselves, and
7 were independent agencies). See appendix II for a list of the agencies
that selected the locations. 13 As noted in the objectives, scope, and
methodology section in appendix I, 26 of the rural sites that fell within
the 25, 000 population threshold were located in MSAs in which large cities
were located. A list of the rural sites is in appendix III.
Most of the Sites Were Eighty- three (or 72 percent) of the sites in our
survey were located in urban
Located in Urban Areas communities (areas with a population above 25, 000),
and 32 (or 28 percent)
were located in rural areas (areas with a population of 25, 000 or below).
Most of the 115 site selections involved relocations within existing
communities (56) or expansions of existing sites (14). As table 3 shows, the
number of newly established locations (locations for agency functions for
which the agency neither relocated nor expanded an existing site) was almost
evenly distributed between rural and urban areas. Functions at the
six rural sites selected for newly established locations included storage/
inventory (mainly Census Bureau material for the 2000 Census), air traffic
control, and law enforcement. The seven urban areas selected for the newly
established locations included functions such as document archiving,
passport production, law enforcement, and inspection of diseased plants near
plant quarantine areas.
Table 3: Established Locations for Sites in Survey: Urban or Rural Sites in
Sites in
urban Percent of
Type of move rural area area Total sites total sites
Relocated within same community 7 49 56 48. 7 Relocated from one community
to
14 18 32 27. 8 another community Newly established location 6 7 13 11. 3
Expansion of same site 5 9 14 12. 2
Total sites 32 83 115 100
Note: The 83 sites in urban areas were in areas with populations of over
25,000, and the 32 sites in rural areas were in areas with populations of
25,000 or fewer.
Source: GAO analysis of survey data.
As table 3 shows, of the 32 sites that were relocated from one community to
another community, 18 were in urban areas and 14 were in rural areas. Among
these relocated sites, law enforcement and administrative program management
were the most prevalent functions; and the two functions were about evenly
divided between urban and rural sites. However, the finance and accounting
and research and development functions were found only at rural sites.
Functions at the urban relocated sites included
inspecting/ auditing, tax administration, and aviation operations.
An agency can use GSA to acquire property on its behalf or acquire the
property independently, using either statutory authority or authority
delegated by GSA. No major difference existed in the percentage of urban
sites selected, regardless of whether the site decisions were made by
agencies working with GSA or made independently of GSA. About 71 percent of
the sites that GSA procured on behalf of agencies were in urban areas, and
about 75 percent of the sites agencies selected independently of GSA were in
urban areas.
Agencies Reported That From a list of 12 factors (and an overall ?others?
category) in our survey, Agency Mission
agencies reported that they considered numerous factors to determine the
delineated area 14 for the sites in our survey. As shown in table 4,
agencies Requirements Determined considered mission in making location
decisions for 82 of the sites in our
Site Location survey. The next most- cited factors were transportation
efficiencies, which
was considered for 46 sites; and particular space needs, such as specialized
floor layouts, which was considered for 45 sites.
14 GSA defines the delineated area as the specific boundaries within which
space will be obtained to satisfy an agency?s space requirements.
Table 4: Factors Agencies Used to Select the Delineated Area for Federal
Facilities in the Survey Number of sites where each factor was considered
during the location decision
Tot al Number of
Number of number of
Percent of Factors agencies used to determine where to locate federal
facilities rural sites urban sites
sites total sites
Agency mission requirements (e. g., need to be near customers) 19 63 82 71.
3 Transportation efficiencies (proximity to interstate highways, airports,
rail lines) 14 32 46 40. 0 Particular space needs (size or nature of
facility) 14 31 45 39. 1 Public transportation (proximity to mass transit,
such as subways and buses) 10 23 33 28. 7 Low real estate costs 14 11 25
21.7 Use of existing infrastructure investment 13 9 22 19. 1 Employees must
be located near coworkers at another site 11 10 21 18. 3 Needed sufficient
competition to meet the Competition in Contracting Act
8 9 17 14. 8 requirements Recruitment and/ or retention issues (e. g.,
quality of life, available applicant pool,
5 111613. 9 and local economic conditions) Personnel cost considerations 6 9
15 13. 0
Political considerations/ congressionally directed 1 8 9 7. 8 Low labor
costs 1 232. 6
Note: The number of sites we surveyed totaled 115. Eighty- three were in
urban areas (areas with population of over 25,000), and 32 were in rural
areas (areas with population of 25,000 or less). The number of sites will
not total to these numbers because agencies cited more than one factor as
the reason for selecting the delineated area for some of the sites.
Source: GAO analysis of survey data.
In their discussion as to why agency mission was the primary factor for site
selections, agencies most often cited the need for the site to be in close
proximity either to the mission service area, other agency facilities, other
government agencies, or related private sector organizations. For example:
The U. S. Customs Service (Customs) reported that it chose the
delineated area for its international mail inspection function in Carson,
CA, because the U. S. Postal Service (USPS) had relocated its international
mail operations to Carson, CA, and Customs needed its inspection function to
be near the international mail site. Customs also reported that its
cybersmuggling center needed to be located within the concentration of
private computer- based industries in Fairfax, VA. U. S. Attorney offices
reported that their policy is to be within four
blocks of federal courthouses because, as the principal litigators for the
U. S. government, U. S. Attorneys need to be available for courtroom
activities on a regular basis. U. S. Marshals Service (USMS) offices also
reported that USMS offices need to be colocated with the courts because the
agency?s primary concern is the safety and security of the judiciary, the
judicial process, and its participants. The Department of Agriculture?s
Animal and Plant Health Inspection
Service (APHIS) reported that the delineated areas of its sites in our
survey were selected because they needed to be in close proximity to
diseased plant quarantine areas. The Federal Emergency Management Agency
also reported that its Pasadena, CA, site in our survey needed to be in
close proximity to a disaster area.
The Immigration and Naturalization Service reported that its national
records center had to be located as close as possible to a National Archives
and Records Administration (NARA) center in Lees Summit, MO, to reduce the
costs associated with a high- volume records transfer to NARA. Agencies
providing services to the public, such as the Social Security
Administration (SSA), IRS, and the Department of Veterans Affairs, reported
that the delineated areas for their offices/ clinics were selected because
the agencies needed to be as close as possible to the client/ patient
population that the agencies service. Agencies did not select rural areas
for 83 of the 115 sites in our survey. For about 75 percent of the 83 sites,
agencies cited mission requirements as the reason for not selecting rural
areas. They again cited proximity
considerations and said that locating the sites in rural areas would have
placed them too far from their clients, other supporting agency facilities,
related research facilities, or the function they had to monitor. For
example, GSA?s Federal Technology Service reported that it did not consider
a rural area for its site because the function needed to remain in
the Washington, D. C., area to have access to its major customers and
telecommunications providers. Other reasons for not selecting rural areas
included the need to be near
public transportation and rural areas? lack of the necessary labor pool and
sufficient space. Some respondents also said that rural areas can have high
costs, such as for transportation to airports. The Bureau of Reclamation
stated that a water resources management operation was not located in a
rural area because of the unavailability of a building to meet space needs.
The IRS said it did not place a telephone based customer service site in a
rural area because of the need for a large number of recruitment candidates
who were available only in a more heavily populated area. Similarly, the SSA
said that when one of its teleservicing centers needed additional
space, it did not move the center to a rural area because of the difficulty
of locating sufficient space and personnel in rural areas. In addition to
agency mission, lower real estate cost was one of three main factors that
contributed to the selection of the 32 rural sites. Respondents representing
almost one- half of the rural sites identified (1) lower real estate costs;
(2) particular space needs (e. g., specialized space for security
reasons); and (3) transportation efficiencies, such as access to major
arteries, as factors considered in the site selection decisions. Agencies
Reported Benefits In response to our survey?s request to list three chief
benefits and and Problems With Selected
problems, if any, associated with the selected location for sites in our
Sites
survey, agencies reported numerous benefits and few problems for both urban
and rural locations. The benefits of urban areas included close proximity to
other agency resources, such as support facilities and related government
agencies, and related private sector organizations. Agencies said proximity
was a benefit because it contributed to more prompt on- site support and
cost savings resulting from less travel and transportation of material over
distances and eased technology sharing and daily interaction
among related organizations. For example, both the Forest Service and APHIS
reported that their sites? close accessibility to universities allowed for
sharing of advanced technologies and improved collaboration between the
agency and university researchers. Also, the Department of Veterans Affairs
reported that the urban location of one of its clinics was a benefit because
it was in close proximity to the city?s medical center complex.
Other benefits cited for sites in urban areas included the availability of a
skilled labor force, the ability to use existing infrastructure, and the
accessibility of public transportation for both employees and clients.
Agencies that located sites in rural areas reported some similar benefits,
such as close proximity to related or support facilities, other program
employees, and the industry to which the agency was connected. They said
proximity resulted in more efficient use of agency resources and less
travel. Other benefits reported for rural sites included improved building
and data security and accessibility to major transportation arteries.
Agencies reported they had no problems with about 45 percent of the sites,
either urban or rural. They provided no response to this survey question for
another 21 percent of the sites. For the remaining sites, agencies
selecting urban areas reported problems such as lack of secure buildings and
expandable space, traffic problems, high rental rates, and specific
problems with buildings needing repairs. Agencies selecting rural areas
reported problems such as a lack of proximity to other agency facilities and
public transportation, great distance from major airports, and a lack of
necessary infrastructure for telecommunications and city waste management
services. Functions Located at As table 5 shows, agencies reported that the
three most common functions Established Sites Varied located in rural areas
included law enforcement, research and Widely
development, and supply storage and inventory control. Three functions,
automated data processing, finance and accounting, and social services, were
located only in rural areas.
Table 5: List of Primary Functions Performed at the Sites in the Survey
Sites in Sites in
urban Tot al
Percent of Primary functions rural area
area sites total sites
Law enforcement, security, border patrol 7 24 31 27. 2 Loans/ grants/
benefits administration/ application and claims processing 1 11 12 10. 5
Administration/ program management 2 8 10 8. 8 Supply storage and/ or
inventory control 5 3 8 7. 0 Research and development 5 387. 0 Health and
medical services 1 565. 3 General support services 2 243. 5 Document
archiving and storage/ records management 1 3 4 3. 5 Plant health
inspection/ quarantine areas/ disaster operations 0 4 4 3. 5 Aviation and
space operations 2 2 4 3. 5 Parks, natural resources, environment
management/ water resources management 0 3 3 2. 6 Telephone- based customer
service (teleservicing) 1 2 3 2.6 Inspecting/ auditing/ examining/
monitoring 0 4 4 3. 5 Automated data processing and/ or electronic storage 2
0 2 1. 8 Finance and accounting 2 021. 8 Equally combined functions
(enforcement/ benefits/ medical services) 0 2 2 1. 8 Passport operations 0
221. 8 Tax administration 0 110. 9 Social Services 1 010. 9 Communications 0
110. 9 Insurance operations 0 110. 9 Morale, well- being, and recreation 0 1
1 0. 9
Total sites 32 82 114 100.2
Note: The number of sites we surveyed totaled 115. Eighty- three were in
urban areas (areas with population of over 25,000), and 32 were in rural
areas (areas with population of 25,000 or less). The total number of sites
in this table is 114, because 1 agency reported that although it obtained
the space, none of the agency?s functions were performed at the site; other
agencies use the site. The total percentage does not add to 100 due to
rounding.
Source: GAO analysis of survey data.
The three most common functions located in urban areas were law enforcement,
administration of loans/ grants/ benefits and processing of applications and
claims, and administration/ program management. Law enforcement was the most
prevalent function in both urban and rural areas, although it was more
prevalent in urban areas. Also, although research and development and supply
storage and inventory functions
were more prevalent in rural areas, sometimes they were also located in
urban areas. The Rural
Several laws and executive orders affect the location of federal facilities.
Development Act and
The laws, which take priority over the executive orders, include RDA, the
primary law on rural siting; and CICA, a law governing federal acquisition
Other Federal Policies
generally. When considering areas in which to locate, RDA "directs the on
Location heads of all executive departments and agencies of the Government
to establish and maintain departmental policies and procedures giving first
priority to the location of new offices and other facilities in rural
areas.?
Any move by an agency to new office space in another location would be
considered a new office or facility covered by RDA. Once agencies have
selected their respective areas for possible locations, CICA generally
requires that agencies obtain full and open competition for facilities
acquisitions within the areas selected. The two primary executive orders on
federal facility location decisions are Executive Order 12072 of August 16,
1978; and Executive Order 13006 of May 21, 1996. Executive Order 12072
specifies that when the agency mission and program requirements call for
facilities to be located in urban
areas, federal agencies must give first consideration to locating in a CBA
and adjacent areas of similar character. Executive Order 13006 requires the
federal government to utilize and maintain, wherever operationally
appropriate and economically prudent, historic properties and districts,
especially those located in the CBA.
Agencies acquiring real estate are responsible for complying with federal
laws and executive orders. If GSA is acquiring the real estate for an
agency, then GSA regulations state 15 that GSA is responsible for ensuring
compliance with ?all applicable laws, regulations, and Executive orders."
However, if the agency is making the acquisition under its independent
statutory authority, or through a delegation from GSA, the agency is
responsible for compliance with relevant laws and regulations. Some agencies
also have been provided statutory authority to acquire real estate for
different purposes. Some agencies such as the Tennessee Valley Authority
(TVA) have been provided broad authority. TVA is authorized to purchase or
lease real property that it deems necessary or convenient in transacting its
business. 16 Other agencies? statutory authority is for more limited
purposes. For example, the Secretary of the Interior is authorized to lease
buildings and associated property for use as part of the National Park
System 17 and the Secretary of the Treasury is authorized to lease
space for the storage of unclaimed or other imported merchandise that the
government is required to store. 18
Limited Consideration of RDA states that executive departments and agencies
must establish
RDA policies and procedures to give first priority to the location of new
offices and other facilities in rural areas. However, among the 13 cabinet
departments, only the departments of Agriculture (USDA), Commerce,
Labor, Transportation, and the Treasury had written policies specifically
addressing RDA. The other departments (Justice, Health and Human Services,
the Interior, Housing and Urban Development, State, and Education) said they
did not have policies on RDA; and two (Energy and Veterans Affairs) said
they expect all employees to abide by all policies on
facility acquisitions, but they also had no written policies regarding RDA.
In addition, many agency real estate specialists in field offices also said
either their agencies did not have RDA policies or they did not know if
their agencies had such policies. Among the 113 sites for which we received
responses, 61 sites involved agencies that did not have RDA policies, and 24
15 Interim Rule D- 1, 41 C. F. R. 101- 21, appendix to subchapter D sect. 101-
17. 205( h). 16 16 U. S. C. sect. 831c. 17 16 U. S. C. sect. 1a- 2. 18 19 U. S. C. sect.
1560.
involved agencies that had policies. Respondents for 28 sites also said that
they did not know if their agencies had RDA policies.
Our survey also requested respondents to report which of the four applicable
laws and executive orders were considered in the acquisition of the surveyed
sites. Agencies reported that CICA was considered for 73 percent of the
113 sites for which a response was received, Executive Order 12072 (on
locating in CBAs) was considered for 50 percent of the 113 sites for which a
response was received, Executive Order 13006 (on historic districts) was
considered for 43 percent of the 112 sites for which a response was
received, and RDA was considered for about 27 percent of the 113 sites for
which a
response was received. Agencies reported that they considered RDA for 8 of
the 36 sites that were acquired independently of GSA. Agencies also reported
that RDA was considered for 21 of the 79 sites acquired by GSA. Conversely,
for about 73 percent of 113 sites for which a response was received,
respondents said they either did not use RDA in site acquisitions or did not
know whether it was used.
To determine if GSA was requiring agencies to apply RDA, we looked at GSA
regulations and examined 33 GSA lease files. GSA regulations state that
federal agencies using GSA are responsible for identifying their delineated
areas, 19 consistent with their missions and program requirements in
accordance with applicable regulations and statutes, including RDA. The
agencies must also submit to GSA a written statement explaining the basis
for their delineated areas, and GSA is responsible for reviewing these
delineated areas to confirm their compliance with laws and
regulations. We looked at 33 files involving GSA leases made from 1989
through 2000 in 3 GSA regions, including the Rocky Mountain Region, based in
Denver; the Greater Southwest Region, based in Ft. Worth, TX; and the Mid-
Atlantic Region, based in Philadelphia. We found no mention of RDA in any of
the 33 acquisition files. In the files we examined, we did find cases where
GSA requested modification of the delineated area in 19 Interim Rule D- 1,
41 C. F. R 101- 21, appendix to subchapter D (101- 17.205( a). GSA defines
the delineated area as the specific boundaries within which space will be
obtained to satisfy
an agency?s space requirements (101- 17. 205( p).
response to other criteria, such as CICA. Additionally, a GSA official in
the National Capital Region (NCR) provided us with a checklist of documents
that are expected to be in each NCR lease file. Neither the 1999 checklist
nor the 2000 update of that list mentioned RDA, although both mentioned
Executive Orders 12072 and 13006. What Constitutes Rural or In addition to
agencies? limited consideration of RDA, the act?s definition of Rural Area
Is Unclear
"rural" is unclear. RDA provides that rural areas, for the purpose of
federal facilities location decisions, are defined in the private business
enterprise exception in section 1926( a)( 7) of title 7 of the U. S. Code.
Prior to 1996,
this exception in 7 U. S. C. sect. 1926( a)( 7) defined rural as ?all territory
of a State that is not within the outer boundary of any city having a
population of fifty thousand or more and its immediately adjacent urbanized
and urbanizing areas with a population density of more than one hundred
persons per square mile, as determined by the Secretary of Agriculture
according to the latest decennial census of the United States: Provided,
that special consideration for such loans and grants shall be given to areas
other
than cities having a population of more than twenty five thousand.? However,
in 1996, 7 U. S. C. sect. 1926( a)( 7) was repealed and replaced with a new
section 1926( a)( 7) that defines ?rural? and ?rural areas? but no longer
contains a provision or even a reference relating to the private business
enterprise exception. 20 The new section 7 U. S. C. sect. 1926( a)( 7) defines
rural- but only for water and waste disposal grants and direct and
guaranteed loans- as "a city, town, or unincorporated area that has a
population of no more than 10, 000 inhabitants." Different Agencies Use
Government agencies have different definitions of what constitutes a rural
Different Rural Definitions area. For example, GSA uses two different
population thresholds to define rural area for purposes of RDA. According to
GSA Interim Rule D- 1, a rural area is any area "that (i) is within a city
or town if the city or town has a
population of less than 10,000 or (ii) is not within the outer boundaries of
a city or town if the city or town has a population of 50,000 or more and if
the adjacent urbanized and urbanizing areas have a population density of
more than 100 per square mile."
20 Public Law No. 104- 127, 110 Stat. 888, 1123 (1996).
Meanwhile, as table 6 shows, other federal agencies use other definitions of
rural to implement various federal programs; and private organizations use
other definitions as well.
Table 6: Definitions of Rural Used by Federal Agencies and Selected Private
Sector Organizations Agency/ organization Population thresholds and
definitions for rural area
Census Bureau Under 2,500 or open country Department of Agriculture?s
Economic Under 2,500 Research Service (Metro or nonmetro area)
Department of Agriculture?s Rural Business Under 10, 000 Opportunity Grant
Program (Open country not associated with urban area) USDA defines open
country as open space separated from any adjacent densely populated urban
area. Department of Agriculture?s Rural Housing 10, 000 and under Programs
Department of Housing and Urban One of five ways:
Development?s Rural Housing and Economic (1) Under 2,500 population (metro
or nonmetro area). Development Program
(2) Counties with no urban population of 20, 000 or more. (3) Rural portions
of "extended cities,? as defined by the Census Bureau. (4) Open country that
is not part of or associated with an urban area. (5) Not over 20, 000 and
not in MSA.
Plants, Sites and Parks Magazine a 20, 000 and under (50 miles or more from
major city or MSA)
Department of Agriculture?s Intermediary Under 25, 000 Relending Program
National Middle School Association a Under 25, 000
Housing Assistance Council a 25, 000 or fewer General Services
Administration (Rural Under 10, 000 or under 50, 000 Development Act
implementation) Department of Agriculture?s Rural Business Under 50, 000
Enterprise Grants Department of Agriculture?s Rural Business Under 50, 000
Cooperative Service OMB Nonmetropolitan areas (areas other than "core
counties? containing one or more central
cities with at least 50, 000 residents or an urbanized area and a total
population of at least 100,000 (75,000 in New England) and adjacent
communities that have a high degree of social and economic integration with
the core counties). a A nongovernmental organization.
Source: Department of Agriculture, the Bureau of the Census, Department of
Housing and Urban Development, OMB and private sector organizations.
Lessons From Private According to our study and our consultant?s review,
location factors
Sector Relocations considered important by the private sector for minimizing
costs might benefit the public sector. These factors are (1) incentives
offered by
That Relate to the localities to attract new employers, such as free land;
and (2) the lower real
Federal Government estate, labor, and operational costs available in some
areas. The private
sector cited these two factors as having influenced their location decisions
more frequently than did the federal agencies in our survey. We recognize
that federal agencies? missions may sometimes preclude them from taking
advantage of the savings represented by these factors. However, in instances
where an agency has flexibility in locating a function, the agency may be
able to take advantage of one or both of these factors, so long as they are
not offset by other higher operational costs.
Location Factors Important According to our consultant, there are two broad
steps involved in office
to the Private Sector location decisions made by the private sector. The
first step is to determine
whether a given location is functionally suited to achieve the purposes of
the office that is to be located. The second step is to test the location
for its ability to meet a range of factors that have been shown to be
important in meeting required goals. Our consultant found that corporations
strongly
preferred urban locations over rural ones. The determining location factor
for most companies, he said, derives from a specific location?s
characteristics. 21 The private sector considers numerous factors in making
location decisions, and the relative importance of the factors appears to be
company specific. 22 However, our consultant?s literature search and survey
of 52 private sector companies identified several factors as the main areas
of consideration in the private sector location decisionmaking process. They
were (1) transportation and logistics, (2) labor availability and cost,
(3) real estate costs, and (4) business climate and business incentives. Of
these factors, some were location factors considered by the federal sites we
surveyed and some were not.
21 According to our consultant, the inclusion of manufacturing firms in his
study did not skew the results because the study focused only on office
locations and not on the location of manufacturing facilities. 22 See
appendix IV for location factors the private sector considered.
Transportation: Access to Access to highways and major thoroughfares is
important for employees
Highways, Trains, and Airports who commute and essential to maintaining
connections to companies? suppliers and customers. When asked to rate the
importance of transportation and logistics, 17 of the 52 respondents in our
consultant?s survey gave it the highest rating for headquarters offices, and
over one- half gave it the highest rating for satellite (field) offices. 23
With the increasing globalization of markets, easy access to airports is
also very important in corporate location decisions. Professional services,
such as those of accountants and lawyers, also increasingly require access
to airports, our consultant said. Transportation factors were also important
to the public sector. In our survey of federal agency sites, officials for
40 percent of the sites said access to transportation, such as airports,
trains, and highways, was an important factor in their location decisions.
Examples cited by the agencies included easy access to airports for trainees
from around the nation and access to highways for service centers.
Availability and Cost of Labor According to our consultant, the availability
and cost of labor are among the most important location factors for the
private sector. Most of the corporations responding to our consultant?s
survey rated these among the top location factors considered when locating
either their headquarters or field offices. Asked to rate the importance of
"availability and cost of labor supply,? of the 52 survey respondents 30
gave it the highest rating for
headquarters offices and 32 gave it the highest rating for satellite (field)
offices. Our consultant emphasized that the availability of sufficient and
qualified labor is crucial to any business location decision because, even
in a low- wage area, the need to train a qualified workforce can wipe out
savings from lower labor costs. Our consultant also stated that while many
small towns on the fringes of metropolitan areas have experienced rapid
growth, their small populations suggest that they will remain small, which
can be a liability to attracting companies. Labor costs include not only
wage rates but also benefits, unemployment insurance, and workmen?s
compensation requirements. Labor costs also include costs associated with
recruitment and training and the competition for labor within the same area.
Some companies try to avoid areas where 23 Our consultant?s report indicated
that satellite (field) offices are similar to federal regional offices in
that they are located apart from the principal office, are smaller, and
serve a
particular function.
they have to compete with major competitors for the same labor pool because
of the possibility that skilled labor would be unavailable or that
competitors would drive up the wage rate. According to our consultant,
these factors are particularly important when considering rural areas where
educational qualifications, in some cases, are not so readily available.
Availability and cost of labor were not location factors considered by
federal agencies for most of the sites in our survey. Respondents reported
that they considered personnel costs, including lower labor costs and
recruitment and retention costs, in location decisions for no more than 23
of the 115 sites in our survey. Whether the federal government can adopt the
private sector?s practice in this area is open to question because, as
previously mentioned, the primary location factor cited by federal agencies
for the sites in our survey was agency mission. If agency mission dictates
where most of the federal facilities have to be located, specifically in
close proximity to clients, then the agency may have little flexibility to
realize costs savings from low- wage areas.
Lower Real Estate and Operating Since at least 1990, real estate costs have
consistently ranked among the
Costs top 10 factors influencing private sector location decisions. Real
estate costs include direct costs (i. e., land, building, and occupancy
costs such as rent and utilities), and indirect costs (costs such as
shipping,
transportation, and storage). When direct costs are higher in one community
than another, the addition of lower indirect costs may result in a lower
overall real estate cost in the community with higher direct costs. When
asked to rate the importance of real estate costs, 31 percent of the
corporate survey respondents gave this factor the highest rating for
corporate headquarters offices, and 63 percent did the same for corporate
field offices. Real estate cost was cited less frequently by federal
agencies in our survey than by the private sector in making site location
decisions. Agencies reported that for about 22 percent of the sites in our
survey, lower real estate cost was a factor in the decision. If the public
sector adopted this private sector practice, specifically for functions
where agencies have flexibility as to where they may be located, potential
savings could be
offered by lower real estate costs, so long as the savings are not offset by
other higher operating costs.
Business Climate and Business The business climate of an area, including its
business incentives, is a cost Incentives factor highly important to the
private sector. When asked to rate the
importance of an area?s business climate, 54 percent of respondents in our
consultant?s survey gave it the highest rating. Business climate factors
include the general business potential and receptivity of a community to the
corporate purpose. This includes the community?s economic health, its
organization and preparedness for growth, and the capacity of the
community to support future growth of the locating company. For example,
zoning issues are critical. Similarly, business incentives, such as tax
abatements, free land, or infrastructure improvements offered by a
community, are indicative of the business climate and are highly important
location decision factors. According to our consultant, while incentives do
not replace the need for a company?s location to make good business sense,
incentives become a means of distinguishing among otherwise acceptable
alternatives.
Business incentives were mentioned by only 2 agencies in our survey of 115
sites. USDA said it chose a site at a local university for wildlife research
because Colorado State University made land available at no cost. In return,
USDA agreed to work in cooperation with university students on wildlife
research. The Environmental Protection Agency (EPA) said when the lease
expired for its regional office in Kansas City, KS, it relocated to another
location within the city because the city provided free land. EPA
reported that this was a ?win- win? situation for both the agency and the
city because the agency saved on its real estate costs, and the office
benefited the economically depressed area where it is located. The limited
use of local incentives by agencies in our survey contrasts with the
emphasis the private sector places on incentives to save costs. For example,
functions that need not be in proximity to the public or other facilities-
such as training, data processing, document distribution, or telephone-
based servicing- have the potential to take advantage of local
incentives. While federal agencies cannot take advantage of all local
incentives, such as tax relief, they might make use of other local
incentives. For example, our 1990 report, referred to earlier, noted that
the Bureau of Engraving and Printing chose a site in Ft. Worth, TX, in the
late 1980s in part because of incentives offered by the locality. The
incentives included the donation of 100 acres of land and construction of a
building, a total package valued at between $12.5 million and $15 million.
Public policy may have an impact on the extent to which federal agencies may
seek incentives provided by local communities. The public sector sometimes
seeks to provide economic assistance to certain areas, rather than the
reverse- consider how the government may benefit from an area.
RDA and executive orders, such as Executive Order 12072, promote locating
federal agencies in rural areas or in the central business districts of
urban areas to foster their economic development. In contrast, according to
our consultant, the private sector seeks the reverse- consider how the
corporation may benefit from the community. Government Lacks
The government lacks a cohesive overall location policy that requires
Cohesive Location Policy agencies to consider costs when initially deciding
whether to locate a site in a rural or an urban area. In 1990, we reported
that the government was
not as cognizant of cost considerations as was the private sector and that
government policy was aimed at improving the economic development of either
rural areas through RDA or urban areas through the executive orders. We
recommended that GSA develop for congressional consideration a more
consistent and cost- conscious govermentwide location policy that considers
such factors as maximizing competition and
taking advantage of lower real estate and labor costs in order for the
government to lower its acquisition and operating costs. In 1991, GSA issued
a temporary regulation requiring agencies to consider the availability of
local labor pools, pay differentials for employees, local incentives
offered, and real estate costs for prospectus- level projects 24 whose
missions did not dictate a geographic area. However, the
requirement was eliminated in 1997 when GSA revised its location
regulations. GSA officials could not explain why the requirement was deleted
when we asked them in May 2001.
On the basis of our latest survey of 115 sites, we found that little
consideration in the site acquisition process was given to the differing
costs of alternative areas. Besides finding little interest in lower real
estate costs or in the use of certain local incentives, our survey also
found that only 15 sites were acquired using cost analyses of alternative
geographic areas,
which compared costs of different areas in which a site could ultimately be
selected. However, no regulation presently calls for such an analysis.
In 1990, we reported that GSA, as a central management agency, had not
provided leadership to assist agencies in implementing and complying with 24
GSA is required to prepare project descriptions called prospectuses for
space acquisitions that are expected to exceed specified dollar thresholds,
which can be adjusted annually. In fiscal year 2000, for example, a
prospectus was required for any lease exceeding an average annual rent of
$1. 93 million. The prospectuses are to be submitted to GSA?s Senate and
House authorizing committees.
RDA. We noted that GSA had not assisted agencies in developing procedures
and guidelines to implement the various location policies. Therefore, we
recommended in our 1990 report that GSA develop for
congressional consideration a more consistent governmentwide location
policy. In our recent survey of agency sites, we found most agencies,
whether they obtained the sites independently or through GSA, did not use
RDA or did not know whether it was used in choosing their sites.
Some Functions Can On the basis of our survey of 115 federal facilities, the
report of our
Potentially Locate in consultant, and our interviews with high- ranking
officials in human resources and information technology at 13 cabinet
agencies, we were able Rural Areas
to identify several federal functions that could be performed in rural
areas. These included printing, archiving, accounting and finance, training,
passport application processing, automatic data processing, research and
development, storage, and law enforcement. Private Sector Functions
Our consultant identified 21 functions that the private sector might locate
That Might Locate in Rural
in rural areas, as shown in table 7. Areas
Table 7: Functions That Might be Located in Rural Areas Functions that might
be located in rural areas
Accounting Legal support Account representative Logistical support
Appraisal/ market research Manufacturing and assembly offices Clerical/
secretarial Operations centers Data processing Printing and publishing
Distribution/ warehousing Records archiving Education/ training Repairs and
servicing Enforcement and quality control Scientific studies, and research
and development Field service operations Technical functions and support
Human resources and social services Telemarketing, order processing, and
communications Information technologies services
Source: Office Location Considerations of Large U. S. Corporations: U. S.
Government Potentials, The Dorchester Group, L. L. C., March 31, 2001.
According to our consultant, these functions lend themselves to being
performed in rural areas because (1) some of them do not demand the large
and technical, sophisticated labor pool often found in urban areas; (2) some
functions may be performed in a location remote from the principal
office?s day- to- day operations; and (3) some support functions can be
performed by telephone. He also emphasized that rural areas are sometimes
suitable for functions where security is important, such as research and
development and law enforcement activities.
We reviewed the 21 functions to see if they were represented in the federal
sector and whether any of the federal agencies we contacted identified them
as being found in rural areas or potential for rural areas. Nine of the
21 functions met these criteria. They were (1) accounting, (2) distribution
and warehousing, (3) education and training, (4) enforcement and quality
control, (5) printing and publishing, (6) records archiving, (7) data
processing, (8) scientific studies and research and development, and (9)
telemarketing/ teleservicing. Table 8 shows the potential benefits and
challenges that would result from
situating the function in a rural area for the nine selected functions.
Table 8: Benefits and Challenges Associated With Rural Areas for Nine
Functions Function Benefits Challenges
Accounting Lower wages and operating costs Data security and quality control
Data processing Reduced costs of office and labor Needs skills more often
found in metropolitan areas
Distribution and warehousing Savings on labor and real estate Needs good
transportation links Education and training Fewer distractions and
recreation opportunities None identified Enforcement/ quality control None
identified Needs good regional access Printing and publishing None
identified Needs good transportation links Records archiving Lower costs for
real estate and wages Limited access to records Scientific studies/ research
and Better security; in some cases, access to universities Specialized
employees may have to be development recruited nationally
Telemarketing, order processing, Operating cost efficiencies Sufficient and
sustainable labor pool communications Source: Office Location Considerations
of Large U. S. Corporations: U. S. Government Potentials. The
Dorchester Group, L. L. C., March 31, 2001.
Functions Performed by Some of the federal functions in our survey were more
often located at Federal Agencies in Rural
rural sites than at urban ones. These were automated data processing, Areas
finance and accounting, social services, research and development, and
storage and inventory. Special space needs and low real estate cost were key
factors for research and development and storage sites. The survey also
asked respondents to pick 1 or more of 12 named reasons why they had chosen
their locations.
Survey responses regarding research and development and storage/ inventory
facilities that were in rural areas pointed to two factors: low real estate
costs and unique space needs. For instance, officials representing four of
the eight research and development sites cited their unique space needs as a
reason for their sites? selection. Of these sites,
three were in rural areas. Officials representing five of the eight storage/
inventory facilities also gave this reason, and four were in rural areas.
Similarly, all three of the research and development sites for which
officials cited low real estate costs as a reason for their site choices
were located in rural areas. All five of the storage and inventory sites for
which respondents cited low real estate costs as a factor were in rural
areas. Information from cabinet agency officials showed that functions that
had been decentralized within the agency were more likely to be found in
rural areas than were centralized functions. We asked these officials, who
worked in information technology or human resources, about five functions-
printing, training, personnel benefits administration, procurement, and
finance/ payroll- and whether these or other functions could be relocated to
rural areas. 25 Officials from 11 of the 13 cabinet agencies said they had
decentralized 1 or more of the 5 functions by placing it in regional or even
local operating units, including those in rural areas.
For instance, USDA said its training and procurement functions were
decentralized to local offices, which are "in a majority of rural counties.?
The Interior Department said that, except for finance and payroll, the other
functions were decentralized ?to the installation level,? and it has
hundreds of rural installations. Four agencies reported that they had placed
training in rural areas, and one, the Department of Energy, said it also had
decentralized the procurement and personnel functions to local offices, half
of which are in nonurban areas.
25 Experts in government management and personnel management had identified
these functions as functions that could be conducted in nonurban areas.
However, if an administrative function was centralized it was more likely to
be in an urban area. For instance, of the seven agencies that said they had
centralized payroll, five said they located that function in cities,
including New Orleans. The remaining two agencies placed the function in
suburbs. The five agencies that centralized printing said they were doing it
at an urban location- Washington, D. C. One agency that centralized its
training and benefits administration said it had achieved economies of scale
that it feared would be lost if any part of that centralized operation was
relocated to a rural area. At least six agencies represented in these
interviews identified one or more problems with rural areas. One official
cited difficulty in recruiting minority employees because some rural areas
tend to lack minorities. Such
areas, this official said, also may pose sufficient cultural adjustments for
minorities and minority employees may not wish to relocate to these areas.
Other officials cited cost concerns. Officials for five agencies, for
instance,
said rural areas can involve personnel- related costs, such as the cost of
relocating employees or of recruiting and training replacement workers.
Officials from three agencies also expressed concern over the relatively
higher cost of travel to rural areas, with one asserting that this made such
areas poor choices for training sites. Three agencies also raised concerns
about facility costs, stating that the lack of available office space in
rural
areas would force them to build new facilities and lose agency
infrastructure investments at current locations. Three agency officials also
told us that their urban operations were in those areas because of factors
intrinsic to urban areas, such as the availability of public transportation
and proximity to the operations of other agencies or private sector
organizations. The full impact of telecommunications advancements in office
location decisions is still uncertain. A widespread notion is that
telecommunications advances have made the use of rural areas more
viable. However, of the 11 cabinet agencies that discussed the benefits and
drawbacks of rural telecommunications, only 2 agencies said
telecommunications advances had made rural locations more viable. The other
nine agencies expressed concern about telecommunications service
in rural areas, with five saying that sophisticated telecommunications
services are not always available or can be costly when they are available.
Three agencies also said telecommunications is of less importance to siting
decisions than other factors, and one of these expressed concern that rural
telecommunications networks are inherently less secure than urban ones. On a
positive note, five agencies saw telecommunications benefiting
employees by, for instance, allowing benefits data and training to be
offered on- line or by allowing employees to work from home or from the
sites where they are conducting inspections.
The private sector offered similar views. According to our consultant,
although telecommunications is an increasingly important factor in location
decisionmaking, its full impact has not become clear. Advanced
telecommunications services are touted as leveling the playing field between
small towns and metropolitan areas; however, broadband (highspeed)
telecommunications facilities 26 are not available in all areas, as noted by
our consultant. 27 He also emphasized that many small towns and rural areas
lack the capital and infrastructure to facilitate these broadband services.
Conclusions Since our 1990 report on this issue, federal agencies continue
to locate for the most part in higher cost, urban areas. Eight of the 13
cabinet agencies surveyed had no formal RDA siting policy, and there was
little evidence that agencies considered RDA?s requirements when siting new
federal facilities. Further, GSA has not developed for congressional
consideration a cost- conscious, governmentwide location policy, as we
recommended in 1990.
In our survey, the sites that involved relocated operations still largely
remained in urban areas, while the sites that involved newly established
operations were more evenly spread over rural and urban areas. Federal
agencies? mission requirements, such as the need to be near clients or other
organizations, apparently have led them to select urban areas. Other
26 The Federal Communications Commission defines services with a
transmission speed of at least 200 kilobits per second (kbps) in one
direction as ?high speed.? A broadband connection, such as that provided by
a cable modem service or by a telephone technology, known as digital
subscriber line (DSL), has a greater capacity, giving the user faster data
transmission rates than a narrowband connection, such as that provided by a
conventional telephone line.
27 We also reported in February 2001 that the availability of broadband
technology was more prevalent in large metropolitan areas than in rural
areas, on the basis of a survey of Internet users who were age 18 and older.
For example, in a metropolitan area with a population of at least 2. 5
million, more than 32 percent (plus or minus 8 percent) of the survey
respondents reported having DSL and cable modem capability where they lived;
in rural areas, the corresponding figure was less than 8 percent (plus or
minus 6 percent). Telecommunications: Characteristics and Choices of
Internet Users, (GAO- 01- 345, Feb. 16, 2001).
factors that led them to select urban areas are the availability of public
transportation and particular space needs. A major factor that influences
private sector site selection for urban areas was the availability and cost
of skilled labor. Other private sector factors included real estate cost,
access
to transportation, and business incentives. In choosing the geographic area
for a facility, the private sector more often cites cost considerations and
incentives offered by states and local areas than did the federal agencies
in our survey.
Several government functions, such as research and development, data
processing, accounting and finance, and teleservice centers, can be located
in rural areas. Although it is not clear from the information we collected
whether any of the federal agencies that located sites in urban areas could
have located them in rural areas, one matter that is clear is that RDA has
not had the influence on federal siting practices that the Congress appears
to have intended when RDA was enacted. Many agencies had no RDA policy, as
required by the act, and many agency personnel in our survey either did not
consider RDA or did not know whether the act was used in making their site
selection decisions. If agencies had RDA policies and
agency personnel were aware of and considered them, certain constraints
would still exist that impede efforts to locate in rural areas, such as
inadequate infrastructure for high- speed telecommunications, limited
public transportation, and a limited labor force. In the future, some of
these constraints may be mitigated for a number of rural areas, but for the
federal government to cost effectively consider rural as well as urban
areas, we believe the following must occur:
The government needs to have a cohesive, governmentwide site location
policy that considers costs to the government as well as the goal of
enhancing the socioeconomic status of urban areas and rural areas. We do not
believe that the public policy objectives of assisting either urban or rural
areas in a way that will allow agencies to fully and effectively
achieve their missions preclude agencies from considering other factors such
as the availability and cost of labor, real estate costs, operational costs,
and certain local incentives. In fact, a more cost- conscious
federal siting policy may even increase agencies? consideration of rural
areas, since rural areas may have lower overall costs. However, we also
recognize that in making siting decisions, the agency?s ability to achieve
its mission can be a more important consideration than costs.
Federal agencies need to have clearly stated and documented policies on
site location that conform to governmentwide policy, including RDA;
and GSA and other agencies need to document their consideration of RDA to
ensure consistent policy application. As a central management agency, GSA
could require any agency subject to its authority to do this. Federal
agencies need one, clear definition of ?rural area? for the
purposes of implementing facility siting under RDA. Matters for
We suggest that Congress consider (1) enacting legislation to require
Congressional agencies to consider, along with their missions and program
requirements, real estate, labor, and other operational costs and applicable
local Consideration
incentives when deciding whether to relocate or establish a new a site in a
rural area or urban area, and (2) amending RDA to clarify the definition of
?rural area? for facility siting purposes to facilitate its implementation.
Recommendations for We recommend that the Administrator of GSA, in GSA?s
role as the federal Executive Action
government?s central property management agency, revise its guidance on
federal facility siting to (1) advise customer agencies that they should
consider, along with their missions and program requirements, real estate,
labor, and other operational costs and applicable local incentives when
deciding whether to relocate or establish a new site in a rural or urban
area; (2) require that each federal agency subject to GSA?s authority
provide a written statement to GSA demonstrating that, in selecting a new
facility location, the agency, as required by RDA, had given first priority
to locating in a rural area, and if a rural area was not selected, the
agency?s justification for the decision; and (3) define the term ?rural
area? to provide its customer agencies with a single definition for purposes
of federal siting under RDA, until the Congress amends RDA to define the
term.
Agency Comments and We provided copies of a draft of this report for comment
to the heads of 21
federal agencies. 28 The agencies included both the agencies in our survey
Our Evaluation and departmental agencies from which we obtained additional
site location information. We received written comments from 14 of the
agencies and oral comments from 7 of the agencies.
28 The 21 agencies include the Department of Education and all of the
departmental agencies and independent agencies listed in appendix II.
Seventeen of the agencies responded that they either had no comments on the
draft report, agreed with the information in the report, or suggested
technical changes, which we considered and incorporated within this report
where appropriate. The remaining four agencies provided more extensive
comments, which are discussed below. The GSA Administrator provided written
comments dated July 16, 2001, which are reprinted in appendix VII. The
Administrator stated that references in our report to GSA as the
government?s central real property management agency were somewhat
misleading, since GSA administers
only about 10 percent of the total federal real property inventory and,
therefore, GSA has no authority to establish governmentwide policy. However,
we note that GSA?s mission statement identifies it as one of three
central management agencies in the federal government. According to GSA, its
inventory includes 40 percent of all federal office space, which is occupied
by 1 million civilian federal employees, approximately half of the total
federal civilian workforce. Thus, GSA?s policies would affect almost half of
the federal government?s civilian office space, the type of space that was
included in our survey. We agreed with the Administrator?s statement in his
comments that agencies acquiring property independently of GSA are not
subject to GSA
regulations, and we have revised this report accordingly. The Administrator
also said that our 1990 report, which we referred to in our draft report,
called for GSA to develop a governmentwide location policy, and he added
that GSA could not have done so since it lacked the authority. Our 1990
report did not call on GSA to develop this policy under its authority, but
instead recommended that GSA propose a policy to Congress as a matter for
consideration. The Administrator also said GSA had no mechanism for
implementing a governmentwide leadership role in 1990, while that might be
possible now through its Office of Governmentwide Policy. As previously
mentioned, we recommended in
1990 that GSA develop such a policy for congressional consideration. The
Administrator also said our draft report implied that GSA selected the
geographic area for agencies? site acquisitions. We did not intend that
implication, and we have revised this report to clarify that issue.
In addition, the Administrator pointed to GSA?s efforts to make its customer
agencies aware of RDA requirements. In our report, we noted GSA?s
regulations require RDA compliance by customer agencies. Nonetheless,
RDA was not often used in the site acquisitions we surveyed, and some
agencies said they were not aware of RDA requirements.
The Administrator also responded to our recommendation that GSA require
written statements from each customer agency demonstrating that the agency
had given first priority to locating in a rural area and, if a rural area
was not selected, the agency also include a justification for the
decision to GSA. He agreed to require a written statement from customer
agencies regarding use of RDA in site acquisitions. However, he did not
agree to asking for a justification because he said this would put GSA into
the position of second- guessing the agencies because he believes that the
agencies have authority to decide where to locate their facilities. While we
agree with GSA on the latter point, we remain convinced that a justification
is needed to help document that agencies gave first priority to rural areas
when they did not choose a rural area. We are not recommending that GSA be
required to evaluate these justifications.
The Administrator also responded to our recommendation that GSA define
?rural area? to provide agencies with a single definition for the purpose of
federal siting under RDA until the Congress amends RDA to define the term.
He said GSA will develop a definition for use by its customer agencies, but
it has no authority to establish a definition for all federal agencies. We
clarified our report to reflect GSA?s authority to develop a definition only
for its customers. GSA did agree, however, to issue a bulletin to make other
agencies aware of this definition. We believe that GSA?s definition should
be useful to other agencies until Congress amends
RDA to set forth a statutory definition. We also received written comments
from the Department of the Interior?s Acting Assistant Secretary of Policy,
Management and Budget dated July 3, 2001, which are reprinted in appendix
VIII. The Acting Assistant Secretary responded that the agency generally
agreed with the findings and agreed in part with the matters for
congressional consideration and the
recommendations for executive action. Our report suggested that Congress
consider enacting legislation to require agencies to consider certain costs
along with agency mission when deciding whether to locate a site in a rural
or urban area. He responded that our suggestion should be limited to the
establishment of new offices because agencies have different considerations,
for example, relocation costs, when expanding operations
at an existing location, as compared to establishing a new office. We did
not intend our recommendation to apply to situations in which an agency
expands an operation at an existing site that does not involve a relocation
or establishment of a new site. We clarified our recommendation in this
regard. The Acting Assistant Secretary also commented that our
recommendation that GSA require customer agencies to provide a written
statement to GSA demonstrating that the agency had given first priority to a
rural area should (1) be required only if the agency does not select a rural
area, (2) be limited to a minimum dollar threshold that would exempt certain
locations from the documentation requirement, and (3) exempt operations that
are being expanded in the same local area. Our recommendation, as noted in
the
draft report, states that all site decisions should include a written
statement to GSA and a justification only should be provided if a rural area
was not selected. Although we agree that the establishment of a minimum
dollar threshold may be reasonable conceptually, we note that RDA does not
include a dollar threshold for application of the act?s requirements. We
also believe that expansions of existing operations should be subject to
this requirement if they might involve a relocation.
The two Department of the Treasury components in our survey also provided
written comments. We received comments from IRS? Director of the Office of
Real Estate and Facilities Management dated June 26, 2001. IRS?s comments on
this report covered four areas: (1) the use of RDA, (2) compliance with RDA
requirements, (3) agencies? ability to consider costs when selecting new
sites, and (4) technical considerations.
With respect to the first point- use of RDA, IRS said that the RDA?s
encouragement of locating in rural areas needs to be balanced against other
legal requirements that sometimes contradict RDA requirements, such as those
of CICA, and OMB and congressional budget requirements and limitations, and
short- term and long- term cost considerations;
a ?rural area? should be defined in a way that achieves the intent of the
RDA and be based on terms other than population alone; and if Congress
supports a location policy that is economically rather than
socially based, then Congress should repeal RDA and replace it with
legislation that would require agencies to meet specific threshold terms
specified in the legislation. We agree that agencies need to consider a
variety of legal requirements when selecting a new site for their facilities
as well as costs. However, the statutory requirement imposed by RDA must be
given priority. We also
believe that if Congress defines ?rural area? for purposes of RDA, it may
want to consider factors in addition to population. By stating in our report
that cost factors should be considered in the location process, we are not
suggesting that Congress enact a location policy based solely on economics.
Rather we are saying that cost should be one of the factors considered in
the decisionmaking process.
With respect to its second point, on compliance, IRS said that agencies
selecting their own sites without GSA assistance are to be held directly
accountable for compliance with RDA and, therefore, GSA should not be
required to evaluate or enforce compliance with the RDA. Additionally, IRS
said that if an agency is using GSA to acquire a site, a simple statement
that the agency considered the RDA should be sufficient. We recommended that
GSA require a written statement only for federal agencies subject to its
authority. We are not recommending that GSA enforce compliance with RDA for
agencies that have and use their own authority to acquire space. In those
cases where GSA acquires space for other agencies, we believe that providing
GSA with a justification for a site selection that includes the reasons for
not choosing a rural area under the RDA will help document that the agency
gave consideration to RDA.
Regarding IRS?s third point, IRS said that, in considering costs, most
agencies have no means to assess project costs, such as real estate or labor
costs, across geographic areas. The agency added that market data on rural
areas are not readily available or readily accessible to compare them with
alternative geographic areas. We believe that GSA and OPM can provide much
of the information needed to do cost analyses. Furthermore, private sector
companies are able to make such analyses and gain access to them. Finally,
several agencies in our survey said their site selection process included
cost analyses of alternative geographic areas as well as cost analysis of
sites within a geographic area.
Regarding IRS?s fourth point, its technical comments, IRS thought we should
make distinctions between leased occupancies and new federal construction
because of the greater time commitment for continued occupancy in new
construction. We do not agree with IRS on this point. RDA does not
distinguish between leased and owned space, and in our
view, it is as important to consider costs and other factors regardless of
whether space is leased or owned, particularly considering that many leases
are for long time periods.
On July 3, 2001, we received written comments from the U. S. Customs?
Director, Office of Planning, which are reprinted in appendix IX. The
Director responded that Customs concurred with the report?s recommendation
to GSA to revise its guidance on federal facilities and stated that
information in the report about Customs? facility acquisition process and
factors used by Customs to select the sites in our survey was correct. He
also stated that when Customs acquires property under its
existing statutory authority, it utilizes the same process as GSA; and,
although not mentioned in our draft report, Customs applies GSA?s basic
policy to house agencies in existing federally owned and leased space before
acquiring additional space. The Director of Planning also stated that many
of Customs? facilities are unique because the operation requires proximity
to the border, an airport, or a seaport, and difficulties sometimes
arise in complying with RDA and the pertinent executive orders because many
of the land border crossings, airports, and seaports are not located in the
central business area of either a rural area or an urban area. We agree
and acknowledged in this report that agency mission requirements primarily
dictated the location of the sites in our survey.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 21 days after
its issue date. At that time, we will send copies of this report to the
Chairman and Ranking Minority Member, Senate Committee on Governmental
Affairs; the Chairman and Ranking Minority Member, House Committee on
Government Reform; the Chairman and Ranking Minority Member, Senate
Committee on Environment and Public Works; the Chairman and Ranking Minority
Member, House Committee on Transportation and Infrastructure; the Chairman
and Ranking Minority Member, Senate Committee on Agriculture, Nutrition and
Forestry; the Chairman and Ranking Minority Member, House Committee on
Agriculture; the House and Senate Appropriations Committees; Representative
Ernest J. Istook; the Director of the Office of Management and Budget; and
the Administrator of GSA. We will also make copies available to others upon
request.
If you have any questions about this report, please call me on (202)
5128387. Key contributors to this report are acknowledged in appendix X.
Sincerely yours, Bernard L. Ungar Director, Physical Infrastructure Issues
Appendi Appendi xes x I
Objectives, Scope, and Methodology Objectives Our objectives were to
determine (1) what executive branch civilian nonDepartment of Defense (DOD)
functions have recently selected urban locations other than Washington, D.
C., and the federal cities, 1 compared to rural locations; and what factors,
benefits, and problems were associated with such site selections; (2) what
federal laws and policies govern facility location and to what extent have
agencies implemented this guidance; (3) what lessons can be learned from
private sector site selections; and (4) what functions lend themselves to
being located in rural areas.
Scope and To address the first objective, we looked at (1) sites selected by
the General Methodology Services Administration (GSA), the government agency
that has authority
to acquire space on behalf of executive branch agencies and (2) sites
selected by executive branch agencies using their independent statutory
authority. We chose to look at sites acquired independently of GSA to
determine whether agencies, when acting independently, engaged in practices
that were different from those of agencies that used GSA for their
acquisitions. We looked at those sites that were acquired from fiscal years
1998 to 2000. In establishing an appropriate site size to study, we wanted
to choose sites that were large enough to have some economic impact on the
community in which they were located, that were sufficient in number to
provide useful information, and for which sufficient information was
available.
Accordingly, we decided to consider only those sites with space of 25,000
square feet or more. 2 Regarding manageability, GSA advised us that spaces
of this size were small enough that they would be found on GSA?s inventory
in all of its 11 regions. Concerning economic impact, GSA advised us that 1
Prior to 1995, the Office of Management and Budget (OMB) established in
Circular A- 105
the following 10 cities as the standard federal cities for federal regional
headquarters: Atlanta, Boston, Chicago, Dallas, Denver, Kansas City, New
York, Philadelphia, San Francisco, and Seattle. On June 8, 1995, OMB
rescinded the Circular stating that the way the
federal government manages resources, agency efforts to reduce duplicative
levels of oversight, and the expanded use of technology make a strict
regional structure inefficient and unnecessary. 2 At sites involving
multitenant federal office buildings, we did not aggregate the holdings of
any one agency. For instance, if an agency such as the Department of Justice
had entities, such as Drug Enforcement Administration and Immigration and
Naturalization Service, that each occupied less than 25, 000 square feet at
that site, the individual entities' holdings were not combined. We recognize
that each entity within an agency can have a unique mission that affects its
location decision.
spaces of 25, 000 square feet or more would tend to be associated with a
relatively larger number of employees than spaces of less than 25, 000
square feet and would consequently have a greater economic impact. 3
Finally, in considering the availability of information, we discovered that
if a space has 25,000 or more square feet, the agency requesting that site
can
officially appeal any GSA revision of the delineated area in which that
agency wishes to search for a site. As a result, we thought the appeals
process would make information on such sites more readily available. 4 We
selected fiscal years 1998 through 2000 to obtain the most recent complete
data available. As agreed with your office, we excluded Washington, D. C.,
and the 10 agency regional cities because of your request to see site
acquisitions made outside of those cities.
We focused exclusively on new sites, rather than locations where leases had
been renewed. In addition, we excluded spaces acquired by the judicial and
legislative branches of the federal government because these branches are
not subject to the Rural Development Act (RDA), which is applicable to
executive departments and agencies. We also excluded sites acquired by DOD
because DOD informed us that it has so much vacant space available at its
bases nationally that it has no choice but to consider its existing vacant
space when locating new or existing operations. We excluded the sites
acquired by the United States Postal Service (USPS) because USPS advised us
that it had little or no discretion in deciding
where to locate most of its facilities, in that they needed to be in
specific locations to serve customers or near airports. In addition, the
Postal Reorganization Act of 1970 exempts USPS from federal laws relating to
contracts and property. Further, USPS has authority to acquire space
independently of GSA. 3 By using a threshold of 25, 000 square feet, we
started with 166 sites that were acquired by federal agencies with the
assistance of GSA in fiscal years 1998 through 2000. If we had used a
threshold of 10, 000 square feet, we would have initially considered 430
sites. The inclusion of sites under a smaller threshold size may have led to
more rural sites being included in our survey, but the acquisitions of
smaller sites probably would have been less important for considerations of
economic impact.
4 Our results are not generalized to sites with space of less than 25, 000
square feet. The type of functions and reasons for locating in rural areas
might be different if we had included sites of less than 25, 000 square
feet.
Identifying Sites Recently GSA provided us with a list of 166 sites it had
recently acquired for
Acquired Through GSA and agencies. After excluding sites on the basis of the
previously discussed
Independently of GSA criteria, the total number of GSA- acquired qualifying
sites was reduced to
81, representing 29 agencies. We did not independently verify the
completeness or accuracy of the site data provided by GSA. GSA also provided
us with a list of 52 agencies, including cabinet
departments and their components, that have some level of statutory
authority to acquire space independently of GSA. After excluding agencies
from the list on the basis of the previously discussed criteria, we reduced
the total number of agencies to 33. We subsequently contacted the 33
agencies, asking each whether it had, independently of GSA, used its
statutory authority to acquire, during fiscal years 1998 through 2000, sites
that met our criteria. 5 All 33 agencies responded, and 12 agencies
identified 37 sites 6 meeting these criteria. Of the 12 agencies, 5 were not
among the 29 agencies represented by the 81 sites GSA helped agencies to
acquire. Therefore, our total universe was 118 sites (81+ 37) represented by
34 agencies (29+ 5). Using a 28- question, mail- out survey form, 7 we
surveyed agency officials at the 118 sites. As of May 3, 2001, we had
received responses for 115 of the 118 sites, for a response rate of 97. 5
percent.
The practical difficulties of conducting any survey may introduce errors,
commonly referred to as nonsampling errors. For example, differences in how
a particular question is interpreted by the survey respondents could
introduce unwanted variability in the survey's results. We took steps in the
development of the questionnaire, the data collection, and the data editing
and analysis to minimize nonsampling errors. These steps included pretesting
the questionnaire with officials of the Department of Veterans Affairs and
the National Institutes of Health, prompting potential respondents in order
to increase our survey's response rate, and editing the questionnaires for
completeness and accuracy.
5 See appendix V for a list of agencies that have independent site
authority. 6 GSA does not track sites acquired by agencies independently of
GSA. We therefore relied upon officials at each agency that acquired sites
using their independent authority to report that all sites meeting our
criteria have been included. We did not independently verify the
completeness or accuracy of the site data provided by agencies with
independent authority to acquire space.
7 See survey form in appendix VI.
Identifying Sites in Rural To determine whether any of the sites were in
rural areas, we reviewed Areas- Defining ?Rural? RDA to obtain a definition
for rural. However, RDA?s definition for rural
was unclear, and we found application of it would be impractical. For the
purpose of locating federal facilities, RDA states that rural areas shall be
defined as those areas identified by the private business enterprise
exception in 7 U. S. C. sect. 1926( a)( 7). Prior to 1996, the private business
enterprise exception in 7 U. S. C. sect. 1926( a)( 7) defined rural areas as
including all territory of a state that is not within the outer boundary of
any
city having a population of 50,000 or more and its immediately adjacent
urbanized and urbanizing areas with a population density of more than 100
persons per square mile, as determined by the Secretary of Agriculture,
according to the latest decennial census of the United States. In 1996, 7 U.
S. C. sect. 1926( a)( 7) was amended and no longer includes the private business
enterprise exception. Therefore, the appropriate definition of rural area
under RDA is unclear. Furthermore, we identified two problems with the pre-
1996 definition. First, determining the population density for communities
adjacent to these federal sites was not feasible within the scope of this
job. Second, the term ?outer boundary? in this definition lacks specificity.
The current definition of rural in 7 U. S. C. sect. 1926( a)( 7) is for purposes
of water and waste disposal grants and loans and defines rural as a city,
town, or unincorporated area that has a population of no more than 10,000
inhabitants. We are not certain that this is the appropriate definition
since it refers to water and sewer grants and not the private business
enterprise exception. The prior threshold, which was eliminated in 1996,
used a
population threshold of 50,000 and included a population density
requirement. Population density data were not readily available; therefore,
it was not feasible for us to use this definition. 8 For this survey, we
chose a threshold of 25,000 or less because it was used
to define rural areas by several other federal agencies and private sector
organizations that we identified. When we applied this population
8 The information on population density for areas outside of cities was not
readily available and is subject to change, pending the results of the 2000
census. Additionally, when the U. S. Department of Agriculture needs to
determine whether a city that has applied for a grant is rural or not, and
may have a population of close to 50, 000, it has experts who survey the
population density of the city's surrounding area to determine whether the
density meets the criteria for rural area. We did not use 50, 000 as a
population threshold because many of the definitions of rural used by other
federal agencies and private sector organizations we identified used
thresholds of 25, 000 or less.
threshold of 25, 000 to the sites on the list of 81 GSA- acquired federal
sites, we determined that 23 were located in rural communities; and of the
37 sites that agencies acquired independently of GSA, 9 were located in
rural communities. Thus, our survey included a total of 32 rural sites. 9 We
note that 26 of the ?rural? sites in our survey that fall within the 25, 000
population threshold were actually located in metropolitan statistical areas
in which large cities are located. Determining Laws,
To address the second objective, which concerned federal laws and
Regulations, and Policy That policies that affect the selection of sites, we
reviewed federal laws, Affect Site Selections
executive orders, and policies that relate to the location of federal
facilities. We also conducted interviews with officials of GSA?s Office of
Governmentwide Policy, the chief realty officers of 13 of the 14 cabinet
agencies, 10 and an Office of Personnel Management official on federal
employee compensation and relocation benefits. Furthermore, we asked survey
respondents to identify whether they had applied the relevant laws and
policies when making a site acquisition. We also examined GSA lease files
created between 1989 and 2000 in three GSA regions- the Rocky Mountain
Region in Denver, CO; the Greater Southwest Region in Ft. Worth, TX; and the
Mid- Atlantic Region in Philadelphia, PA- where we were already conducting
an examination of GSA files for another assignment. We examined the files
for documentation regarding application of RDA. However, we did not attempt
to verify whether GSA or other agencies were in compliance with RDA.
Private Sector Lessons for To address our third objective, we contracted
with a private sector the Public Sector
consultant 11 to (1) perform a literature search, interview experts in
corporate real estate consulting, and survey corporations that had made
recent site selection decisions; (2) determine the factors and criteria the
private sector uses to select urban, suburban, or rural office locations;
(3) 9 See appendix III for a listing of the 32 rural sites.
10 As previously mentioned, DOD was not included in our review because DOD
informed us that because of the amount of vacant space at its bases, it
generally considers its existing vacant space when locating new operations.
11 John D. Dorchester, Jr., of The Dorchester Group, L. L. C. His report was
entitled Office Location Considerations of Large Corporations: U. S.
Government Potentials, March 31, 2001.
identify types of office functions (such as claims processing) that lend
themselves to being performed in more rural areas; (4) identify, to the
extent possible, similar federal functions; and (5) identify and explain how
technological advances in the last decade have reduced the disadvantages
previously associated with rural areas and what impact U. S. economic
changes have had on facility location decisions.
Our consultant reviewed relevant professional literature, surveyed a
judgmental sample of private sector firms, and analyzed selected economic
data for indicators of private sector location practices. Our consultant's
results are not statistically representative of private sector locations
practices because of the following factors: (1) a judgmental sample rather
than a random sample was used, (2) 17 percent of those surveyed responded,
and (3) no evidence was provided that those who responded were distributed
proportionately across industry- type and geographic region to the
proportions corresponding to these factors in the population of the 1,000
largest U. S. companies. Our consultant also did not empirically determine
whether the same factors that influence private sector location
decisions are applicable to location decisions of federal facilities.
Information obtained from our consultant was still very useful for our
review because the information included data from both survey respondents
and an extensive literature search on factors involved in corporate location
decisions. Also, although our consultant's study included various types of
companies, the study's focus was on the location of offices of those
companies. Offices in the consultant's survey performed such functions as
professional services, management, computing, secretarial, clerical, and
administrative, functions that are similar to government functions.
Identifying Functions That To accomplish the fourth objective, which
concerned the potential of
May Relocate certain federal functions to relocate to rural areas, we used
the agency survey described above and interviewed officials at 13 of the 14
cabinet agencies about the location of functions- such as printing,
personnel benefits administration, and procurement- that are often conducted
on an
agencywide basis. Experts in government management and personnel management
had identified such functions as those that could be conducted in nonurban
areas. At these agencies, we contacted the chief technology and human
resources officials to inquire whether each of these agencywide functions
was being conducted in an urban or a nonurban area
and why. These officials were also asked to report the impact of
telecommunications technology on the location of these agency functions and
whether technology had made rural areas more viable as site locations. We
also reviewed several of our reports, which provided background information
on all four of our objectives. 12 We did our review between August 2000 and
May 2001 in Washington, D. C.,
and in the cities of Philadelphia, PA; Denver, CO; and Fort Worth, TX,
cities where we were already conducting an examination of GSA files for
another assignment. Our review was conducted in accordance with generally
accepted government auditing standards.
12 Facilities Location Policy: GSA Should Propose a More Consistent and
Businesslike Approach (GAO/ GGD- 90- 109, Sept. 28, 1990); Federal Statutes
and Executive Orders Applicable to Public Buildings Service's Leasing
Program (GAO/ GGD- 00- 27R, Oct. 18, 1999); and Facility Relocation: NRC
Based Its Decision to Move Its Technical Training Center on Perceived
Benefits-- Not Costs (GAO/ GGD- 01- 54, Oct. 19, 2000).
List of Surveyed Federal Agencies That
Appendi x II
Recently Selected Site Locations Agencies that recently selected site
locations Department of Agriculture:
Animal and Plant Health Inspection Service Natural Resources Conservation
Service Forest Service
Department of Commerce
Bureau of the Census National Oceanic and Atmospheric Administration
Department of Energy Department of Health and Human Services
Centers for Disease Control and Prevention National Institutes of Health
Agency for Health Care Research and Quality
Department of Housing and Urban Development Department of the Interior
National Park Service Bureau of Reclamation
Department of Justice
U. S. Attorney Bureau of Prisons Drug Enforcement Administration Federal
Bureau of Investigation Immigration and Naturalization Service U. S.
Marshals Service
Department of Labor Department of State Department of Transportation
U. S. Coast Guard Federal Aviation Administration
Department of the Treasury
U. S. Customs Service Internal Revenue Service
Department of Veterans Affairs Environmental Protection Agency Equal
Employment Opportunity Commission Federal Emergency Management Agency
Agencies that recently selected site locations General Services
Administration National Aeronautics and Space Administration Smithsonian
Institution a Social Security Administration
a The Smithsonian Institution is an independent trust instrumentality of the
United States. Source: Survey data.
Location of the 32 Rural Sites (Areas With
Appendi x I II
Populations of 25,000 or Less) in Our Survey City/ town State Name of MSA a
Beckley WV (Not in MSA) Cape Canaveral FL Melbourne- Titusville- Palm Bay
Capitol Heights MD Washington, D. C. Chamblee GA Atlanta Clarksburg WV (Not
in MSA) Clarksville IN Louisville Decatur b GA Atlanta Eagle Pass TX (Not in
MSA) Fairfax VA Washington, D. C. Ft. Meade (Odenton) MD Baltimore Greenbelt
MD Washington, D. C. Herndon VA Washington, D. C. Jeffersonville c IN
Louisville Key West FL (Not in MSA) Lanham MD Washington, D. C. Martinsburg
WV Washington, D. C. Mineola NY Naussau- Suffolk Newtown Square PA
Philadelphia Norcross GA Atlanta Opa- Locka FL Miami Oxford MS( (Not in MSA)
Peachtree City GA Atlanta Pomona NJ Atlantic- Cape May New Port Richey FL
Tampa- St. Petersburg Quantico VA Washington, D. C. Springfield VA
Washington, D. C. Williamsburg KY (Not in MSA) Williston VT Burlington
Wilmington MA Boston
Total locations- 32
Note: Twenty six of the 32 rural sites (located in areas with populations of
25, 000 or less) were actually located in metropolitan statistical areas
(MSA), in which large cities are located. a MSA is an area having 1 or more
counties containing a city of 50,000 or more or a Census Bureau
defined urbanized area and a total population of at least 100,000 (or 75,000
in New England). b Two sites were located in Decatur, GA.
c Three sites were located in Jeffersonville, IN. Source: Survey data and
the Bureau of the Census.
Location Factors Considered by Private
Appendi x V I Sector Organizations Categories of overall factors and factors
within the categories Overall category of factors Factors within overall
categories
Workforce issues Availability: skilled and unskilled labor Costs Worker/
technical training Productivity Retention considerations Recruitment
possibilities Quality of life Transportation and utilities Transportation
Highway accessibility Proximity to a major airport Water and port
accessibility Energy availability and cost Electricity availability and cost
Water availability Adequacy of sewage facilities Technology Infrastructure
for business
Infrastructure for residential use State and local incentives Tax abatements
Educational incentives Others Business climate Responsiveness
Permitting Attitudes toward growth and business Environmental considerations
Tax policy Costs Operations
Occupancy Construction Land Room for expansion Proximity to markets/
suppliers/ raw materials/ competitors Consistency with corporate Image
Source: Office Location Considerations of Large U. S. Corporations: U. S.
Government Potentials, The Dorchester Group, L. L. C., March 31, 2001.
Federal Executive Branch Agencies With Some Level of Independent Authority
to
Appendi x V
Acquire Real Property, Calendar Year 2000 As table 9 shows, some agencies
have been provided independent statutory authority to acquire real estate,
and some agencies have broad authority. For example, the Tennessee Valley
Authority is authorized to purchase or lease real estate property that it
deems necessary or convenient in transacting its business; 1 and the
Securities and Exchange Commission is authorized to enter into real property
leases for office, meeting, storage,
and other space as is necessary to carry out its functions. 2 Other
agencies' statutory authority to acquire space is for more limited purposes.
For example, the Secretary of the Interior is authorized to lease buildings
and associated property for use as part of the National Park System, 3 while
the Secretary of the Treasury is authorized to lease space for the storage
of unclaimed or other imported merchandise that the government is required
to store. 4
Table 9: Executive Branch Agencies With Some Level of Independent Authority
to Acquire Real Property
Executive branch agencies with some level of authority to acquire real
property
Agency for International Development American Battle Monuments Commission
Appalachian Regional Commission Bonneville Power Administration Central
Intelligence Agency Department of Agriculture Department of Commerce
Department of Defense Department of Education Department of Energy
Department of Health and Human Services Department of Housing and Urban
Development Department of the Interior
1 16 U. S. C. sect. 831c. 2 15 U. S. C. sect. 78d. 3 16 U. S. C. sect. 1a- 2. 4 19 U. S.
C. sect. 1560.
Executive branch agencies with some level of authority to acquire real
property
Department of Justice Department of Labor Department of State Department of
Transportation Department of the Treasury Department of Veterans Affairs
Environmental Protection Agency Federal Emergency Management Agency General
Services Administration National Aeronautics and Space Administration
National Archives and Records Administration National Science Foundation
National Transportation Safety Board Panama Canal Commission Pennsylvania
Avenue Development Corporation Securities and Exchange Commission
Smithsonian Institution a Tennessee Valley Authority Broadcasting Board of
Governors U. S. Parole Commission U. S. Postal Service U. S. Sentencing
Commission U. S. Trade Representative a The Smithsonian Institution is an
independent trust instrumentality of the United States.
Source: GSA.
Appendi x VI Survey of Federal Facilities? Locations
Comments From the General Services
Appendi x VII Administration
Comments From the Department of the
Appendi x VI II Interior
Appendi x IX Comments From the U. S. Customs Service
Appendi x X
GAO Contacts and Staff Acknowledgments GAO Contacts Bernard Ungar (202) 512-
8387 John Baldwin (202) 512- 8387 Acknowledgments In addition to those named
above Alan Belkin, Lucy Hall, Brandon Haller,
Stuart Kaufman, Thomas Keightley, Gary Lawson, Susan Michal- Smith, Edward
Warner, and Greg Wilmoth all made key contributions to this report.
(240420) Lett er
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GAO United States General Accounting Office
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Contents
Contents Page 2 GAO- 01- 805 Facilities Location
Page 3 GAO- 01- 805 Facilities Location United States General Accounting
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Appendix I
Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix I Objectives, Scope, and Methodology
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Appendix II
Appendix II List of Surveyed Federal Agencies That Recently Selected Site
Locations
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Appendix III
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Appendix IV
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Appendix V
Appendix V Federal Executive Branch Agencies With Some Level of Independent
Authority to
Acquire Real Property, Calendar Year 2000 Page 56 GAO- 01- 805 Facilities
Location
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Appendix VI
Appendix VI Survey of Federal Facilities? Locations
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Appendix VI Survey of Federal Facilities? Locations
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Appendix VI Survey of Federal Facilities? Locations
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Appendix VI Survey of Federal Facilities? Locations
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Appendix VI Survey of Federal Facilities? Locations
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Appendix VII
Appendix VII Comments From the General Services Administration
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Appendix VII Comments From the General Services Administration
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Appendix VII Comments From the General Services Administration
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Appendix VIII
Appendix VIII Comments From the Department of the Interior
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Appendix IX
Appendix IX Comments From the U. S. Customs Service
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Appendix X
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