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20–638 PDF 2017

INDEPENDENT LEASING AUTHORITIES: INCREASING OVERSIGHT AND REDUCING COSTS OF 

SPACE LEASED BY FEDERAL AGENCIES 

(114–47) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND 

EMERGENCY MANAGEMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 6, 2016 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

RYAN A. COSTELLO, Pennsylvania 

GARRET GRAVES, Louisiana 

MIMI WALTERS, California 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

MIKE BOST, Illinois 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY

MANAGEMENT

LOU BARLETTA, Pennsylvania, Chairman 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RYAN A. COSTELLO, Pennsylvania 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

BILL SHUSTER, Pennsylvania (Ex Officio) 

ANDRE ́ CARSON, Indiana 

ELEANOR HOLMES NORTON, District of 

Columbia 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

DINA TITUS, Nevada 

PETER A. DEFAZIO, Oregon (Ex Officio) 

VACANCY 

(III) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... iv 

TESTIMONY 

David Wise, Director, Physical Infrastructure Issues, U.S. Government Accountability Office ................................................................................................ 5 

Chris Wisner, Assistant Commissioner for Leasing, Public Buildings Service, 

U.S. General Services Administration ................................................................ 5 

Hon. W. Thomas Reeder, Director, Pension Benefit Guaranty Corporation ...... 5 

John K. Lapiana, Deputy Under Secretary for Finance and Administration, 

Smithsonian Institution ....................................................................................... 5 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

David Wise ............................................................................................................... 25 

Chris Wisner ............................................................................................................ 39 

Hon. W. Thomas Reeder .......................................................................................... 44 

John K. Lapiana ...................................................................................................... 48 

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(1) 

INDEPENDENT LEASING AUTHORITIES: INCREASING OVERSIGHT AND REDUCING 

COSTS OF SPACE LEASED BY FEDERAL 

AGENCIES 

WEDNESDAY, JULY 6, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, 

PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:30 a.m., in room 

2167, Rayburn House Office Building, Hon. Lou Barletta (Chairman of the subcommittee) presiding. 

Mr. BARLETTA. The committee will come to order. 

Since I became chairman of the subcommittee, the committee has 

worked with GSA on reducing the cost of leased space by negotiating better deals and reducing the real estate footprint. 

We held a hearing and a series of roundtables with GSA, tenant 

agencies, and real estate experts on the large number of GSA 

leases expiring in the next 5 years and how we can take advantage 

of the current market to reduce costs to the taxpayer. We could 

save $500 million annually by just negotiating better lease deals. 

As a result of these efforts, we introduced and the House passed 

H.R. 4487, the Public Buildings Reform and Savings Act, which includes a leasing pilot program which will give GSA the tools that 

it needs to more effectively lock in good lease deals. 

But while we have been working to improve how GSA manages 

its leases, there are more than 50 other agencies with their own 

authority to lease office and warehouse space. And half of those 

agencies do not even have to comply with OMB’s directives to reduce space or report their leases to the governmentwide Federal 

real property database. 

For many of these agencies, there is little oversight of how they 

manage their leases. That is why the committee requested that the 

GAO do a review of these independent leasing authorities, including: 

One, how they are used and managed; 

Two, whether the agencies are getting good deals for the taxpayer; 

Three, whether agencies are reducing their costs and space footprint; and 

Four, whether agencies are acting within their legal authority. 

2 

While the GAO found that some of these agencies were able to 

get comparable leasing rates or even better than GSA, in part due 

to their use of real estate brokers, very often they leased more 

space than they needed. 

In addition, there are serious questions about whether some of 

these agencies are exceeding their leasing authority, potentially 

running afoul of key laws such as the Anti-Deficiency Act. 

The committee’s investigation of the Securities and Exchange 

Commission’s use of its leasing authority in 2011 revealed the pitfalls agencies can fall into. The SEC exceeded its leasing authority 

and wound up committing the taxpayers to a $500 million lease 

that it did not need and, ultimately, had to be bailed out with help 

from GSA. The SEC, the Commodity Futures Trading Commission, 

and the VA are just a few agencies that have run afoul of laws limiting their leasing authorities. 

Intentional or not, agencies that do not have real property as 

their primary mission face serious legal risks. And it is critical, 

starting with this hearing, that this message is made clear to them. 

Before an agency signs a lease, there are three basic questions 

it should ask: 

One, does the agency have leasing authority? 

Two, does the agency have either no-year funding or explicit authority to enter into multiyear leases? 

And, three, does the agency have an exemption from the Anti-Deficiency Act and the recording statute? 

While there are a few exceptions, if the answer to any of these 

questions is no, the agency may not have the legal authority to sign 

a lease or may have to obligate the full amount of the lease upfront. 

This analysis is separate from the analysis for whether or not a 

lease is a capital lease for scoring purposes. 

We hope to hear more from GAO about its findings and learn 

how agencies with their own leasing authorities are managing and 

using their leasing authorities. 

We also asked the GAO to review the use of purchase options in 

GSA leases. If used strategically, purchase options could save significant taxpayer dollars. 

The budgetary scoring rules enacted in the 1990s effectively 

ended the practice of negotiating discounted purchase options in 

lease agreements by labeling them as capital leases. As capital 

leases, the full cost of the lease must be obligated upfront, creating 

a disincentive to use them. 

The result has been the taxpayer paying for a building several 

times over through lease payments without ever being able to gain 

an equity interest. For example, we will have paid nearly $2 billion 

for headquarters space for DOT when the current lease expires 

without accruing any equity. 

By identifying and reviewing a number of purchase options in 

GSA leases, GAO found that in the options exercised in recent 

years there was an $80 million benefit to the taxpayer. The Public 

Buildings Reform and Savings Act includes a provision that would 

provide GSA with the ability to again include these options, where 

appropriate, in its leases. 

3 

I look forward to hearing more from GAO and from our other 

witnesses today on these issues. 

Thank you. 

I now call on the ranking member of the subcommittee, Mr. Carson, for his opening statement. 

Mr. CARSON. Thank you, Chairman Barletta and Ranking Member DeFazio. 

Welcome to today’s hearing about the use of independent leasing 

authority, on behalf of subcommittee Chairman Barletta and I, who 

have requested two reports from GAO on the use of independent 

leasing authority by Federal agencies and the use of purchase options in leasing. 

This hearing highlights some of the findings from both of these 

reports. I am especially interested in the assessment of how GSA 

manages the civilian real estate inventory and its ability to advise 

other parts of the Federal Government on leasing commercial office 

space and warehouse space. 

In 1949, President Harry Truman signed a law that created the 

modern day GSA and consolidated several Federal agencies into 

one agency tasked with providing workplaces for Federal employees 

and administering supplies. Since GSA was created, it has grown 

into a real estate giant that leases over 8,000 property assets, totaling 191 million rentable square feet with annual costs of $5.6 billion. 

However, in January 2003, GAO designated Federal real property management as a high-risk area due, in part, to the Federal 

Government’s overreliance on costly leasing. The Federal Government’s real estate portfolio was in need of oversight and corrective 

action. 

To that end, the Office of Management and Budget issued memoranda in 2012, 2013, and 2015 requiring Federal agencies to freeze 

and reduce their space footprint. This administration’s sustained 

efforts, coupled with the efforts of this subcommittee, have resulted 

in millions of square footage of underutilized and unneeded property being shed from the Federal real estate inventory. These efforts have saved money and have allowed precious resources to be 

better used to achieve agency missions. 

While there has been progress in really right-sizing the Federal 

real estate inventory, last February the leadership of this committee wrote to GAO asking them to study how agencies with their 

own leasing authority independent of GSA are exercising that authority. As detailed earlier by the chairman, many of these agencies were not subject to the Freeze the Footprint or even Reduce 

the Footprint directives from OMB. 

Though this group of agencies tended to get lease rates that were 

similar to GSA, many of them often acquired more space than GSA 

would typically allow. 

Additionally, GAO has indicated that some of the agencies that 

have independent leasing authority do not necessarily have the 

legal authority to sign a long-term operating lease. Many of the 

agencies that GAO have examined are doing a good job, but there 

is still room for improvement and the opportunity to find additional 

savings in future lease agreements. 

4 

Today’s testimony and dialogue should serve as guideposts to 

how agencies exercise their independent leasing authority going 

forward and how more effective use of purchase options can lower 

the cost of housing Federal agencies further. 

I look forward to moving on with this discussion. 

I yield back, Mr. Chairman. 

Mr. BARLETTA. Thank you, Ranking Member Carson. 

I now call on the ranking member of the full committee, Mr. 

DeFazio. 

Mr. DEFAZIO. Thank you, Mr. Chairman, and thank you for putting scrutiny on this important issue, the costs and potential efficiencies that could be gained with enhanced leasing. 

The review of the independent leasing authority certainly has 

merit, and I do not mean just to gloss over that and I look forward 

to hearing more about that, but the other issue which has really 

disturbed me for so many years is that some idiot at OMB in 1990 

promulgated a rule which we have been bound by which is restricting the Government’s ability. 

We hear a lot about running Government like a business. Well, 

what business is going to go out, enter into a costly lease, and deny 

itself the opportunity to purchase at the end of that lease at a discounted price, therefore being perpetually forever locked into expensive leasing? 

Well, brainiac down at OMB, you know, wrote this into a rule, 

which somehow has never gotten changed at OMB. I am not certain how we change OMB. I am working with Chairman Chaffetz 

on OMB reform because I keep running into them doing all sorts 

of things that do not make sense for the U.S. Government or the 

taxpayers of the United States of America. 

But in this case I am pleased to see that our committee has a 

solution in H.R. 4487. I mean, you know, for the first time ever in 

I think it was 2008, the Federal Government began occupying more 

leased than owned space, and in almost every case that is the more 

expensive way to go, and it also deprives the Federal Building 

Fund of direct payments that would help for future acquisitions of 

space and for maintenance and repair of Federal assets. 

So the bill, H.R. 4487, does not really address the idiots at OMB. 

It does not end-run around their rule, but that is at least an improvement. So I fully support H.R. 4487, and I am looking forward 

to hearing more. 

And I would love anybody on the panel to justify what we are 

doing now by denying ourselves the authority to purchase at a discounted rate, and if anybody wants to volunteer that, I would be 

happy to discuss it with them. 

Thank you, Mr. Chairman. 

Mr. BARLETTA. Thank you, Mr. DeFazio. 

On our panel today we have Mr. David Wise, Director of Physical 

Infrastructure Issues, Government Accountability Office; Mr. Chris 

Wisner, Assistant Commissioner for Leasing, Public Buildings 

Service, General Services Administration; the Honorable W. Thomas Reeder, Director, Pension Benefit Guaranty Corporation; and 

Mr. John K. Lapiana, Deputy Under Secretary for Finance and Administration, the Smithsonian Institution. 

5 

I ask unanimous consent that our witnesses’ full statements be 

included in the record. 

Without objection, so ordered. 

Each of you is no recognized for 5 minutes. Mr. Wise, you may 

proceed. 

TESTIMONY OF DAVID WISE, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 

OFFICE; CHRIS WISNER, ASSISTANT COMMISSIONER FOR 

LEASING, PUBLIC BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; HON. W. THOMAS REEDER, DIRECTOR, PENSION BENEFIT GUARANTY CORPORATION; AND 

JOHN K. LAPIANA, DEPUTY UNDER SECRETARY FOR FINANCE AND ADMINISTRATION, SMITHSONIAN INSTITUTION 

Mr. WISE. Chairman Barletta, Ranking Member Carson, and 

members of the subcommittee, I am pleased to be here today to discuss our work on Federal use of independent leasing authority for 

real property. 

While GSA leases real property on behalf of many Federal tenants, Congress can provide independent leasing authority to Federal entities either through their enabling legislation or through an 

appropriations act. GSA tracks and reports on its tenants’ real 

property holdings. However, less is known about the holdings of 

Federal entities that independently lease real property. 

In 2004, the President issues an Executive order establishing the 

Federal Real Property Council, FRPC, composed of CFO Act Federal entities. OMB chairs the FRPC. 

Goals of the FRPC include developing guidance, facilitating agency asset management plans, and serving as a clearinghouse for 

leading practices. The order also directed establishment of a governmentwide real property database, now called the Federal Real 

Property Profile, FRPP. 

Today I would like to make four main points. One, in surveying 

103 Federal entities, we found that of the 52 reporting leasing authority 25 are not required to report to FRPP, and there is a lack 

of coordination and information sharing with the FRPC. 

Two, most of the 37 selected independent leases we reviewed 

were comparable to or lower than matched GSA rates. 

Three, most selected entities’ leasing policies generally align with 

leasing practices but lack documentation. 

And, four, most selected entities exceeded GSA’s recommended 

target for space allocation. 

While not required, neither GSA nor OMB maintains a comprehensive list of Federal Government entities with independent 

leasing authority. FRPP offers a possible way to determine this, 

but the information is incomplete, as only the agencies in the 

FRPC are required to annually submit their real property information to FRPP. 

Based on our survey, the 25 entities that are not members of 

FRPC reported in fiscal year 2015 that they leased space covering 

approximately 8.3 rentable square feet and costing about $293 million in annual rent. 

FRPC members coordinate efforts and share leading practices in 

areas such as space allocation that OMB staff have said are critical 

6 

to reform efforts. However, the 25 non-member entities are excluded from FRPC efforts. 

We also found that FRPC members were more likely to have 

leasing policies that aligned with the leading practices than nonmembers. Increasing FRPC participation would likely allow all 

Federal entities to benefit from the collaboration and sharing of 

leading practices. 

Our related report that we issued today recommended that OMB 

establish efficient methods for including data from non-FRPC member entities to the FRPP and increase collaboration between FRPC 

member and non-member entities. OMB agreed with both recommendations. 

We analyzed 37 selected independent leases across seven Federal 

entities. Of these 14 had rates that were less costly than matched 

GSA leases and 11 had comparable rates. The remaining 12 leases 

had rates that cost more than matched GSA leases. We identified 

several possible factors why some of the independent leases we 

analyzed were less expensive than matched GSA leases as follows. 

GSA uses standardized lease documents that include clauses that 

can be more rigorous than the leases provided by private sector 

landlords. 

Renovation or reconfiguration costs were more common in GSA 

leases than the independent leases in our sample. 

The independent leases we analyzed had periods of free rent 

built into the leases more frequently than the matched GSA lease. 

We developed a list of leading practices that Federal entities 

should incorporate into their real property leasing functions. These 

include: one, assessing need; two, planning ahead; three, ensuring 

best value; and four, analyzing and documenting lease budget effect. 

We reviewed the extent to which eight selected Federal entities 

had policies that aligned with leading Government leasing practices. Although most of the selected entities had established policies 

consistent with leading Government practices, we found numerous 

instances where the lease files lacked evidence of support that the 

leading practices were actually used. 

Specifically, we found that a high percentage of the entities’ lease 

files lacked evidence for analyzing and documenting the budget effects of the lease. This is important because Federal entities must 

comply with the recording statute requires Federal agencies to 

record the full amount of their contractual liabilities, including 

leases, against funds available when the contract is executed. 

Violations of the recording statute can also result in Anti-Deficiency Act violations if lease obligations exceed available budget 

authority at the time the lease is executed. 

All of the eight entities we reviewed leased more office space per 

employee than GSA’s recommended target of 150 square feet per 

employee. Twenty-eight of the thirty selected office leases we analyzed exceeded the GSA recommended target on average by a factor 

of two. Many of these leases had vacant office spaces, which can 

inflate the per person space allocation. 

Greater involvement in FRPC could help these agencies learn 

and implement leading practices in space utilization. 

7 

This completes my prepared statement. I would be pleased to respond to any questions that you may have. 

Mr. BARLETTA. Thank you, Mr. Wise. Thank you for your testimony. 

Mr. Wisner, you may proceed. 

Mr. WISNER. Good morning, Chairman Barletta, Ranking Member Carson, and members of the subcommittee. I am Chris Wisner, 

the Assistant Commissioner for Leasing at the General Services 

Administration’s Public Buildings Service. I appreciate being invited here today to discuss GSA’s efforts to provide cost effective 

leased space for our partner Federal agencies. 

GSA’s mission is to provide the best value in real estate to Government and to the American taxpayer. We currently have an inventory of 376 million square feet of space. Approximately half of 

that is leased, accounting for more than 8,300 leases across the 

country. 

We seek to provide space for our partner Federal agencies and 

assist them in achieving their missions while best serving the public interest. As a part of the administration’s management agenda, 

GSA prioritizes finding ways to maximize utilization of the existing 

federally owned inventory, including reducing the number of leases 

we hold in our portfolio. By dramatically improving utilization of 

our current inventory, we have saved millions of dollars for our 

partner Federal agencies and the general public. 

GSA works closely with OMB to help implement the national 

strategy for the efficient use of real property, and the two agencies 

have been key coordinators of Freeze the Footprint and the current 

Reduce the Footprint initiatives. GSA is implementing Reduce the 

Footprint by helping other Federal agencies increase their office 

space utilization and minimize cost, including thoroughly implementing innovative workplace strategies. 

One example of GSA’s efforts is the Department of Homeland Security consolidation at St. Elizabeths due to be completed in 2021. 

The first phase of the project completed in 2013 consolidated the 

United States Coast Guard Headquarters at the St. Elizabeths 

campus. As a result, GSA was able to vacate several leases totaling 

nearly 1 million square feet. 

When all three phases of the consolidation are completed, approximately 40 leases will be consolidated on the federally owned 

campus resulting in over $1 billion in savings. 

GSA leasing support services contract, or GLS, continues to be 

a workforce multiplier and is a critical part of GSA’s strategy in 

delivering space. This past September GSA awarded nine GLS contracts across the country, including two to two small businesses. 

We anticipate GLS to be used for approximately 30 to 40 million 

square feet of our inventory, equating to approximately $100 million in rent cost avoidance to our partner Federal agencies. 

GSA’s goal for the leasing program is to make it easier for the 

real estate industry to do business with the Federal Government, 

for GSA to deliver space quicker to our Federal customer agencies, 

and for GSA to secure competitive lease rates. 

GSA uses a comprehensive, deliberative process that ensures full 

competition and fair rental rates for the taxpayer, while taking into 

account such public interest as proximity to central business disVerDate Aug 31 2005 09:41 May 16, 2017 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\ED\7-6-16~1\20638.TXT JEAN
8 

tricts and public transportation and supporting the mission requirements of GSA partners. 

In an effort to improve the delivery of leased space in 2015, GSA 

rolled out is online offered portal known as the Automated Advanced Acquisition Program, or AAAP, in all U.S. markets. The 

goal for the platform is to make it easier for the real estate industry to do business with the Federal Government, for GSA to deliver 

space quicker to its Federal customer agencies, and for GSA to receive competitive rates. 

AAAP’s paperless, online offered submission process enables the 

Government to establish this goal. Since its inception in the GSA 

national capital region in 2005, the AAAP has conducted over lease 

transactions totaling over 4 million square feet and over $1.7 billion in total contract value. 

Chairman Barletta, Ranking Member Carson, and members of 

the subcommittee, we strive to meet our customers’ requirements 

in an efficient and transparent manner and are committed to reducing cost. Thank you for the opportunity to testify before you 

today. I will be happy to answer any questions. 

Mr. BARLETTA. Thank you for your testimony. 

Mr. WISNER. Thank you, sir. 

Mr. BARLETTA. Mr. Reeder, you may proceed. 

Mr. REEDER. Good morning, Mr. Chairman, Ranking Member 

Carson, Ranking Member DeFazio, and members of the subcommittee. 

I am very pleased to appear before you today to discuss the Pension Benefit Guaranty Corporation and its engagement of the General Services Administration to secure a new headquarters lease 

for PBGC that reduces our space and consolidates our headquarters operations into a single location. 

PBGC was established over 40 years ago by the Employee Retirement Income Security Act, or ERISA, to protect the retirement incomes of workers and retirees covered by private sector defined 

benefit pension plans. PBGC receives no taxpayer dollars. PBGC’s 

operations are financed by insurance premiums, investment income, and assets and recoveries from failed plans. 

PBGC covers more than 40 million Americans and more than 

23,000 pension plans. We work with financially troubled employers 

that sponsor pension plans to help them preserve promised benefits 

and avoid plan failure. 

For workers and retirees in plans that do fail, the agency’s guarantee is critical to their retirement security. Today PBGC is responsible for the payment of current and future pensions for about 

1.5 million Americans in 4,800 failed pension plans. 

PBGC’s staff come from diverse fields, including law, actuarial 

science, financial analysis, auditing, and information technology. 

The great service provided by our highly collaborative, talented and 

devoted workforce is well recognized by our customers. 

In 2015, our customers’ satisfaction score surpassed the scores of 

all Government agencies, as well as the best companies in the private sector. 

PBGC began leasing its current headquarters space at 1200 K 

Street in 1992. As the demand for PBGC’s services has grown, its 

Federal and contractor workforce has also expanded, and it’s now 

9 

over 1,800 total Federal employees and contractors, and our headquarters has expanded to two additional nearby buildings here in 

Washington. 

PBGC also leases space in Kingstowne, Virginia, to take advantage of lower rates for certain back office operations while maintaining proximity for headquarters staff, and we have a decreasing 

number of field offices. 

In 1994 we had 17 field offices. Today we have only five as we 

continue to find opportunities to improve efficiency and further reduce our footprint. 

Although ERISA technically gives us independent leasing authority, it was an obvious decision for us to go to the agency with the 

expertise, bench strength, and clear authority to obtain the best 

value for PBGC’s premium payers and other stakeholders as we 

contemplated the expiration of our headquarters lease at the end 

of 2018. 

Last year we submitted our program of requirements to the GSA, 

and in March of this year, PBGC met with GSA, and the broker 

assigned to PBGC’s lease procurement to go over proposed 

timelines and additional information. 

Last month GSA submitted the prospectus lease for PBGC’s consolidated headquarters space to the committee, and we have begun 

discussing the prospectus with subcommittee staff. Although it is 

still early in the process, I believe we have established a sound 

working relationship with GSA. The PBGC and GSA teams have 

been working well together and communications are good. We are 

moving forward in accordance with the steps GSA and PBGC have 

agreed to, and we are making good progress. 

PBGC is pleased to be partnering with GSA in seeking a consolidated headquarters location. Consolidating our headquarters into 

one building will not only reduce our footprint and our cost, but it 

will also improve effective communication and collaboration in 

serving our customers. 

Again, I appreciate the opportunity to appear before you today 

and look forward to answering any questions you may have. 

Mr. BARLETTA. Thank you for your testimony. 

Mr. Lapiana, you can proceed. 

Mr. LAPIANA. Thank you. 

On behalf of the Smithsonian Institution, thank you, Chairman 

Barletta, Ranking Member Carson and members of the subcommittee, for the opportunity to testify before the subcommittee 

today. 

The Smithsonian is the world’s largest museum, education and 

research complex, consisting of 19 museums and galleries, the National Zoo, and nine research facilities. Millions visit us each year, 

but very few see the hard work happening away from the museums 

that makes it all possible, and much of that behind the scenes work 

is being accomplished in leased space. 

The Smithsonian’s leasing requirements are unique. Our combined need for collections storage, administrative offices, research, 

laboratory and exhibition space is unlike that of any other Federal 

agency. 

10 

We currently lease about 1.5 million square feet at an annual cost of approximately $52 million. This is a significant cost to the 

Smithsonian and, in turn, to the American public. 

As a result, we take seriously our responsibility to spend these 

dollars wisely and transparently. We get our wisdom through inhouse professional real estate staff and outside private sector experts who identify the most cost effective leasing opportunities 

through detailed studies of real estate markets and submarkets. 

We recognize that by relying on both internal and external expertise the Smithsonian can best meet its unique space requirements, 

ensure competitive negotiations with lessors, and identify when 

consolidation makes the most economic or programmatic sense. 

We believe that this reliance has resulted in leases at or below 

market rates. We also believe that the Smithsonian is obligated to 

demonstrate that its use of taxpayer dollars is responsible. As an 

entity with independent leasing authority, we are not required to 

file annual reports with the Federal Real Property Council, but we 

do so voluntarily as part of our commitment to follow best practices. 

Our Board of Regents, too, recognizes the importance of following 

best practices and must vet and approve all leases by the Smithsonian with a net present value of $5 million or more. Six Members 

of Congress sit on the Board, and three of those congressional Regents are also members of the Board’s Facilities Committee, which 

has primary oversight over the Smithsonian’s leasing activities, 

among other duties. 

In determining our leasing requirements, Smithsonian museums, 

research centers, and support offices are required to formally compile a detailed request of their needs. Once approved, our real estate office works with the unit to verify and refine the requirement 

and develop an appropriate space plan. 

We will only look to leasing space if current Smithsonian assets 

are unavailable, insufficient, or inappropriate for the proposed use. 

As the Smithsonian’s inspector general noted in a 2014 audit report on leasing activities, ‘‘by monitoring the Smithsonian’s use of 

leased office spaces the Real Estate Office successfully consolidated 

some spaces to reduce costs where possible.’’ 

A disciplined leasing process is particularly important in securing space to house the national collections. Since Congress established the Smithsonian in 1846, we have learned much about the 

proper care and preservation of diverse collections and have applied that learning to develop realistic space requirements. 

And these requirements can vary dramatically among the 138 

million items in our collections, from mosquitoes to daguerreotypes 

types to the space shuttle, but all must satisfy Smithsonian standards for temperature, relative humidity, ventilation, lighting, fire 

suppression, and security. Our stringent policies and our adherence 

to them reflect how seriously we take our obligation to preserve 

and protect the national collections. 

Looking ahead, last year we issued a collection space framework 

plan to guide our current and future collection needs while providing renovation and construction strategies that in the end will 

eliminate our need for leased collection space. Pursuant to the 

framework, we are planning to construct an additional storage pod 

11 

at the Museum Support Center in Suitland, Maryland, and two 

new storage modules at the Udvar-Hazy Center in Chantilly, Virginia. 

The first of those modules will initially serve as a temporary collection swing space during the revitalization of the National Air 

and Space Museum. A bill authorizing those projects has been referred to this subcommittee. 

Our requirements for office space are less complex, but still carefully developed to ensure operational needs are met in a cost effective manner. 

In addition to controlling leasing costs through competition, the 

Smithsonian is now pursuing a long-term cost savings strategy. 

Our current leased office holdings in DC are scattered across the 

metro area, creating operational inefficiencies and growing leasing 

costs. 

To address this, we have aligned the termination dates of these 

leases with an eye toward consolidating space and creating savings. 

Proposals are now being evaluated in response to a nonbinding solicitation to consolidate Smithsonian administrative office space in 

the DC metro area. 

We are conducting a cost-benefit analysis of all realistic options, 

from maintaining to status quo and extending those leases to outright purchase of a building, and we have also consulted with the 

GSA to identify suitable properties that may be available for consolidation within the Federal real estate portfolio. 

As we look forward to the opening of the new National Museum 

of African American History and Culture this September and the 

renovation of the Air and Space Museum, and as our collections 

continue to grow, our need for space is greater than our budget will 

allow. For that reason, the Smithsonian will continue to seek efficiencies and consolidate our leased spaces in the most responsible 

and transparent manner possible. 

Thank you for the opportunity to testify today, and thank you for 

your support of the Smithsonian Institution. 

Mr. BARLETTA. Thank you for your testimony. 

I will now begin the first round of questions limited to 5 minutes 

for each Member. If there are any additional questions following 

the first round, we will have additional rounds of questions, as 

needed. 

Mr. Wise, one report issued by GAO today is a review of the 

independent leasing authorities of agencies outside of GSA, and a 

number of agencies like the SEC and the Commodity Futures Trading Commission, or CFTC, have exceeded their legal leasing authorities and run afoul of the law. 

We want to alert the other agencies before they make mistakes. 

If we could have the chart put up. 

Generally, in order to determine if an agency has the obligational 

authority to sign a lease, GAO asks three questions: 

First, does the agency have leasing authority? 

Second, does the agency have either explicit multiyear leasing 

authority or no-year funds? 

And, third, does the agency have explicit exemptions from the 

Anti-Deficiency Act and the recording statute? 

12 

Barring some exceptions, the answer to all of these questions 

must be yes for an agency to sign a long-term lease, and not to obligate the full cost of the lease upfront; is this correct? 

Mr. WISE. Yes, sir. Yes, Mr. Chairman, that is correct. 

Mr. BARLETTA. Mr. Wise, and to be clear, the evaluation of 

whether an agency has the obligational authority to sign a lease 

under the Anti-Deficiency Act is a separate evaluation from the 

scoring issue of whether a lease is a capital or an operating lease; 

is that correct? 

Mr. WISE. Yes, Mr. Chairman. That is also correct. 

Mr. BARLETTA. Mr. Wise, recently GAO reviewed the CFTC’s use 

of its leasing authority. Can you elaborate on what GAO found? 

Mr. WISE. Yes, Mr. Chairman. In the case of CFTC, it was a little bit of kind of putting the cart ahead of the horse. What happened with CFTC was they anticipated getting a great increase in 

their funding and then at the same time anticipated they would be 

hiring a lot more staff. 

It did not happen. In the meantime, they leased the space, and 

as a result they ended up with a lot of very underutilized space and 

some significant obligations that could incur up to about $75 million in additional leasing costs. 

As a matter of fact, I had an opportunity to visit the office in 

Kansas City that was one of the offices that was part of our review, 

and it was rather modest office space, but it included two floors, 

one of which had been emptied out. 

Now, CFTC was trying to work with the landlord to see if it 

could sublease that space, but the landlord, of course, has probably 

relatively minimal interest in doing that since he is already being 

paid by CFTC, and these leases do not expire until 2025. So there 

is a significant issue there with the Recording Act. 

Now, whether or not it is an Anti-Deficiency Act violation, that 

is something that is still being determined. Our report was issued 

back in May, and CFTC is still trying to work through those issues, 

but it was definite an issue with the Recording Act, and they got 

way ahead of themselves when it came to getting into obligations 

that were beyond the authority that they had. 

Mr. BARLETTA. Mr. Reeder, the PBGC is now working through 

GSA to lease new headquarters space. Why did your agency decide 

to use GSA? 

Mr. REEDER. As you can probably tell from my oral testimony, 

I am very proud of what the PBGC does. We are very busy and 

very adept at preserving pensions and protecting pensioners and 

paying timely benefits and maintaining high standards of stewardship. 

And regarding stewardship and accountability, we believe that 

the GSA is more adept at obtaining the best value for our headquarters lease. Although we clearly meet the first two criteria that 

you mentioned, that we have express statutory leasing authority 

and we have no-year funds, the interpretation of the recording statute is unclear enough to us that we wanted to go with the GSA to 

have a clearer authority for our headquarters lease. 

Mr. BARLETTA. Thank you. 

Mr. Lapiana, I understand the Smithsonian is currently reviewing its leasing authority. As chairman of the subcommittee, it 

13 

seems the answer should be a simple one: work with GSA to meet 

your leasing needs. 

When do you expect to have a decision on how the Smithsonian 

plans to proceed with its leases? 

Mr. LAPIANA. Thank you. 

Let me back up and just say that as we have entered into leases, 

we have done so in good faith, and we think we have very good 

grounds for doing so. 

The issue was raised in the last few months about whether we 

had the budget authority to do so or not, and there was some lack 

of clarity. We are working with OMB right now in addressing those 

issues, and we will keep the committee apprised of our results 

there. 

We are hopeful that it will be sooner rather than later. 

Mr. BARLETTA. Thank you. 

I will now recognize the ranking member, Mr. Carson. 

Mr. CARSON. Thank you, Chairman Barletta. 

Mr. Wise, is it fair to say that agencies that are responsible for 

procuring their own space tend to acquire more space per employee 

than when GSA procures space for other agencies? What do you 

think is the case? 

Mr. WISE. Yes, in our review, Ranking Member Carson, we found 

that in most cases, almost all the independent leasing entities 

ended up allowing almost twice as much as the recommended 150 

square feet per employee that GSA now recommends. 

Mr. CARSON. In your mind, sir, should GSA be making greater 

use of purchase options to reduce the cost of housing Federal employees? 

Mr. WISE. Well, it is certainly a possibility. The way we view it 

is that purchase options could be one more tool in the GSA toolkit 

that would potentially enable the Government to save money in acquiring space for its employees. 

In our review we found a few cases where that has taken place, 

and there are a couple more in the pipeline that could potentially 

save money. I think as the chairman mentioned in his opening remarks, there was some significant savings for several properties 

over the past several years. 

And so, yes, I think it could be an option that could be useful 

for the Government and could lead to some potential savings, although one needs to analyze the totality of the leasing environment. 

Mr. CARSON. Thank you. 

Mr. Wisner, how long on average does GSA occupy a building 

where GSA is the sole lease tenant? 

Mr. WISNER. Sir, where we are the sole lease tenant, on average 

we are in the building between 26 and 27 years. 

Mr. CARSON. How do other governments, either local or foreign, 

handle long-term leasing? 

Mr. WISNER. My own personal information on these is Canada 

and Japan and England often own their Federal facilities. 

Mr. CARSON. OK. And thanks you, sir. 

And lastly, Mr. Reeder, can you elaborate on how PBGC came to 

the conclusion as to why it was in their interest to have GSA take 

over the lease consolidation efforts? 

14 

Mr. REEDER. As I mentioned earlier, we do think that they have 

the bench strength and the clear authority to negotiate a lease. 

Since we saw our lease ending in 2018, beginning in 2014 we began 

looking at all of the options we had, various leasing options and including a purchase option. Before making the decision to go to the 

GSA, we hired a space planner and architectural firm and began 

developing our program of requirements. 

We made the decision to go with GSA fairly recently. So we did 

it in consultation in our own building as well as with OMB, as well 

as with GSA, and I think it is the right decision. 

Mr. CARSON. Lastly, really this time, Mr. Lapiana, would the 

Smithsonian lose anything by going through GSA to meet their 

leasing needs for office and warehouse space? 

And does the Smithsonian have the institutional knowledge to be 

an effective player in the commercial office real estate market? 

Mr. LAPIANA. If I could answer your second question first, we believe we do, and as Director Reeder noted in the rationale for why 

PBGC looks to GSA, at the Smithsonian we do have the expertise. 

We do have the bench strength. We have diverse and unique leases 

and properties that we manage, and for us, the most efficient and 

effective and responsive way to enter into leases or at least seek 

leases is internally with outside experts. 

We also rely on GSA as an important resource. As I mentioned 

in my testimony, we voluntarily report to the council because we 

know it is the best practice, and we are always open to discussing 

with GSA other opportunities that would make our leasing more efficient and cost effective. 

Mr. CARSON. Yes, sir. Thank you, gentlemen. 

I yield back, Mr. Chairman. 

Mr. BARLETTA. And the Chair recognizes Mr. DeFazio. 

Mr. DEFAZIO. Thank you, Mr. Chairman. 

Mr. Wisner, let us just look at purchase options for a moment. 

If purchase options are included, does that invariably drive up the 

monthly rental cost? I mean, does the owner exact a premium at 

the beginning? And would it make it more difficult for you to negotiate if you were including the purchase option? 

Mr. WISNER. Sir, each deal would need to be evaluated specifically, but it is my experience that when you are negotiating in the 

initial prior to award, purchase options can be built into leases. 

They are a point of negotiation. 

We in the past have traded purchase options for free rent. We 

have traded purchase options for other things. So kind of all things 

being equal, it is what is important to the individual that you are 

negotiating against, what their financial requirements are, and 

what their institutions behind the lease want. 

So if they are a long-term hold organization, they may not be as 

interested in a purchase option. If they are looking at a potential 

get GSA or get the Federal Government as a tenant and then sell 

the building, a purchase option may be of no consequence to them. 

So every deal is specific, but my experience is that you can put 

purchase options on the table, yes. 

Mr. DEFAZIO. So it could be a useful tool. 

Mr. WISNER. Yes, sir. 

15 

Mr. DEFAZIO. And right now, as this committee has recognized, 

I mean, this is a little bit nonsensical. So let me just give a really 

simply, I know not realistic example. We have an operating lease 

for 30 years. We are going to pay $1 million a year, OK, $30 million outlay. We have a lease-purchase, and let us just say it worked 

the same way. You are going to pay $1 million a month, but at the 

end of 30 years, you get to purchase at a discount from the value 

of the property, and you would be able to continue tenancy, et 

cetera. 

But the one with annual rent counts in this year’s budget as $1 

million and the other one counts as $30 million plus the purchase 

price; is that correct? 

Mr. WISNER. Sir, scoring is not in my purview. 

Mr. DEFAZIO. Yes. 

Mr. WISNER. However, I can tell you that there must be an evaluation of the entire deal. So when we look at the deal, it is the 

value of the rent and whatever the purchase option is at the end, 

and it could score as a capital lease for us. 

Mr. DEFAZIO. Right. And so what would be ideal would be we 

would look at all the same way. We would look at the obligation 

over time. So if we are going to rent it for a million bucks a year, 

we are going to say, well, it is going to cost $30 million to the taxpayers, and if we are going to rent it, you know, for less and have 

a lease-purchase, then you could say, well, gee, that is going to cost 

50, except we would get an asset. 

I mean, there has got to be a better way to do this. I mean, I 

think the rule was written, and maybe someone there can address 

it; I think the rule was written because at the time the Government used to actually more regularly build, acquire property and 

build structures when we knew we were going to have long-term 

needs because that is the most cost effective way to go. 

But then the lease-purchase came along, which was less cost effective obviously, but what happened in writing a rule to try and 

level the playing field, we actually put the lease-purchase off the 

table and Congress, in its infinite wisdom, not having created capital budgets, does not hardly ever allow the purchase of property 

in the building of a structure. We would rather be idiots and pay 

a premium and end up with nothing. 

Can anybody address that? 

No? OK. Mr. Wise. 

Mr. WISE. Yes, I do not know if I would characterize Congress 

quite that way, but in any case, the—— 

Mr. DEFAZIO. Do not call us idiots. I can call us idiots. 

Mr. WISE. What happened is pretty much what you said. It leveled the playing field. It was an attempt to level the playing field, 

but then it took away the incentives for the lease-purchases, especially the discount lease-purchases. 

And as a result, agencies moved more towards operating leases 

which only had to be accounted for, as you put it, 1 year at a time 

versus counting the totality, which put a pretty big hole in agency 

budgets. 

So then you end up with a situation where agencies may be paying rent essentially ad infinitum. 

16 

I mean, we found cases where I think in one of our reports we 

found EPA renting a facility in Seattle for 60 years. 

Mr. DEFAZIO. Well, EPA has not existed quite that long. Jimmy 

Carter was the EPA. That was not 60 years. 

Mr. WISE. Well, anyway, renting for a long time in Seattle. In 

doing this work, we examined over 18,000 leases since the early 

1990s, since the scoring rules came into effect. Validating your 

point, we only found 17 cases where lease-purchases were involved. 

Thus, the scoring rules had effectively taken away the incentive 

both for discount and for even lease-purchases. 

Thus we are left with what we have today, which is a great overreliance on leasing and, as you framed it, much higher costs in the 

long run to the Government, which is something we have talked 

about in many of our reports for this committee and for others. 

Mr. DEFAZIO. Thank you. 

Thank you, Mr. Chairman. 

Mr. BARLETTA. Thank you. 

The Chair recognizes Mr. Curbelo. 

Mr. CURBELO. Thank you very much, Mr. Chairman, and I thank 

all the witnesses for their testimony today. 

Mr. Wise, while the GAO report does not include an exhaustive 

list of agencies with leasing authorities, is there a particular reason 

why the VA is not included in the report? 

And I will explain to you why I am asking you this question. I 

represent the southernmost district in Florida, and we have many 

veterans who live down on the Florida Keys, and oftentimes these 

people have to drive long distances in order to get the quality care 

they deserve. Sometimes they do not even get that, but that is a 

separate issue. 

So I wanted to pose a question and see if there is anything we 

can do by working together to remedy this situation. 

Mr. WISE. Yes, thank you for your question. 

Actually I think the short answer to that is VA now goes through 

GSA for its leasing. 

Mr. CURBELO. OK. So you do not foresee any role or any opportunity for us to work on this. I would have to be exclusively 

through GSA? 

Mr. WISNER. I can take part of that answer from the GSA side. 

So the Veterans Administration has come to GSA for delegation of 

authority. We are using our authority to assist them in the acquisition of leased space for these requirements. 

I am not familiar with the one in Florida, but we have approved 

a significant number of leases and lease actions with the Veterans 

Administration. They have done a lot of work to centralize their 

real estate program, and we have seen a significant amount of improvement over the couple of years that I have been involved with 

them. 

Mr. CURBELO. OK. Well, I thank you, and I look forward to working with you to remedy this situation because, again, sometimes we 

have veterans driving 3 and 4 hours in order to get care, and if we 

can do anything to expand access to care, it would make a great 

difference to the people in my district and I am sure this is something that happens throughout the country. 

So thank you both very much. 

17 

That is all I have, Mr. Chairman. Thank you. 

Mr. BARLETTA. Thank you. 

We will now begin the second round of questions. 

Mr. Reeder and Mr. Lapiana, what steps have your agencies 

taken in the past to ensure you achieve the best lease rates for the 

taxpayers? 

Mr. Reeder, do you want to start first? 

Mr. REEDER. Yes. We began leasing our current headquarters 

back in 1992, and our field offices in our Kingstowne space were 

leased in a comparable timeframe. So as I implied earlier, we do 

not do a lot in the leasing arena and not often. It has been 24 years 

since we have leased our main space, and we follow procurement 

standards. We follow the regular procurement requirements, and 

we believe we have gotten competitive or below market rates on 

most of our leases, as has been shown by the GAO report. 

But we believe that our turn towards the GSA will help us do 

that even better. 

Mr. CURBELO. Mr. Lapiana? 

Mr. LAPIANA. Thank you. 

Before we even consider whether we should be seeking a lease, 

we do an internal needs analysis and make sure that within our 

portfolio we can accommodate the needs of the particular unit or 

museum. 

After the needs analysis, both staff, real estate experts and outside consultants and brokers advise us on framing an RFP. 

All of our leases are subject to competition, and it is a rigorous 

competition. We take it very seriously, and the Smithsonian is a 

very good tenant, and we get very good responses to our RFPs. 

Once we get down to the best and final offers, we negotiate hard 

with our potential lessors. As I mentioned, we are a very good tenant, and the competition and the responses that we get reflect that, 

and our staff of experts look to use every available tool. Tenant improvement allowances, free rent, negotiation of escalation costs, it 

is all part of the final negotiation. 

And we believe that in the end the proof is in that our leases are 

at or below market rates. 

Mr. CURBELO. Mr. Wisner, how does GSA ensure that its tenant 

agencies do not lease more space than they need? 

Mr. WISNER. Excuse me, sir. So we work with tenant agencies on 

their program requirements, and many of the tenant agencies have 

submitted the reduced footprint plans to OMB. They oftentimes 

have already set their space requirements, which is a really good 

way to enter into the program. 

Sometimes we work with a customer agency who has not established their utilization rates or are in the process of establishing 

their utilization rates, and that is where we use the recommended 

square footage utilization that GSA has in place. 

So we work with our customer agencies. We have units around 

the country that are workplace strategists. Their job is to help 

more efficiently plan the space, look for the most efficient ways to 

plan space, look for shares space, look for all opportunities with before we go to the market and run a competition. 

So the goal is to get the program requirements locked in at a utilization rate that is significantly improved over where they are curVerDate Aug 31 2005 09:41 May 16, 2017 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\ED\7-6-16~1\20638.TXT JEAN
18 

rently and get to the 150 square foot GSA standard that we are 

looking at, but we have many agencies that are below the 150 

square foot standard right now. 

Mr. BARLETTA. Mr. Lapiana, in your testimony you talk about 

the importance of minimizing lease costs. How much office space do 

you current lease and how many people do you house in that 

space? 

And do you currently meet or exceed GSA’s standard for space 

utilization? 

Mr. LAPIANA. We have the vast majority of our office space in the 

metro DC area, and it is about 360,000 square feet. In general, it 

depends on the building, and I say that with respect to what we 

own and what we lease and what activities are going on in the 

building so that it is difficult for us to use the GSA office number 

across the board because not all of our activities and actually a majority of the space that we need is devoted to non-office or administrative functions. 

However, in the end, staff-wise, FTE-wise, we are in the ballpark 

with respect to the GSA number. In preparing for this hearing, we 

were looking at that and anticipating a question like this. We have 

6,300 employees, and we also have 6,500 volunteers and interns 

who are also using those spaces. We do not have the numbers with 

us yet but we would be happy to share it with the committee once 

we have collected the information. 

So that when we make the calculations with regard to the GSA 

number, we are looking only at staff, but those interns and those 

volunteers, whom we could not run the Smithsonian without, are 

not in that calculation. 

So we are actually very confident, even under a very conservative 

calculation, that we meet or are under the GSA number. 

Mr. BARLETTA. I recognize Ranking Member Carson. 

Mr. CARSON. Thank you, Chairman. 

Mr. Wise, how can Federal real property leasing practices be better developed and shared across the entire community of Federal 

leases? 

Mr. WISE. Mr. Carson, we recommended in our report that the 

FRPC, the Federal Real Property Council, is a good vehicle for 

doing this because they meet monthly. They discuss exactly the 

kinds of issues that are of interest to all real property managers. 

It acts like a clearing house, a forum for discussing the issues of 

the day for all senior Federal real property managers. 

That said, we understand that, you know, putting a lot of small 

entities into the Federal Real Property Council could make it a little bit more unwieldy, but there is another potential vehicle we 

identified and have discussed during the course of our work, and 

that is the Small Business Council, which acts as sort of a subsidiary group to the FRPC. 

We feel that the framework is actually in place to do that, and 

that is why we recommended that this would be, we think, an excellent idea in order to bring everybody into the tent, so to speak, 

and would help in terms of being able to implement leading practices and more efficiencies, thus enabling agencies to do a better 

job. 

Mr. CARSON. Thank you. 

19 

Mr. Lapiana, the GAO found that many agencies with independent leasing authority often lease twice as much office space 

that GSA usually allows for office space. How does the Smithsonian 

allotment of office space per employee compare with the GSA 

standard of 150 square feet of office space per person? 

Mr. LAPIANA. I think we reflect well against the GSA standard. 

As I mentioned, a smaller portion of our staff is administrative and 

in traditional offices. We have a lot of curators with collections who 

are in with the collections. In our number we have exhibit design 

and fabrication, and we have some museum space. 

We have research laboratories, and we also have volunteers who 

actually turn out to be about half of our workforce. 

Taking that all into account, we are very confident that we are 

at or better than the GSA number. However, it does come with 

these caveats of it is not just office space in the calculation. It is 

laboratories; it is libraries; it is exhibitions; it is exhibit fabrication 

and research. 

Mr. CARSON. Thank you. 

I yield back, Mr. Chairman. 

Mr. BARLETTA. Thank you. 

Mr. Wisner, as you know, the committee has been pushing GSA 

hard to increase your average lease terms to 10 years or more, and 

to increase your use of brokers to get better deals, and to work 

through your expiring leases while the market is still favorable for 

the Government. 

Can you update us on those two efforts? 

Mr. WISNER. Yes, sir. Internally we have established a policy for 

longer term leases. The goal here is 10-year leases or longer. Exceptions to a 10-year deal must be escalated through our management program. 

So I have policies in place and I have approvals in place. We are 

executing longer term leases in markets where it does make sense, 

and that revolves around escalating markets, markets there were 

are opportunities to lock in now. 

The second part of your question, excuse me. Do you mind repeating it? 

Mr. BARLETTA. Sure. 

Mr. WISNER. The broker? 

Mr. BARLETTA. Yes. 

Mr. WISNER. Yes, sir. So we established a new broker contract 

in September of this last year. We have nine new brokers across 

the country. We split the country into zones so we could give an 

opportunity for small businesses to compete on that contract. 

The required tasking and measure within GSA is 50 percent of 

all of our leases that are commissionable events will be tasked to 

the broker contract. We have currently met our minimum obligation under the contract this year. We will continue to do that 

tasking. This contract runs for 5 years, and it is my expectation we 

will continue to task at that rate. 

So the goal is 50 percent of all of our leases that are 

commissionable events will go to the brokers. 

Mr. BARLETTA. Thank you. 

Mr. Wise, GAO is issuing two reports today. One of them is purchase options and lease agreements. I was able to visit one of the 

20 

buildings you highlighted in that report, the IRS building in Detroit. We were able to purchase that building for $1. Can you talk 

briefly about your findings and the potential financial benefits of 

the purchase option? 

Mr. WISE. Mr. Chairman, yes. There are really three key points 

to the report that we issued today that you referred to. As I had 

mentioned a little bit earlier, one key point is the scoring rules that 

have virtually kind of done away with the lease-purchase options 

and especially the discount purchase options. 

As I had mentioned earlier, of the over 18,000 leases we looked 

at, we only found a handful, 17 or so, that tried to exercise that 

option. 

And I would say that, you know, something else that we have 

been talking about during the course of this hearing is it certainly 

can be advantageous to the Government to be able to eventually acquire a building. I think Mr. DeFazio was alluding to that in his 

remarks. 

The IRS building in Detroit was a good example. While the Government did pay rent for 20 years, at the end of the day, the Government acquired the building. So you have a long-term solution to 

housing the IRS office in Detroit. In that case it is, I think, one in 

the win column for the Government. 

And as we talked about a little bit earlier, if that can be even 

as an option for the Government going forward, then there is a potential for additional savings. 

We saw in the course of our work there are two other buildings 

that also saved substantial money. One was Columbia Plaza, which 

is about a block or so from the State Department, which the Government managed to come up with a savings of about $50 million 

from that exercise in the lease-purchase. 

And another one was a USDA facility in Riverdale, nearby in Maryland here, which also saved about $14 million. 

Then there are two other buildings during the course of our review we found that looked like they could have potential to save 

money going forward exercising an option. One is the Federal Energy Regulatory Commission building, which is located not far from 

Union Station, and that will have a lease-purchase option that will 

be open in 2025. The building has been appraised at $133 million 

and the option is for $20 million. So there is a potential savings 

there. 

Again, as I mentioned earlier, these things have to be looked at 

in totality, once you get to that point, you know, looking at security 

issues, looking at seismic issues and other kinds of regulations that 

go into the Federal building regulations. 

Another building that may have a potential savings is a National 

Oceanic and Atmospheric Administration facility out in College 

Park, Maryland, which also has a 2025 option. It has been assessed 

for $86 million with a $27 million option. 

One can conclude that lease-purchase is simply another potential 

tool in the toolkit to try to help the Government rationalize its real 

property portfolio and end up with a situation where you are not 

just paying rent in perpetuity. 

Mr. BARLETTA. Thank you. 

I have no further questions. Ranking Member Carson? 

21 

Mr. CARSON. No, sir. 

Mr. BARLETTA. I did not see Ms. Norton. The Chair recognizes 

Ms. Norton. 

Ms. NORTON. Thank you very much, Chairman Barletta. 

Indeed, I thank you for holding this hearing because I have had 

a long-term issue with independent leases apart from the expert 

agency that Congress said should do the leasing, and we have had 

some terrible mishaps when that was not done and agencies essentially acted like the world was theirs. They say let us see if we can 

find the best opportunity for us, not necessarily the best opportunity for the Government. 

But in light of the fact that I have long been critical of agencies 

independently doing their own leasing, Mr. Wise, I was interested 

that you looked at 37 independent leases. It says ‘‘selected independent leases,’’ but I assume that they were randomly selected, 

and found comparable to or lower than the GSA rates. 

How do you account for that? 

Mr. WISE. Ms. Norton, thanks for the question. 

It could be any number of reasons for that. There are cases 

where they are looking at various properties. There may be they 

are willing to take property with fewer tenant improvements than, 

say, a Government property, or there could be a possibility that 

they will take it as is, which means that they are willing to shoulder some of the burden themselves or not get involved in big, expanded kinds of improvements. Location could also make a difference. 

Ms. NORTON. But some of these may have been opportunities 

that perhaps anybody could have seen, and the agencies saw them 

and took advantage of them, and the kind of expertise that GSA 

is purported to have might not have been necessary to see these 

opportunities. 

Mr. WISE. We learned in talking to GSA and others that there 

are somewhat more stringent requirements in GSA-related leases 

that have to do with security, that have to do with things like seismic requirements that may not be relevant for the independent 

leasing authority which may not necessarily get engaged in those 

kinds of things, and from what we understood—— 

Ms. NORTON. At least I would have thought security and all of 

that sort of thing was relevant for every leasing authority, particularly anywhere near the Nation’s capital or the national capital region. 

Mr. WISE. Well, there can be, but at least according to the GSA 

officials, the GSA standards can be somewhat higher for some of 

these things depending on the type of building and the location, as 

well as the environmental aspects of the building, like seismic and 

energy saving requirements and this sort of thing. 

So those were reasons that we found during the course of our 

work, ma’am. 

Ms. NORTON. This question would be, I suppose, both for Mr. 

Wisner and Mr. Wise. 

I recall that in fact—this is an ongoing event—there is going to 

be development taking place at the old soldiers’ home here in the 

District of Columbia. I believe that the DOD wants that to take 

22 

place as a way to support the soldiers’ home and the soldiers who 

are there. 

And it is interesting that they reached out to GSA and essentially gave GSA the authority. Now, this is DOD. DOD does some— 

some?—a great deal of construction of its own, but I believe, recognizing that this construction was occurring in an urban neighborhood, they might have felt that GSA was the best actor in this 

case. 

So my question is: does GSA offer; do agencies come to GSA to 

seek their advice or should an agency which is not in the business 

of construction not seek their advice and perhaps ask GSA to, in 

fact, do the construction or the leasing for them? 

I do not see the advantage to the Government of the SEC saying, 

‘‘We are going to build ourselves a building,’’ for example, to name 

an agency that did that in recent years. 

Mr. WISNER. Yes, Ms. Norton. Thank you for the question. 

GSA is happy to partner with our customer agencies and agencies that have their own leasing authority to provide expertise on 

market rates, to provide expertise on construction build-out and 

other things. 

I am not familiar with the particular project that you are talking 

about because it is construction, but we are happy and willing to 

work with any agency out there. 

On expertise, I would suggest that if we are using GSA authority, they must follow GSA regulations. We are the experts in real 

estate and that is our core mission. So this is the job of GSA or 

one of the jobs of GSA. 

We are happy to support other real estate programs or other 

leasing organizations. We are also happy to work—— 

Ms. NORTON. Let me ask you this, Commissioner Wisner. 

Mr. WISNER. Yes, ma’am. 

Ms. NORTON. Suppose an agency does have the authority. You 

know who they are. Is there guidance form GSA available to agencies who have their own leasing authority? Surely they could do 

with some advice even if they do not ask for it. 

Mr. WISNER. There is not guidance to use GSA. However, there 

are leasing—— 

Ms. NORTON. No, I do not mean use GSA. I am talking about 

agencies, none of whom are in the business of leasing or construction, who might never even think of GSA. All they think about is 

they have the authority. So let me go willy-nilly at it. 

If they had a piece of paper that said let us see what the expert 

agency says is the way to approach this, would that not be useful 

to agencies who have such authority? 

Mr. WISNER. Available to the public and available online—— 

Ms. NORTON. Say it again. 

Mr. WISNER. Available to the public and available online are all 

of our leasing desk guides and our pricing policy guidance, yes, 

ma’am. 

Ms. NORTON. All right. I just want to say that is not what I am 

talking about. I am talking about leasing authority, the kinds of 

issues to look for. The issues that, for example, Mr. Wise said some 

found apparently on their own and got comparable or rates that 

were even better. 

23 

One more question if I might. I had a roundtable last year because I have been concerned over a number of years with holdover 

and short-term leases, and there was, if anything, a backlog of such 

leases. 

Actually the GSA did a report. I thought it was an excellent report. It showed very substantial progress being made in the elimination of holdover leases and a commitment to finding long-term 

solutions for all of the outstanding leases in this region, which is 

perhaps the most heavily leased region in the country, to find longterm solutions for leases expiring before September 30, 2017. 

So Assistant Commissioner Wisner, I would like to ask you: are 

you on track to find long-term solutions? That means no short-term 

or holdover leases by September 30 of 2017. 

And what strategy are you using to avoid a holdover or shortterm leases in the future? 

Mr. WISNER. Thank you, Ms. Norton. 

So I will address the facts to start off with. We have reduced the 

number of holdovers by at least 50 percent in our portfolio. We are 

down to around 50 holdovers total. That does vary. It goes up a bit, 

and every month we watch it diligently. 

Ms. NORTON. Is that where you expected it to be by this time, 

Mr. Wisner? 

Mr. WISNER. I expect it to be lower than that. The internal goal 

for holdovers is zero. So we do have puts and takes in that list. We 

calculate number of months in holdover, which is extremely critical 

for us. That being said, a short-term holdover, 1 or 2 months to get 

us through a negotiation as opposed to an 18-month holdover 

where we are at a standstill. We are focused on the long-term holdovers, the critical issues around that. So we are focused around 

that as a metric across our entire portfolio. 

As far as extensions, we have reduced the number of extensions 

that we have in place currently and led by our commissioner, every 

action that we have as far as an expiring lease will have a plan 

3 years prior to its expiration. We will be reaching out to the customer agencies to put a replacement competitive action in place for 

each of those projects that we are currently considered. 

We have increased the number of long-term solutions. I believe 

we are up to about 83 percent of all of our portfolio has long-term 

solutions in place or have long-term planning in place. 

Ms. NORTON. What does it mean, a ‘‘long-term solution’’? 

Mr. WISNER. Long-term solutions means that we will have a competitive action that takes us to a new procurement that leads us 

to a longer term solution in the market. So it may be a 5-year solution in some cases where we only want to occupy the space for 5 

years. It may be a 10-year firm solution or it may be even longer 

up to the level of our scoring requirements, but not to exceed. 

So we have a very good plan in place, a very robust plan in place, 

and I am happy to share the documents with you. 

Ms. NORTON. Does the new footprint, the reduced footprint help 

or hurt your timetable to get rid of short-term leasing? 

Mr. WISNER. No, ma’am. I think this actually helps us. We work 

with customer agencies which can often be a protracted period of 

time to work on reducing the square footage, but overall we are reducing the amount of leases that we have in our portfolio. It has 

24 

gone down. We have reduced the amount of square footage that we 

have in our portfolio now. 

That is reducing the stay in place option with customers. We 

must run a procurement. We must run a competitive procurement, 

and that oftentimes with the new square footage reduction drives 

us to new facilities or drives existing lessors to reduce the amount 

of square footage that they are offering to us. 

So it is not precluding staying in place, but there is a competitive 

action that drives down the square footage and potentially can 

drive down cost or at least control cost. 

Ms. NORTON. Thank you very much for your indulgence, Mr. 

Chairman. 

Mr. BARLETTA. Thank you. 

If there are no further questions? 

Mr. CARSON. No. 

Mr. BARLETTA. I would like to thank you for your testimony. 

Your comments have been helpful to today’s discussion. 

I would ask unanimous consent that the record of today’s hearing 

remain open until such time as our witnesses have provided answers to any questions that may be submitted to them in writing, 

and unanimous consent that the record remain open for 15 days for 

any additional comments and information submitted by Members 

or witnesses to be included in the record of today’s hearing. 

Without objection, so ordered. 

I would like to thank our witnesses again for their testimony 

today. 

If no other Members have anything to add, this subcommittee 

stands adjourned. 

[Whereupon, at 11:48 a.m., the subcommittee was adjourned.] 

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