General Services Administration: Leasing Practices in Selected Regions
(Letter Report, 04/14/2000, GAO/GGD-00-88).
Pursuant to a congressional request, GAO reviewed the process used by
the Public Buildings Service (PBS) to procure leased space for federal
agencies, focusing on the: (1) approaches 3 of the General Services
Administration's 11 regional offices use to lease space, including how
each region determines an agency's space requirements, identifies and
assesses potential space, and communicates with actual offerors; and (2)
effect of solicitation practices on competition.
GAO noted that: (1) all three regions used the traditional, simplified,
and sole source approaches to leasing; (2) under the traditional leasing
approach, a specific space need is generally advertised in the local
newspaper to allow everyone who has space that could meet the agency's
requirements to submit an offer; (3) the simplified leasing approach is
used to expedite the leasing process for leases that are expected to be
under $100,000 in net annual rent; (4) under this approach, the
contracting officer has to solicit only three sources, to promote
competition, or document the file to explain the lack of competition;
(5) because the agency's space requirements are usually less than 10,000
square feet, they are not required by regulation to be advertised in the
newspaper; (6) the sole source approach is used when the contracting
officer determines that only one source can meet the agency's
requirements, and thus only the one source is solicited; (7) in all
three regions, specific space requirements are developed and defined
primarily by the customer agencies; (8) PBS officials said the
contracting officers typically question an agency's requirements only if
they have concerns about their ability to secure sufficient competition
because of the nature of the space requirements; (9) to determine which
sites could satisfy an agency's space requirements, the contracting
officer or realty specialist and the customer agency representative may
visit the potential sites; (10) according to PBS officials, much of the
communication with potential and actual offerors during the leasing
process is oral; (11) required communication with actual offerors was
well documented in some of the lease files; (12) for other lease files,
contracting officers told GAO that all required communication occurred,
even though it was not always documented as required by regulation; (13)
the processes used to develop the agencies' space needs, identify and
assess potential space, and communicate with the actual offerors did not
appear to unduly restrict competition; and (14) GAO reviewed 45 of the
360 leases that became effective in three regions in fiscal year 1999
and found that: (a) the space needs were generally broad enough to
elicit multiple offers; (b) representatives for the buildings that PBS
identified and assessed were solicited unless PBS determined that a
building clearly could not meet the agency's requirements; and (c)
communication with actual offerors was generally conducted according to
regulation, although it was not always documented as required.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-00-88
TITLE: General Services Administration: Leasing Practices in
Selected Regions
DATE: 04/14/2000
SUBJECT: Federal procurement
Real estate leases
Federal office buildings
Leasing policies
Contract negotiations
Sole source procurement
Competitive procurement
IDENTIFIER: GSA Advanced Acquisition Program
PBS Can't Beat GSA Leasing Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. This text was extracted from a PDF file. **
** Delineations within the text indicating chapter titles, **
** headings, and bullets have not been preserved, and in some **
** cases heading text has been incorrectly merged into **
** body text in the adjacent column. Graphic images have **
** not been reproduced, but figure captions are included. **
** Tables are included, but column deliniations have not been **
** preserved. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
GAO/GGD-00-88
GENERAL SERVICES ADMINISTRATION: Leasing Practices in Selected Regions (GAO/GGD-00-88)
GENERAL SERVICES ADMINISTRATION
Leasing Practices in Selected Regions
United States General Accounting Office
GAO Report to the Honorable Fred Thompson, Chairman
Committee on Governmental Affairs U. S. Senate
April 2000
GAO/GGD-00-88
United States General Accounting Office General Government Division Washington, D. C. 20548
Page 1 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
B- 284261 April 14, 2000
The Honorable Fred Thompson Chairman, Committee on Governmental Affairs United States Senate
Dear Mr. Chairman: This report responds to your request that we review the process used by the General Services Administration's (GSA) Public Buildings Service (PBS) to procure leased space for federal agencies. You were particularly interested in how different regional offices determine agencies' space requirements, conduct market surveys, and communicate with offerors during the leasing process. You also expressed concerns about possible limitations on competition during the lease solicitation process.
As agreed with your office, this report (1) identifies the approaches 3 of GSA's 11 regional offices use to lease space, including how each region determines an agency's space requirements, identifies and assesses potential space, and communicates with actual offerors, and (2) assesses the effect of solicitation practices on competition.
The three regional offices included in the review were Mid- Atlantic in Philadelphia, PA; Southeast in Atlanta, GA; and National Capital (NCR) in Washington, D. C. When combined, these regions account for over half of PBS' total amount of leased square footage and annual rent paid for leased space.
All three regions used the traditional, simplified, and sole source approaches to leasing. In addition, NCR has developed a leasing approach unique to its region called the Advanced Acquisition Program (AAP), which it uses extensively. Under the traditional leasing approach, a specific space need is generally advertised in the local newspaper to allow everyone who has space that could meet the agency's requirements to submit an offer. The simplified leasing approach is used to expedite the leasing process for leases that are expected to be under $100,000 in net annual rent. Under this approach, the contracting officer has to solicit only three sources, to promote competition, or document the file to explain the lack of competition. Because the agency's space requirements are usually less than 10, 000 square feet, they are not required by regulation to be advertised in the newspaper. The sole source approach is used when the Results in Brief
B- 284261 Page 2 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
contracting officer determines that only one source can meet the agency's requirements, and thus only the one source is solicited. NCR's AAP is a variation of the traditional leasing approach under which NCR advertises annually for a variety of generic space requirements; evaluates the offers it receives; and develops an inventory of available space, based on acceptable offers, from which it can quickly award leases when specific space needs are identified.
In all three regions, specific space requirements are developed and defined primarily by the customer agencies. PBS officials said that the contracting officers typically question an agency's requirements only if they have concerns about their ability to secure sufficient competition because of the nature of the space requirements. In these regions, potential sites are identified in many ways, including through newspaper advertisements, contacts with local real estate brokers, and the contracting officers' knowledge of the area. To determine which sites could satisfy an agency's space requirements, the contracting officer or realty specialist and the customer agency representative may visit the potential sites. According to PBS officials, much of the communication with potential and actual offerors during the leasing process is oral. We were unable to assess the level of communication with potential offerors both because there are no requirements related to communication with potential offerors and its documentation, and because documentation of any communication varied in the lease files we reviewed. Required communication with actual offerors was well documented in some of the lease files we reviewed. For other lease files, contracting officers told us that all required communication occurred, even though it was not always documented as required by regulation.
The processes used to develop the agencies' space needs, identify and assess potential space, and communicate with the actual offerors did not appear to unduly restrict competition. We reviewed 45 of the 360 leases that became effective 1 in the three regions in fiscal year 1999 and found that (1) the space needs were generally broad enough to elicit multiple offers; (2) representatives for the buildings that PBS identified and assessed were solicited unless PBS determined that a building clearly could not meet the agency's requirements; and (3) communication with actual offerors was generally conducted according to regulation, although it was not always documented as required. In 10 of the 12 sole source cases we reviewed, justifications for limiting the competition to one source were prepared and approved as required. In the case of the other two sole
1 The effective date of the lease is the date on which the rent payments commence.
B- 284261 Page 3 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
source leases we reviewed, the justification for one was prepared but not signed by the appropriate official, while the file for the other lease we reviewed, which was for a few parking spaces that cost about $5,000 annually, did not contain documentation as to why only one offer was solicited.
Participants in PBS' leasing process who believe that a contract has been or is about to be awarded in violation of the laws and regulations that govern contracting with the federal government can protest the awards to GSA and us. In the three regions we visited, protests were filed in connection with 4 of the 360 leases that became effective in fiscal year 1999. All of these protests were submitted by incumbent lessors who were not successful in retaining their government lease when GSA conducted a new acquisition for the expiring lease. Two of these protests were withdrawn by the protesters before we issued a decision, and the other two were denied.
As the federal government's landlord, PBS provides space for most federal agencies. It manages about 151 million square feet of leased space in about 6,400 private sector properties at an annual cost of about $2.7 billion. In addition to the leased space, PBS also manages about 184 million square feet of space in almost 2,000 government- owned properties.
Between 1993 and 1995, the National Performance Review, GSA's Inspector General, and we 2 raised several concerns about PBS' leasing program, including that PBS' leasing program (1) was not efficient, (2) did not promote competition, (3) took too long to award leases, and (4) was not meeting the customers' needs. Numerous recommendations were made by these organizations and us to address the concerns that were raised. The essence of the recommendations was to (1) adopt private sector practices, (2) streamline procedures, (3) increase customer satisfaction, (4) promote competition, and (5) separate policymaking from oversight.
In July 1996, PBS reformed its leasing process nationwide to be more businesslike and results- oriented through the implementation of its Can't Beat GSA Leasing program. Through this program, PBS responded to the recommendations that had been made and adopted leasing practices commonly used by the private sector, streamlined the leasing process by eliminating or making optional many of the previously required reviews
2 Federal Office Space: More Businesslike Leasing Approach Could Reduce Costs and Improve Performance (GAO/ GGD- 95- 48, Feb. 27, 1995). Background
B- 284261 Page 4 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
and paperwork, and reduced the time it took to acquire leases. Federal agencies also now have the option either to use PBS to acquire new leased space when necessary or to conduct the lease procurement themselves after requesting a delegation of authority for leasing from PBS. To separate policymaking from oversight, GSA established the Office of Governmentwide Policy outside of PBS.
To understand PBS' lease acquisition process, we reviewed PBS' guidance on its leasing process in the General Services Administration Acquisition Regulation System (GSAR), 48 CFR Part 570, Can't Beat GSA Leasing desk guide, and several acquisition letters on real property leasing activities. At your request, we visited PBS' Mid- Atlantic, Southeast, and National Capital (NCR) regions, which combined account for over half of PBS' total number of leased square feet and annual rent paid for leased space. In these three regions, we identified (1) the leasing approaches used including how each region determined agencies' space requirements, identified and assessed potential space, and communicated with actual offerors and (2) the effect of solicitation practices on competition.
We spoke with the cognizant officials in each region about the leasing approaches used in the region. We reviewed a random sample of 42 of the 360 leases that the regional office officials identified as becoming effective in these three regions in fiscal year 1999. Since the leasing approach can vary based on the lease's annual rent, we stratified the lease inventory in each region into three groups based on annual rent below $100, 000, between $100, 000 and $1.9 million, and above $1.9 million. We randomly selected a sample of leases from each of these groups for review. 3 However, because of the relatively small number of lease files we reviewed, we did not generalize the results of our lease file reviews to the universe of leases in the regions we visited. We reviewed GAO protest decisions or protest files for the four leases that became effective in fiscal year 1999 that the regions identified as having protests associated with them. For three of the four protested leases, we also reviewed PBS' lease files. We did not review the other lease file because it contained classified information. 4 In total, we reviewed 45 of PBS' lease files in the three regions we visited.
3 In the Southeast region, there were three leases above $1. 9 million that became effective in fiscal year 1999, and we reviewed the files for all three of these leases. In the Mid- Atlantic region, there were no leases above $1. 9 million that became effective in fiscal year 1999.
4 We did not review any classified documents in the GAO protest files. Scope and
Methodology
B- 284261 Page 5 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
We reviewed PBS' lease files to examine the leasing approach used for each lease, including (1) how space needs were determined, (2) how potential sites were identified and assessed, and (3) what level of communication with potential and actual offerors took place. We were unable to assess the level of communication with potential offerors because there were no requirements related to communication with potential offerors and its documentation, and documentation of any communication varied in the lease files we reviewed. While reviewing the lease files, we also looked for the effect that these aspects of the leasing process had on competition. When necessary, we spoke to the contracting officers responsible for the lease files to clarify events that occurred during the leasing process and to get answers to any questions we had on the leasing approach.
We did not evaluate the overall efficiency, effectiveness, and prices of, or customer satisfaction with, PBS' leasing program. Nor did we review PBS' decisions to satisfy the agencies' space requests through leasing rather than construction or purchase of a building. 5 We also did not question PBS' decisions regarding justifications for eliminating sites from competition and for using sole source solicitations.
We did our work from October 1999 to March 2000 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Administrator of GSA. GSA's comments are discussed at the end of this report.
The Mid- Atlantic, Southeast, and National Capital (NCR) regions all used the three basic leasing approaches that are provided for in statute or regulationtraditional, simplified, and sole source. Because of NCR's history of volume leasing in a small geographic area, it has developed and uses extensively a unique leasing approach called the Advanced Acquisition Program (AAP), which regional officials said allows it to award leases more quickly by developing an inventory of available space for lease. The extent to which each leasing approach was used in the different regions varied, but specific aspects of the process of acquiring a lease were similar among the regions.
5 We previously reported that the federal government could realize significant savings if it owned some of the space it leased, but that GSA had to lease the space because it lacked sufficient funds for construction. See General Services Administration: Comparison of Space Acquisition Alternatives Leasing to Lease- Purchase and Leasing to Construction (GAO/ GGD- 99- 49R, Mar. 12, 1999), Space Acquisition Cost: Comparison of GSA Estimates for Three Alternatives (GAO/ GGD- 97- 148, Aug. 6, 1997), and Federal Office Space: Increased Ownership Would Result in Significant Savings (GAO/ GGD90- 11, Dec. 22, 1989). Many Similarities in
Leasing Approaches Used in the Regions
B- 284261 Page 6 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
The Mid- Atlantic region and NCR used what they considered the quickest and easiest leasing approach the majority of the time. The Mid- Atlantic region used the simplified leasing approach for 58 percent of all its leases, and NCR used the AAP approach for 54 percent of all its leases that became effective in fiscal year 1999. The Southeast region used the traditional and simplified leasing approaches equally 45 percent each. Table 1 shows the percentage of each region's use of each leasing approach for leases that became effective in fiscal year 1999.
Percentage of leases using Region
Total number of
leases Traditional approach Simplified
approach Sole source approach AAP
Southeast 193 45% 45% 11% N/ A Mid- Atlantic 108 32 58 10 N/ A NCR 59 24 5 17 54% Note 1: Percentages may not add to 100 due to rounding. Note 2: N/ A = not applicable. Source: PBS regional officials.
As a part of the Can't Beat GSA Leasing program, PBS streamlined its leasing process to make it more businesslike, thereby eliminating many of the previously required reviews and documentation. The contracting officer now has more flexibility to make business decisions about leasing, and PBS relies on the contracting officer's knowledge in making leasing decisions. While more flexibility has been built into the process, statutes and regulation still prescribe the circumstances in which the different leasing approaches may be used and certain steps that must occur during the leasing process. 6
The traditional leasing approach, which can be used for all leases, uses the full and open competition standard that allows all sources to compete for the lease. Under the traditional leasing approach, once the agency's space requirements have been defined, they are generally advertised in the local newspapers to identify potential sites. All space requirements exceeding 10,000 square feet are required by regulation to be advertised in the local newspaper or the Commerce Business Daily. PBS officials told us that they advertise in the local newspapers. The potential sites are visited to determine whether they could satisfy the agency's space requirements. The contracting officer then prepares a Solicitation for Offers (SFO), which contains the agency's requirements and information related to submitting
6 The specific federal statutes and executive orders that are applicable to PBS' leasing program are listed and explained in a letter we issued on this subject, Federal Statutes and Executive Orders Applicable to the Public Buildings Service's Leasing Program (GAO/ GGD- 00- 27R, Oct. 18, 1999).
Table 1: Leasing Approaches Used in Three PBS Regions for Leases Effective in Fiscal Year 1999
B- 284261 Page 7 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
an offer. The SFO is to be sent to everyone who is determined to have space that could meet the agency's requirements or who requests the SFO. After offers are received, they are to be evaluated based on the SFO requirements and the offered price. These basic steps were taken in all three regions when the traditional leasing approach was used.
The simplified leasing approach used in the three regions expedites the leasing process and can be used if the average annual rent is expected to be $100,000 or less, excluding operating expenses. The process is intended to be less formal than the traditional leasing approach, with much of it handled by telephone or during on- site visits. Under the simplified approach, the contracting officer only has to (1) solicit three sources to promote competition or (2) document the file to explain the lack of competition. Because space requirements are generally under 10, 000 square feet, they are not required by regulation to be advertised in the local newspaper. The potential sites may be visited to determine which three sites satisfy the agency's requirements and thus should be solicited. Offers are to be evaluated by considering the agency's space requirements and the offered price.
Under the sole source leasing approach, the contracting officer determines that there is only one source that can satisfy the agency's space requirements. Sole source lease awards typically occur as an outcome of the traditional or simplified leasing approach, since the determination that there is only one source that can satisfy the agency's space requirements is to be made after the market survey is completed. PBS can negotiate with the one source for the space and then award the lease using a sole source contract. For all sole source leases, there must be information in the file explaining why only one source was solicited. If the lease's annual rent is $500,000 or more, and depending on the size of the lease, a justification to use other than full and open competition must be approved by either (1) the competition advocate in the region responsible for promoting full and open competition, (2) the head of the procuring activity, or (3) the senior procurement executive of the agency. The justification for using the sole source contract must include an explanation of what was done to determine that only one source could provide the space and that the price offered was fair and reasonable.
NCR began to use AAP in 1991 to expedite the acquisition of small amounts of space because of complaints from customer agencies that it was taking too long to obtain needed space. NCR currently uses AAP for leases of all sizes. Through this program, NCR conducts a competitive procurement process through which it annually solicits potential offerors
B- 284261 Page 8 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
for generic space requirements, ranging from 2,000 to 440,000 square feet, in a certain geographic area. NCR then evaluates the offers received and develops an inventory of available space ranging from 2,000 to 440,000 square feet. When NCR receives a space request, the AAP inventory is sorted according to the agency's space requirements, and those sites in the inventory that may satisfy the requirements are reviewed. The offeror of the available space that will satisfy the agency's requirements at the lowest price is to be awarded the lease. NCR then states that it can award a lease for this space without further competition or negotiation because it has already gone through a competitive procurement process to acquire the space. According to NCR officials, this approach has worked well for NCR because of the large government presence and consequent high demand for space in its relatively small geographic area.
Figure 1 summarizes the traditional, simplified, and AAP leasing approaches. It does not include the sole source leasing approach since sole source awards typically occur as an outcome of the traditional or simplified leasing approach.
B- 284261 Page 9 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
Source: GAO summary of GSAR and information provided by regional PBS officials.
Figure 1: Key Steps in Various PBS Leasing Approaches
B- 284261 Page 10 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
There are certain aspects of the leasing process, such as the development of space requirements, identification and assessment of potential sites, and communication with actual offerors, that occur in all acquisitions, regardless of the leasing approach used. These aspects of the leasing process were essentially done the same way in each of the regions we visited.
In all three regions, space requirements including the amount of space, location, and any required special features were primarily developed by the customer agency. PBS officials in the regions told us that they generally question the customer agency's space requirements only if they have concerns about their ability to generate sufficient competition because of the nature of the space requirements.
This is markedly different from how space needs were developed prior to PBS' Can't Beat GSA Leasing program, when PBS prescribed what an agency could or could not have for their office space. In fiscal year 1998, PBS began preparing occupancy agreements to establish the relationship between itself and its customer agencies. The occupancy agreement includes the customer agency's identified space requirements, the term of the lease, and the estimated per square foot and annual rental costs of the space requirements. The purpose of the agreement is to ensure that the agency is aware of and agrees to the estimated cost of acquiring space to satisfy its requirements, and understands how changes to the space requirements can result in an increase in the total cost for the space.
Potential sites that may satisfy the agency's space requirements are identified in various ways. While space needs of 10,000 square feet or more must be advertised in a local newspaper, the contracting officer has flexibility in using other sources to identify potential sites to meet space requirements. In the cases that we reviewed, the methods or sources used to identify potential sites varied somewhat by contracting officer. However, these differences did not appear to be due to regional office preferences or direction, but rather to the contracting officer's personal preferences and knowledge of the real estate market. In addition to advertising in local newspapers, contracting officers often contacted local real estate brokers or used their own knowledge of the market to identify potential sites. Examples of other sources that were contacted or reviewed when trying to identify potential sites for leasing included the local government, the chamber of commerce, an economic development authority, a group representing shopping centers, and newspaper advertisements offering space for lease. Determination of Agency
Space Requirements Identification and Assessment of Potential Space
B- 284261 Page 11 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
To assess a potential site's ability to satisfy the agency's space requirements, the contracting officer or realty specialist and an agency representative may visit the site. Representatives from those sites that appear to satisfy the agency's requirements are then asked to submit an offer. Site visits may not be necessary when the contracting officer is familiar with the potential sites and their ability to satisfy the agency's requirements. When visiting potential sites, it was the practice in all three regions to have a customer agency representative accompany the contracting officer or realty specialist. The PBS officials said that this is an important step because if a particular building will not satisfy the agency's needs, it is important to identify this fact as early as possible and not spend time soliciting such sites. According to PBS officials, there must be a valid reason for why a site will not satisfy the agency's space requirements, since a key aspect of the contracting officer's job is to generate competition. In the cases that we reviewed that included site visits, it appeared that the contracting officer or realty specialist and agency representatives had agreed on which sites would satisfy the agency's space requirements.
According to PBS officials, much of the communication with actual offerors is oral. Regulations require that a written record of all exchanges related to negotiations be placed in the lease file, and that written notice be provided to any offeror excluded from the competition as well as to any unsuccessful offeror. The level of documented communication with actual offerors in the lease files we reviewed varied by contracting officer. Some of the lease files contained a summary, or detailed notes, or records of the specific negotiations with each offeror and a clear trail of written correspondence. Other lease files did not contain documentation of negotiations held with offerors. All of the lease files involving leases where offerors were excluded from competition contained supporting documentation. However, some lease files did not contain documentation of written notice to the unsuccessful offerors. Contracting officers told us that in these cases all required communication occurred, even though it was not documented in the file as is required.
When we brought the issue of lease files missing documentation to the attention of NCR management, they said that their own review of lease files in the region had also found documentation to be missing. As a result of our work and their own review, in December 1999, NCR issued a real estate bulletin on lease file documentation that contained a checklist of required documents. In February 2000, NCR also issued a bulletin on the memorandum the contracting officer is required to prepare that summarizes the lease process, including the results of negotiations with Communication With
Offerors
B- 284261 Page 12 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
actual offerors. NCR is also providing training for the staff on these bulletins.
For the lease files we reviewed, the way in which (1) space needs were determined, (2) potential sites were identified and assessed, and (3) communication with actual offerors took place did not appear to unduly restrict competition. Participants in PBS' leasing process who believe that a contract has been or is about to be awarded in violation of the laws and regulations that govern contracting with the federal government can protest the awards to GSA and us. According to officials in the three regions we visited, about 1 percent (4 of 360) of the leases that became effective in fiscal year 1999 were protested.
The space requirements as defined by the customer agency and reviewed by the contracting officer were generally broad enough to elicit multiple offers. Of the eight leases we reviewed that were awarded using the traditional leasing approach, six received an average of about four offers, with a range of from two to five offers for each lease. For the other two leases, the agencies' requirements that they be located in a geographically small area because of their missions resulted in one offer being received for each lease. Of the 19 leases that were awarded using the simplified approach, the contracting officers solicited at least three sources to promote competition or provided documentation to explain the lack of competition. In the 12 lease cases we reviewed where the sole source approach was used, the required justification for using other than full and open competition was prepared and approved for 10 of the leases. Of the other two sole source leases we reviewed, one had a justification that was prepared but not signed by the appropriate official, while the file for the other lease, which was for a few parking spaces that cost about $5,000 annually, did not document why only one offer was solicited.
Finally, while it was not required by regulation, five of the six lease files we reviewed in NCR that used the AAP approach contained documentation concerning the number of properties identified in the AAP inventory that could satisfy the specific space requirement and how the successful offer was selected. The other AAP lease file did not contain this information.
As discussed previously, it was the practice in the three regions we visited to have a customer agency representative accompany the contracting officer or realty specialist on the visits to the potential sites to help determine which sites could satisfy the agency's requirements and whose representatives should be asked to submit an offer. In the cases we Leasing Processes Did
Not Unduly Restrict Competition
B- 284261 Page 13 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
reviewed in which site visits occurred, we found nothing in the files to indicate that the presence of the agency representative on these visits caused sites to be eliminated from consideration without justification. For those cases where the site's representative was not asked to submit an offer, there was generally a reason noted for why the particular site would not satisfy the agency's requirements.
As discussed earlier, the level of communication with the actual offerors that was documented in the lease files varied by contracting officer. PBS contracting officers stated that not all communication with offerors that occurred was documented. However, we did not find anything to suggest that the same information was not being provided to all offerors at the same time. Based on the lease files we reviewed, there was no indication that the extent or means of communications with the actual offerors had an adverse effect on competition.
According to PBS officials in the 3 regions we visited, only 4 of the 360 leases that became effective in fiscal year 1999 were protested. All of these protests were submitted to GAO by incumbent lessors who were not successful in retaining their government lease when GSA conducted a new acquisition for the expiring lease. One protester 7 filed a protest over PBS' determination that its building would not be considered since it was not located within the central business area (CBA) in accordance with executive order 12072. 8 GAO denied this protest because PBS reasonably determined that the protester's building was outside the CBA and thus was not entitled to consideration for lease under the terms of executive order 12072. Another protester filed a protest alleging that PBS deliberately excluded it from the competition when it did not send the protester a copy of the solicitation. 9 GAO denied the protest because PBS advertised the requirements for leased space as required, and obtained full and open competition and a reasonable price for the space in response to the SFO. Additionally, GAO stated that there was no evidence that the contracting officer deliberately excluded the protester from competing. The other two protests were withdrawn by the protesters before GAO issued a decision. In one of these protests, the protester argued that a sole source contract to acquire space was not justified. In reviewing this file, we found that PBS awarded a sole source contract to utilize vacant space that it was already
7 Peachtree 25 th LLC d/ b/ a American Management Company, B- 281185. 2, Dec. 4, 1998, 98- 2 CPD 126. 8 Executive order 12072 requires that GSA, in leasing office space in an urban area, give first consideration to a city's centralized business area. 9 Interproperty Investments, Inc., B- 281600, March 8, 1999, 99- 1 CPD 55.
B- 284261 Page 14 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
leasing and paying rent on. Furthermore, PBS had determined that the protester's space did not meet the agency's minimum requirements. The other withdrawn protest stated that PBS intentionally precluded competition through the use of arbitrary requirements. The lease in question contained relevant security requirements for an agency that required a high level of security.
The GSAR contains the basic leasing approaches and actions that must occur when leasing space for federal agencies. The three regional offices we visited used these basic leasing approaches traditional, simplified, and sole source and generally complied with the requirements pertaining to the steps of the leasing process. NCR uses the three leasing approaches contained in the GSAR but has also developed the AAP, which is a variation of the traditional leasing approach. NCR uses AAP extensively to expedite the acquisition of leased space in its region, which is characterized by a large federal presence in a relatively small geographical area.
PBS' contracting officers have been allowed to exercise flexibility and discretion in acquiring leased space for federal agencies. Based on the lease files that we reviewed, we did not find any indication that the process by which leased space was being acquired adversely affected competition.
We requested comments on a draft of this report from the Administrator of GSA. On March 21, 2000, we met with GSA's Assistant Commissioner, Office of Business Performance, and other GSA officials to discuss our draft report. The officials said that they agreed with the report and noted the weakness in documentation in the lease files. An NCR official said that they too had found weaknesses in documentation of lease files in NCR and have instituted a training program to address the issue. On March 30, 2000, the Assistant Commissioner sent an e- mail message to all GSA regional offices emphasizing the need to document in the lease files conversations with and notification to unsuccessful offerors.
We are sending copies of this report to Senator Joseph I. Lieberman, Ranking Minority Member of your committee; Senator George V. Voinovich, Chairman, and Senator Max Baucus, Ranking Minority Member, Subcommittee on Transportation and Infrastructure, Senate Committee on Environment and Public Works; Representative Bob Franks, Chairman, and Representative Robert Wise, Jr., Ranking Democratic Member, Subcommittee on Economic Development, Public Buildings, Hazardous Materials and Pipeline Transportation, House Committee on Conclusions
Agency Comments
B- 284261 Page 15 GAO/ GGD- 00- 88 Leasing Practices in Selected Regions
Transportation and Infrastructure; the Honorable David J. Barram, Administrator, GSA; and to others upon request.
If you have any questions about this report, please call me or Ron King on (202) 512- 8387. Key contributors to this assignment were Maria Edelstein, Shirley Bates, and Lisa Wright- Solomon.
Sincerely yours, JayEtta Hecker, Associate Director, Government
Business Operations Issues
Ordering Copies of GAO Reports The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent.
Order by mail: U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013
or visit: Room 1100 700 4 th St. NW (corner of 4 th and G Sts. NW) U. S. General Accounting Office Washington, DC
Orders may also be placed by calling (202) 512- 6000 or by using fax number (202) 512- 6061, or TDD (202) 512- 2537.
Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512- 6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
Viewing GAO Reports on the Internet For information on how to access GAO reports on the INTERNET, send e- mail message with info in the body to:
info@ www. gao. gov or visit GAO's World Wide Web Home Page at: http:// www. gao. gov Reporting Fraud, Waste, and Abuse in Federal Programs To contact GAO FraudNET use: Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm E- Mail: fraudnet@ gao. gov Telephone: 1- 800- 424- 5454 (automated answering system)
United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300
Address Correction Requested Bulk Rate
Postage & Fees Paid GAO Permit No. G100
(240362)
GENERAL SERVICES ADMINISTRATION: Leasing Practices in Selected
Regions (GAO/GGD-00-88) GENERAL SERVICES ADMINISTRATION Leasing
Practices in Selected Regions United States General Accounting
Office GAO Report to the Honorable Fred Thompson, Chairman
Committee on Governmental Affairs U. S. Senate April 2000
GAO/GGD-00-88 United States General Accounting Office General
Government Division Washington, D. C. 20548 Page 1 GAO/GGD-00-88
Leasing Practices in Selected Regions B-284261 April 14, 2000 The
Honorable Fred Thompson Chairman, Committee on Governmental
Affairs United States Senate Dear Mr. Chairman: This report
responds to your request that we review the process used by the
General Services Administration's (GSA) Public Buildings Service
(PBS) to procure leased space for federal agencies. You were
particularly interested in how different regional offices
determine agencies' space requirements, conduct market surveys,
and communicate with offerors during the leasing process. You also
expressed concerns about possible limitations on competition
during the lease solicitation process. As agreed with your office,
this report (1) identifies the approaches 3 of GSA's 11 regional
offices use to lease space, including how each region determines
an agency's space requirements, identifies and assesses potential
space, and communicates with actual offerors, and (2) assesses the
effect of solicitation practices on competition. The three
regional offices included in the review were Mid- Atlantic in
Philadelphia, PA; Southeast in Atlanta, GA; and National Capital
(NCR) in Washington, D. C. When combined, these regions account
for over half of PBS' total amount of leased square footage and
annual rent paid for leased space. All three regions used the
traditional, simplified, and sole source approaches to leasing. In
addition, NCR has developed a leasing approach unique to its
region called the Advanced Acquisition Program (AAP), which it
uses extensively. Under the traditional leasing approach, a
specific space need is generally advertised in the local newspaper
to allow everyone who has space that could meet the agency's
requirements to submit an offer. The simplified leasing approach
is used to expedite the leasing process for leases that are
expected to be under $100,000 in net annual rent. Under this
approach, the contracting officer has to solicit only three
sources, to promote competition, or document the file to explain
the lack of competition. Because the agency's space requirements
are usually less than 10, 000 square feet, they are not required
by regulation to be advertised in the newspaper. The sole source
approach is used when the Results in Brief B-284261 Page 2
GAO/GGD-00-88 Leasing Practices in Selected Regions contracting
officer determines that only one source can meet the agency's
requirements, and thus only the one source is solicited. NCR's AAP
is a variation of the traditional leasing approach under which NCR
advertises annually for a variety of generic space requirements;
evaluates the offers it receives; and develops an inventory of
available space, based on acceptable offers, from which it can
quickly award leases when specific space needs are identified. In
all three regions, specific space requirements are developed and
defined primarily by the customer agencies. PBS officials said
that the contracting officers typically question an agency's
requirements only if they have concerns about their ability to
secure sufficient competition because of the nature of the space
requirements. In these regions, potential sites are identified in
many ways, including through newspaper advertisements, contacts
with local real estate brokers, and the contracting officers'
knowledge of the area. To determine which sites could satisfy an
agency's space requirements, the contracting officer or realty
specialist and the customer agency representative may visit the
potential sites. According to PBS officials, much of the
communication with potential and actual offerors during the
leasing process is oral. We were unable to assess the level of
communication with potential offerors both because there are no
requirements related to communication with potential offerors and
its documentation, and because documentation of any communication
varied in the lease files we reviewed. Required communication with
actual offerors was well documented in some of the lease files we
reviewed. For other lease files, contracting officers told us that
all required communication occurred, even though it was not always
documented as required by regulation. The processes used to
develop the agencies' space needs, identify and assess potential
space, and communicate with the actual offerors did not appear to
unduly restrict competition. We reviewed 45 of the 360 leases that
became effective 1 in the three regions in fiscal year 1999 and
found that (1) the space needs were generally broad enough to
elicit multiple offers; (2) representatives for the buildings that
PBS identified and assessed were solicited unless PBS determined
that a building clearly could not meet the agency's requirements;
and (3) communication with actual offerors was generally conducted
according to regulation, although it was not always documented as
required. In 10 of the 12 sole source cases we reviewed,
justifications for limiting the competition to one source were
prepared and approved as required. In the case of the other two
sole 1 The effective date of the lease is the date on which the
rent payments commence. B-284261 Page 3 GAO/GGD-00-88 Leasing
Practices in Selected Regions source leases we reviewed, the
justification for one was prepared but not signed by the
appropriate official, while the file for the other lease we
reviewed, which was for a few parking spaces that cost about
$5,000 annually, did not contain documentation as to why only one
offer was solicited. Participants in PBS' leasing process who
believe that a contract has been or is about to be awarded in
violation of the laws and regulations that govern contracting with
the federal government can protest the awards to GSA and us. In
the three regions we visited, protests were filed in connection
with 4 of the 360 leases that became effective in fiscal year
1999. All of these protests were submitted by incumbent lessors
who were not successful in retaining their government lease when
GSA conducted a new acquisition for the expiring lease. Two of
these protests were withdrawn by the protesters before we issued a
decision, and the other two were denied. As the federal
government's landlord, PBS provides space for most federal
agencies. It manages about 151 million square feet of leased space
in about 6,400 private sector properties at an annual cost of
about $2.7 billion. In addition to the leased space, PBS also
manages about 184 million square feet of space in almost 2,000
government- owned properties. Between 1993 and 1995, the National
Performance Review, GSA's Inspector General, and we 2 raised
several concerns about PBS' leasing program, including that PBS'
leasing program (1) was not efficient, (2) did not promote
competition, (3) took too long to award leases, and (4) was not
meeting the customers' needs. Numerous recommendations were made
by these organizations and us to address the concerns that were
raised. The essence of the recommendations was to (1) adopt
private sector practices, (2) streamline procedures, (3) increase
customer satisfaction, (4) promote competition, and (5) separate
policymaking from oversight. In July 1996, PBS reformed its
leasing process nationwide to be more businesslike and results-
oriented through the implementation of its Can't Beat GSA Leasing
program. Through this program, PBS responded to the
recommendations that had been made and adopted leasing practices
commonly used by the private sector, streamlined the leasing
process by eliminating or making optional many of the previously
required reviews 2 Federal Office Space: More Businesslike Leasing
Approach Could Reduce Costs and Improve Performance (GAO/GGD-95-
48, Feb. 27, 1995). Background B-284261 Page 4 GAO/GGD-00-88
Leasing Practices in Selected Regions and paperwork, and reduced
the time it took to acquire leases. Federal agencies also now have
the option either to use PBS to acquire new leased space when
necessary or to conduct the lease procurement themselves after
requesting a delegation of authority for leasing from PBS. To
separate policymaking from oversight, GSA established the Office
of Governmentwide Policy outside of PBS. To understand PBS' lease
acquisition process, we reviewed PBS' guidance on its leasing
process in the General Services Administration Acquisition
Regulation System (GSAR), 48 CFR Part 570, Can't Beat GSA Leasing
desk guide, and several acquisition letters on real property
leasing activities. At your request, we visited PBS' Mid-
Atlantic, Southeast, and National Capital (NCR) regions, which
combined account for over half of PBS' total number of leased
square feet and annual rent paid for leased space. In these three
regions, we identified (1) the leasing approaches used including
how each region determined agencies' space requirements,
identified and assessed potential space, and communicated with
actual offerors and (2) the effect of solicitation practices on
competition. We spoke with the cognizant officials in each region
about the leasing approaches used in the region. We reviewed a
random sample of 42 of the 360 leases that the regional office
officials identified as becoming effective in these three regions
in fiscal year 1999. Since the leasing approach can vary based on
the lease's annual rent, we stratified the lease inventory in each
region into three groups based on annual rent below $100, 000,
between $100, 000 and $1.9 million, and above $1.9 million. We
randomly selected a sample of leases from each of these groups for
review. 3 However, because of the relatively small number of lease
files we reviewed, we did not generalize the results of our lease
file reviews to the universe of leases in the regions we visited.
We reviewed GAO protest decisions or protest files for the four
leases that became effective in fiscal year 1999 that the regions
identified as having protests associated with them. For three of
the four protested leases, we also reviewed PBS' lease files. We
did not review the other lease file because it contained
classified information. 4 In total, we reviewed 45 of PBS' lease
files in the three regions we visited. 3 In the Southeast region,
there were three leases above $1. 9 million that became effective
in fiscal year 1999, and we reviewed the files for all three of
these leases. In the Mid- Atlantic region, there were no leases
above $1. 9 million that became effective in fiscal year 1999. 4
We did not review any classified documents in the GAO protest
files. Scope and Methodology B-284261 Page 5 GAO/GGD-00-88 Leasing
Practices in Selected Regions We reviewed PBS' lease files to
examine the leasing approach used for each lease, including (1)
how space needs were determined, (2) how potential sites were
identified and assessed, and (3) what level of communication with
potential and actual offerors took place. We were unable to assess
the level of communication with potential offerors because there
were no requirements related to communication with potential
offerors and its documentation, and documentation of any
communication varied in the lease files we reviewed. While
reviewing the lease files, we also looked for the effect that
these aspects of the leasing process had on competition. When
necessary, we spoke to the contracting officers responsible for
the lease files to clarify events that occurred during the leasing
process and to get answers to any questions we had on the leasing
approach. We did not evaluate the overall efficiency,
effectiveness, and prices of, or customer satisfaction with, PBS'
leasing program. Nor did we review PBS' decisions to satisfy the
agencies' space requests through leasing rather than construction
or purchase of a building. 5 We also did not question PBS'
decisions regarding justifications for eliminating sites from
competition and for using sole source solicitations. We did our
work from October 1999 to March 2000 in accordance with generally
accepted government auditing standards. We requested comments on a
draft of this report from the Administrator of GSA. GSA's comments
are discussed at the end of this report. The Mid- Atlantic,
Southeast, and National Capital (NCR) regions all used the three
basic leasing approaches that are provided for in statute or
regulationtraditional, simplified, and sole source. Because of
NCR's history of volume leasing in a small geographic area, it has
developed and uses extensively a unique leasing approach called
the Advanced Acquisition Program (AAP), which regional officials
said allows it to award leases more quickly by developing an
inventory of available space for lease. The extent to which each
leasing approach was used in the different regions varied, but
specific aspects of the process of acquiring a lease were similar
among the regions. 5 We previously reported that the federal
government could realize significant savings if it owned some of
the space it leased, but that GSA had to lease the space because
it lacked sufficient funds for construction. See General Services
Administration: Comparison of Space Acquisition Alternatives
Leasing to Lease- Purchase and Leasing to Construction (GAO/GGD-
99-49R, Mar. 12, 1999), Space Acquisition Cost: Comparison of GSA
Estimates for Three Alternatives (GAO/GGD-97-148, Aug. 6, 1997),
and Federal Office Space: Increased Ownership Would Result in
Significant Savings (GAO/ GGD90- 11, Dec. 22, 1989). Many
Similarities in Leasing Approaches Used in the Regions B-284261
Page 6 GAO/GGD-00-88 Leasing Practices in Selected Regions The
Mid- Atlantic region and NCR used what they considered the
quickest and easiest leasing approach the majority of the time.
The Mid- Atlantic region used the simplified leasing approach for
58 percent of all its leases, and NCR used the AAP approach for 54
percent of all its leases that became effective in fiscal year
1999. The Southeast region used the traditional and simplified
leasing approaches equally 45 percent each. Table 1 shows the
percentage of each region's use of each leasing approach for
leases that became effective in fiscal year 1999. Percentage of
leases using Region Total number of leases Traditional approach
Simplified approach Sole source approach AAP Southeast 193 45% 45%
11% N/ A Mid- Atlantic 108 32 58 10 N/ A NCR 59 24 5 17 54% Note
1: Percentages may not add to 100 due to rounding. Note 2: N/ A =
not applicable. Source: PBS regional officials. As a part of the
Can't Beat GSA Leasing program, PBS streamlined its leasing
process to make it more businesslike, thereby eliminating many of
the previously required reviews and documentation. The contracting
officer now has more flexibility to make business decisions about
leasing, and PBS relies on the contracting officer's knowledge in
making leasing decisions. While more flexibility has been built
into the process, statutes and regulation still prescribe the
circumstances in which the different leasing approaches may be
used and certain steps that must occur during the leasing process.
6 The traditional leasing approach, which can be used for all
leases, uses the full and open competition standard that allows
all sources to compete for the lease. Under the traditional
leasing approach, once the agency's space requirements have been
defined, they are generally advertised in the local newspapers to
identify potential sites. All space requirements exceeding 10,000
square feet are required by regulation to be advertised in the
local newspaper or the Commerce Business Daily. PBS officials told
us that they advertise in the local newspapers. The potential
sites are visited to determine whether they could satisfy the
agency's space requirements. The contracting officer then prepares
a Solicitation for Offers (SFO), which contains the agency's
requirements and information related to submitting 6 The specific
federal statutes and executive orders that are applicable to PBS'
leasing program are listed and explained in a letter we issued on
this subject, Federal Statutes and Executive Orders Applicable to
the Public Buildings Service's Leasing Program (GAO/GGD-00-27R,
Oct. 18, 1999). Table 1: Leasing Approaches Used in Three PBS
Regions for Leases Effective in Fiscal Year 1999 B-284261 Page 7
GAO/GGD-00-88 Leasing Practices in Selected Regions an offer. The
SFO is to be sent to everyone who is determined to have space that
could meet the agency's requirements or who requests the SFO.
After offers are received, they are to be evaluated based on the
SFO requirements and the offered price. These basic steps were
taken in all three regions when the traditional leasing approach
was used. The simplified leasing approach used in the three
regions expedites the leasing process and can be used if the
average annual rent is expected to be $100,000 or less, excluding
operating expenses. The process is intended to be less formal than
the traditional leasing approach, with much of it handled by
telephone or during on- site visits. Under the simplified
approach, the contracting officer only has to (1) solicit three
sources to promote competition or (2) document the file to explain
the lack of competition. Because space requirements are generally
under 10, 000 square feet, they are not required by regulation to
be advertised in the local newspaper. The potential sites may be
visited to determine which three sites satisfy the agency's
requirements and thus should be solicited. Offers are to be
evaluated by considering the agency's space requirements and the
offered price. Under the sole source leasing approach, the
contracting officer determines that there is only one source that
can satisfy the agency's space requirements. Sole source lease
awards typically occur as an outcome of the traditional or
simplified leasing approach, since the determination that there is
only one source that can satisfy the agency's space requirements
is to be made after the market survey is completed. PBS can
negotiate with the one source for the space and then award the
lease using a sole source contract. For all sole source leases,
there must be information in the file explaining why only one
source was solicited. If the lease's annual rent is $500,000 or
more, and depending on the size of the lease, a justification to
use other than full and open competition must be approved by
either (1) the competition advocate in the region responsible for
promoting full and open competition, (2) the head of the procuring
activity, or (3) the senior procurement executive of the agency.
The justification for using the sole source contract must include
an explanation of what was done to determine that only one source
could provide the space and that the price offered was fair and
reasonable. NCR began to use AAP in 1991 to expedite the
acquisition of small amounts of space because of complaints from
customer agencies that it was taking too long to obtain needed
space. NCR currently uses AAP for leases of all sizes. Through
this program, NCR conducts a competitive procurement process
through which it annually solicits potential offerors B-284261
Page 8 GAO/GGD-00-88 Leasing Practices in Selected Regions for
generic space requirements, ranging from 2,000 to 440,000 square
feet, in a certain geographic area. NCR then evaluates the offers
received and develops an inventory of available space ranging from
2,000 to 440,000 square feet. When NCR receives a space request,
the AAP inventory is sorted according to the agency's space
requirements, and those sites in the inventory that may satisfy
the requirements are reviewed. The offeror of the available space
that will satisfy the agency's requirements at the lowest price is
to be awarded the lease. NCR then states that it can award a lease
for this space without further competition or negotiation because
it has already gone through a competitive procurement process to
acquire the space. According to NCR officials, this approach has
worked well for NCR because of the large government presence and
consequent high demand for space in its relatively small
geographic area. Figure 1 summarizes the traditional, simplified,
and AAP leasing approaches. It does not include the sole source
leasing approach since sole source awards typically occur as an
outcome of the traditional or simplified leasing approach. B-
284261 Page 9 GAO/GGD-00-88 Leasing Practices in Selected Regions
Source: GAO summary of GSAR and information provided by regional
PBS officials. Figure 1: Key Steps in Various PBS Leasing
Approaches B-284261 Page 10 GAO/GGD-00-88 Leasing Practices in
Selected Regions There are certain aspects of the leasing process,
such as the development of space requirements, identification and
assessment of potential sites, and communication with actual
offerors, that occur in all acquisitions, regardless of the
leasing approach used. These aspects of the leasing process were
essentially done the same way in each of the regions we visited.
In all three regions, space requirements including the amount of
space, location, and any required special features were primarily
developed by the customer agency. PBS officials in the regions
told us that they generally question the customer agency's space
requirements only if they have concerns about their ability to
generate sufficient competition because of the nature of the space
requirements. This is markedly different from how space needs were
developed prior to PBS' Can't Beat GSA Leasing program, when PBS
prescribed what an agency could or could not have for their office
space. In fiscal year 1998, PBS began preparing occupancy
agreements to establish the relationship between itself and its
customer agencies. The occupancy agreement includes the customer
agency's identified space requirements, the term of the lease, and
the estimated per square foot and annual rental costs of the space
requirements. The purpose of the agreement is to ensure that the
agency is aware of and agrees to the estimated cost of acquiring
space to satisfy its requirements, and understands how changes to
the space requirements can result in an increase in the total cost
for the space. Potential sites that may satisfy the agency's space
requirements are identified in various ways. While space needs of
10,000 square feet or more must be advertised in a local
newspaper, the contracting officer has flexibility in using other
sources to identify potential sites to meet space requirements. In
the cases that we reviewed, the methods or sources used to
identify potential sites varied somewhat by contracting officer.
However, these differences did not appear to be due to regional
office preferences or direction, but rather to the contracting
officer's personal preferences and knowledge of the real estate
market. In addition to advertising in local newspapers,
contracting officers often contacted local real estate brokers or
used their own knowledge of the market to identify potential
sites. Examples of other sources that were contacted or reviewed
when trying to identify potential sites for leasing included the
local government, the chamber of commerce, an economic development
authority, a group representing shopping centers, and newspaper
advertisements offering space for lease. Determination of Agency
Space Requirements Identification and Assessment of Potential
Space B-284261 Page 11 GAO/GGD-00-88 Leasing Practices in Selected
Regions To assess a potential site's ability to satisfy the
agency's space requirements, the contracting officer or realty
specialist and an agency representative may visit the site.
Representatives from those sites that appear to satisfy the
agency's requirements are then asked to submit an offer. Site
visits may not be necessary when the contracting officer is
familiar with the potential sites and their ability to satisfy the
agency's requirements. When visiting potential sites, it was the
practice in all three regions to have a customer agency
representative accompany the contracting officer or realty
specialist. The PBS officials said that this is an important step
because if a particular building will not satisfy the agency's
needs, it is important to identify this fact as early as possible
and not spend time soliciting such sites. According to PBS
officials, there must be a valid reason for why a site will not
satisfy the agency's space requirements, since a key aspect of the
contracting officer's job is to generate competition. In the cases
that we reviewed that included site visits, it appeared that the
contracting officer or realty specialist and agency
representatives had agreed on which sites would satisfy the
agency's space requirements. According to PBS officials, much of
the communication with actual offerors is oral. Regulations
require that a written record of all exchanges related to
negotiations be placed in the lease file, and that written notice
be provided to any offeror excluded from the competition as well
as to any unsuccessful offeror. The level of documented
communication with actual offerors in the lease files we reviewed
varied by contracting officer. Some of the lease files contained a
summary, or detailed notes, or records of the specific
negotiations with each offeror and a clear trail of written
correspondence. Other lease files did not contain documentation of
negotiations held with offerors. All of the lease files involving
leases where offerors were excluded from competition contained
supporting documentation. However, some lease files did not
contain documentation of written notice to the unsuccessful
offerors. Contracting officers told us that in these cases all
required communication occurred, even though it was not documented
in the file as is required. When we brought the issue of lease
files missing documentation to the attention of NCR management,
they said that their own review of lease files in the region had
also found documentation to be missing. As a result of our work
and their own review, in December 1999, NCR issued a real estate
bulletin on lease file documentation that contained a checklist of
required documents. In February 2000, NCR also issued a bulletin
on the memorandum the contracting officer is required to prepare
that summarizes the lease process, including the results of
negotiations with Communication With Offerors B-284261 Page 12
GAO/GGD-00-88 Leasing Practices in Selected Regions actual
offerors. NCR is also providing training for the staff on these
bulletins. For the lease files we reviewed, the way in which (1)
space needs were determined, (2) potential sites were identified
and assessed, and (3) communication with actual offerors took
place did not appear to unduly restrict competition. Participants
in PBS' leasing process who believe that a contract has been or is
about to be awarded in violation of the laws and regulations that
govern contracting with the federal government can protest the
awards to GSA and us. According to officials in the three regions
we visited, about 1 percent (4 of 360) of the leases that became
effective in fiscal year 1999 were protested. The space
requirements as defined by the customer agency and reviewed by the
contracting officer were generally broad enough to elicit multiple
offers. Of the eight leases we reviewed that were awarded using
the traditional leasing approach, six received an average of about
four offers, with a range of from two to five offers for each
lease. For the other two leases, the agencies' requirements that
they be located in a geographically small area because of their
missions resulted in one offer being received for each lease. Of
the 19 leases that were awarded using the simplified approach, the
contracting officers solicited at least three sources to promote
competition or provided documentation to explain the lack of
competition. In the 12 lease cases we reviewed where the sole
source approach was used, the required justification for using
other than full and open competition was prepared and approved for
10 of the leases. Of the other two sole source leases we reviewed,
one had a justification that was prepared but not signed by the
appropriate official, while the file for the other lease, which
was for a few parking spaces that cost about $5,000 annually, did
not document why only one offer was solicited. Finally, while it
was not required by regulation, five of the six lease files we
reviewed in NCR that used the AAP approach contained documentation
concerning the number of properties identified in the AAP
inventory that could satisfy the specific space requirement and
how the successful offer was selected. The other AAP lease file
did not contain this information. As discussed previously, it was
the practice in the three regions we visited to have a customer
agency representative accompany the contracting officer or realty
specialist on the visits to the potential sites to help determine
which sites could satisfy the agency's requirements and whose
representatives should be asked to submit an offer. In the cases
we Leasing Processes Did Not Unduly Restrict Competition B-284261
Page 13 GAO/GGD-00-88 Leasing Practices in Selected Regions
reviewed in which site visits occurred, we found nothing in the
files to indicate that the presence of the agency representative
on these visits caused sites to be eliminated from consideration
without justification. For those cases where the site's
representative was not asked to submit an offer, there was
generally a reason noted for why the particular site would not
satisfy the agency's requirements. As discussed earlier, the level
of communication with the actual offerors that was documented in
the lease files varied by contracting officer. PBS contracting
officers stated that not all communication with offerors that
occurred was documented. However, we did not find anything to
suggest that the same information was not being provided to all
offerors at the same time. Based on the lease files we reviewed,
there was no indication that the extent or means of communications
with the actual offerors had an adverse effect on competition.
According to PBS officials in the 3 regions we visited, only 4 of
the 360 leases that became effective in fiscal year 1999 were
protested. All of these protests were submitted to GAO by
incumbent lessors who were not successful in retaining their
government lease when GSA conducted a new acquisition for the
expiring lease. One protester 7 filed a protest over PBS'
determination that its building would not be considered since it
was not located within the central business area (CBA) in
accordance with executive order 12072. 8 GAO denied this protest
because PBS reasonably determined that the protester's building
was outside the CBA and thus was not entitled to consideration for
lease under the terms of executive order 12072. Another protester
filed a protest alleging that PBS deliberately excluded it from
the competition when it did not send the protester a copy of the
solicitation. 9 GAO denied the protest because PBS advertised the
requirements for leased space as required, and obtained full and
open competition and a reasonable price for the space in response
to the SFO. Additionally, GAO stated that there was no evidence
that the contracting officer deliberately excluded the protester
from competing. The other two protests were withdrawn by the
protesters before GAO issued a decision. In one of these protests,
the protester argued that a sole source contract to acquire space
was not justified. In reviewing this file, we found that PBS
awarded a sole source contract to utilize vacant space that it was
already 7 Peachtree 25 th LLC d/ b/ a American Management Company,
B-281185. 2, Dec. 4, 1998, 98- 2 CPD 126. 8 Executive order 12072
requires that GSA, in leasing office space in an urban area, give
first consideration to a city's centralized business area. 9
Interproperty Investments, Inc., B-281600, March 8, 1999, 99- 1
CPD 55. B-284261 Page 14 GAO/GGD-00-88 Leasing Practices in
Selected Regions leasing and paying rent on. Furthermore, PBS had
determined that the protester's space did not meet the agency's
minimum requirements. The other withdrawn protest stated that PBS
intentionally precluded competition through the use of arbitrary
requirements. The lease in question contained relevant security
requirements for an agency that required a high level of security.
The GSAR contains the basic leasing approaches and actions that
must occur when leasing space for federal agencies. The three
regional offices we visited used these basic leasing approaches
traditional, simplified, and sole source and generally complied
with the requirements pertaining to the steps of the leasing
process. NCR uses the three leasing approaches contained in the
GSAR but has also developed the AAP, which is a variation of the
traditional leasing approach. NCR uses AAP extensively to expedite
the acquisition of leased space in its region, which is
characterized by a large federal presence in a relatively small
geographical area. PBS' contracting officers have been allowed to
exercise flexibility and discretion in acquiring leased space for
federal agencies. Based on the lease files that we reviewed, we
did not find any indication that the process by which leased space
was being acquired adversely affected competition. We requested
comments on a draft of this report from the Administrator of GSA.
On March 21, 2000, we met with GSA's Assistant Commissioner,
Office of Business Performance, and other GSA officials to discuss
our draft report. The officials said that they agreed with the
report and noted the weakness in documentation in the lease files.
An NCR official said that they too had found weaknesses in
documentation of lease files in NCR and have instituted a training
program to address the issue. On March 30, 2000, the Assistant
Commissioner sent an e- mail message to all GSA regional offices
emphasizing the need to document in the lease files conversations
with and notification to unsuccessful offerors. We are sending
copies of this report to Senator Joseph I. Lieberman, Ranking
Minority Member of your committee; Senator George V. Voinovich,
Chairman, and Senator Max Baucus, Ranking Minority Member,
Subcommittee on Transportation and Infrastructure, Senate
Committee on Environment and Public Works; Representative Bob
Franks, Chairman, and Representative Robert Wise, Jr., Ranking
Democratic Member, Subcommittee on Economic Development, Public
Buildings, Hazardous Materials and Pipeline Transportation, House
Committee on Conclusions Agency Comments B-284261 Page 15 GAO/GGD-
00-88 Leasing Practices in Selected Regions Transportation and
Infrastructure; the Honorable David J. Barram, Administrator, GSA;
and to others upon request. If you have any questions about this
report, please call me or Ron King on (202) 512- 8387. Key
contributors to this assignment were Maria Edelstein, Shirley
Bates, and Lisa Wright- Solomon. Sincerely yours, JayEtta Hecker,
Associate Director, Government Business Operations Issues Ordering
Copies of GAO Reports The first copy of each GAO report and
testimony is free. Additional copies are $2 each. Orders should be
sent to the following address, accompanied by a check or money
order made out to the Superintendent of Documents, when necessary.
VISA and MasterCard credit cards are accepted, also. Orders for
100 or more copies to be mailed to a single address are discounted
25 percent. Order by mail: U. S. General Accounting Office P. O.
Box 37050 Washington, DC 20013 or visit: Room 1100 700 4 th St. NW
(corner of 4 th and G Sts. NW) U. S. General Accounting Office
Washington, DC Orders may also be placed by calling (202) 512-
6000 or by using fax number (202) 512- 6061, or TDD (202) 512-
2537. Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512- 6000 using a
touchtone phone. A recorded menu will provide information on how
to obtain these lists. Viewing GAO Reports on the Internet For
information on how to access GAO reports on the INTERNET, send e-
mail message with info in the body to: info@ www. gao. gov or
visit GAO's World Wide Web Home Page at: http:// www. gao. gov
Reporting Fraud, Waste, and Abuse in Federal Programs To contact
GAO FraudNET use: Web site: http:// www. gao. gov/ fraudnet/
fraudnet. htm E- Mail: fraudnet@ gao. gov Telephone: 1- 800- 424-
5454 (automated answering system) United States General Accounting
Office Washington, D. C. 20548- 0001 Official Business Penalty for
Private Use $300 Address Correction Requested Bulk Rate Postage &
Fees Paid GAO Permit No. G100 (240362)
*** End of document. ***