GAO/RCED-00-208R State Office Collocation

United States General Accounting Office

Washington, DC 20548

Resources, Community, and

Economic Development Division

B-285644

June 30, 2000

The Honorable Larry Combest

Chairman

The Honorable Charles W. Stenholm

Ranking Minority Member

Committee on Agriculture

House of Representatives

Subject: U.S. Department of Agriculture: State Office Collocation

The Federal Crop Insurance Reform and Department of Agriculture Reorganization

Act of 19941directed the Secretary of Agriculture to streamline and reorganize the

U.S. Department of Agriculture (USDA) to achieve greater efficiency, effectiveness,

and economies in its organization and management of programs and activities.

Following passage of the act, USDA began a major effort to, among other things,

collocate the state offices of its three field-based agencies—the Farm Service Agency

(FSA), the Natural Resources Conservation Service (NRCS), and Rural Development

(RD).2These state offices provide policy interpretation and technical advice to their

field representatives located in USDA county service centers throughout the nation.

The county service centers deliver USDA programs to farmers, rural residents, and

communities. At the time of the act, these three agencies’ state offices could be, and

often were, located in different cities within a given state. Collocation therefore

meant locating these three state offices at one site in order to share space and

administrative personnel and, potentially, to eliminate duplicative overhead

expenses. By March 10, 2000, USDA had collocated state offices in 26 states. At that

time, USDA also announced its collocation decisions for the three agencies’ state

offices in the remaining 26 states. These decisions were based on recommendations

in collocation plans submitted by officials in USDA state offices. USDA’s

announcement noted that the moves in these latter 26 states were expected to save

$9 million by 2008 and to result in better, more efficient, less costly service to USDA

customers.

Concerned about the reasonableness of the process USDA used to reach the state

collocation decisions announced in March, you asked us to determine (1) what

1

P.L. 103-354, Oct. 13, 1994.

2

USDA has 52 state offices, including offices in the Commonwealth of Puerto Rico and the Territory of

Guam.
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2 GAO/RCED-00-208R State Office Collocation

criteria USDA established to guide its collocation decisions, (2) whether USDA

consistently applied each of the criteria in making its collocation decisions, and (3)

how USDA validated the cost data submitted by the three agencies’ state offices to

support their collocation recommendations and whether they included all relevant

costs. In addition, in a related matter, you asked us to identify examples of federal

agencies that have realized economic benefits in relocating their offices because they

asked communities to offer financial benefits as an incentive to relocate in those

communities.

In summary, USDA established 10 criteria to be considered in making collocation

decisions. These included several criteria directly related to cost considerations,

such as the one-time costs and savings resulting from the collocation, as well as other

criteria not directly cost-related. These other criteria included the availability of

transportation and the location of the collocated office central to the agencies’

activities and near other USDA, federal, and state government agencies. USDA did

not establish guidance on how state and headquarters officials should weigh the

relative importance of the 10 criteria in making their collocation decisions. As a

result, USDA state agency officials in several states could not reach consensus on

where to locate their combined state offices.

The extent to which USDA used each of the individual criteria in making collocation

decisions or to which it consistently applied each criterion is unclear because USDA

did not establish procedures that required state or headquarters officials to document

the impact that each criterion had on their decisions. According to our review of the

limited available documentation for the final collocation decisions, USDA appeared

to focus primarily on one criterion—the one-time cost of the collocation. This cost

item includes the estimated cost to relocate employees, the expenses of moving

offices, and the estimated savings associated with combined office space.

To validate the reasonableness of the cost data submitted by state office officials to

support their recommendations, USDA headquarters officials asked state officials to

verify that certain cost estimates contained in their collocation plans were current.

However, USDA did not make sure that all relevant costs were included in the cost

estimates. For example, the estimates did not consider the costs of severance pay for

employees who do not relocate and the payment of relocation costs and training for

experienced replacement employees drawn from other agency offices. The omission

of these costs, as well as other adjustments that USDA made to the state cost

estimates, tend to overstate the overall savings USDA expects from its collocation

efforts.

Concerning the issue of encouraging communities to offer incentives for relocation,

we identified one, albeit dated, case in which a federal agency realized economic

benefits by encouraging such competition. In our 1990 report on facilities location

policy, we noted that the Bureau of Engraving and Printing was able to generate

widespread competition in meeting its space needs and was able to obtain

considerable savings for the government. However, USDA did not consider economic

incentives in selecting collocation sites. USDA’s position in this regard is based on a

concern that considering economic incentives could create competition among
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communities and would in effect shift the financial burden from the federal

government to local community taxpayers—that is, local taxpayers would be

subsidizing a federal activity.

Background

On March 26, 1998, USDA instructed the FSA, NRCS, and RD state agency leaders in

the states that did not have collocated state offices to develop collocation plans by

June 1,1998. These plans were to include recommendations for the location of the

collocated state office. USDA divided the states into two groups. The group whose

offices were 50 miles or less apart were projected for collocation by October 1, 2000,

and the group whose offices were more than 50 miles apart were projected for

collocation by December 2002. USDA reviewed and analyzed the data submitted by

the state offices and in some cases requested clarifying or updated information.

Using the results of this analysis, USDA’s National Food and Agriculture Council,

composed of the FSA, NRCS, and RD agency heads, recommended collocation sites

to the Secretary of Agriculture. On March 10, 2000, USDA announced the Secretary’s

decision on collocation sites for the 26 states that had not collocated during the

intervening period—18 involved moves of 50 miles or less; 8 involved moves of more

than 50 miles. As of June 1, 2000, none of the collocations of offices requiring moves

of more than 50 miles had been initiated.

Enclosure I provides information on the current office locations and the site selected

for the collocated office for the 26 states. USDA’s announcement said the collocation

of these offices was expected to save $1.3 million during the next 5 years and over

$8.9 million by 2008 and to result in better, more efficient, less costly service to USDA

customers.

Criteria for Collocation Decisions

USDA established 10 criteria to be considered in making collocation decisions. These

criteria were (1) space availability in existing state office locations, (2) the availability

of suitable space controlled by the General Services Administration (GSA) or owned

or leased by USDA; (3) a location, to the extent possible, in a central business area;

(4) the acquisition costs of new space when existing space was not adequate; (5) the

availability of transportation; (6) a location central to all agency activities, (7) the

location of other USDA, federal, and state government agencies; (8) market

conditions, lease costs, and the availability of potential office locations, (9) unique,

mission-related issues, and (10) one-time relocation costs and savings resulting from

collocation. This last criterion was listed as a separate item for which the states were

instructed to provide detailed information, including estimated office moving

expenses, estimated savings associated with combined office space, and the

estimated cost to relocate employees. The largest cost component—the cost of

relocating an employee—included such items as the sales commissions and fees on

the sale and purchase of an employee’s residence as well as the payment for moving

household effects.
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4 GAO/RCED-00-208R State Office Collocation

USDA’s procedures for making collocation decisions did not provide guidance on

how headquarters or state officials should weigh the relative importance of individual

criteria in reaching their decisions. The procedures that USDA used for making

collocation decisions consisted primarily of March 1998 guidance to state agency

officials directing them to respond to the 10 criteria. The guidance also provided a

format for reporting selected cost items, such as office moving expenses and

relocation costs. However, the guidance provided no directions on which of the

criteria were most important and should be weighed more heavily than others. For

example, USDA provided no elaboration concerning the relative importance of

mission-related criteria to the one-time relocation cost criteria. Furthermore, none of

the criteria provided guidance on the location characteristics that would help ensure

that the selected site was best suited for carrying out the mission of a collocated state

office (for example, a location in the state capital or a location near a land grant

university). As a result, USDA state officials could not reach consensus on sites for a

collocated state office for seven of the eight states involving the relocation of offices

more than 50 miles.

USDA’s Use of Criteria Is Unclear

USDA’s procedures for making collocation decisions did not require that USDA state

or headquarters officials document the extent to which each of the individual criteria

influenced their decisions. As a result, it is difficult to determine exactly how each of

the criteria was used during the decision-making process.

In making final collocation decisions, USDA headquarters officials did not document

the extent to which each of the individual 10 criteria influenced USDA’s final

decision. However, on the basis of our review of documents explaining the final

decisions, it appears USDA generally focused its decision on one of the criteria—the

one-time cost of the collocation. Concerning Texas, for example, USDA’s

explanation noted that Temple was the lowest cost alternative and stated, “relocating

the least number of employees and families makes Temple the logical alternative for

a collocated state office.” USDA’s estimates showed the cost to collocate the office

in Temple was about one-half the cost of the other site under consideration.

In all but one of the eight states involving relocations of more than 50 miles, USDA

selected the location that its estimates showed as the lowest cost alternative. In

Kansas, however, USDA selected a collocation site primarily because it was located

centrally between two alternative sites, even though it was not the lowest cost

alternative. USDA’s explanation stated that the RD, FSA, and NRCS national agency

heads believed that this location best met program performance needs. Furthermore,

USDA noted relocation costs for the chosen collocation site may possibly be lower

than estimated if employees from the other sites commute rather than relocate.

USDA Conducted a Limited Review of Data Submitted by State Offices and

Did Not Include All Relevant Relocation Costs

USDA’s March 1998 guidance required its non-collocated state offices to provide, by

June 1998, a cost analysis that included the costs for the existing separate state
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offices and estimated costs for collocated state offices in support of each state’s

recommended collocation site. In March 1999, USDA provided a schedule to the

states that contained certain cost information from the original state submissions—

lease costs, office moving costs, and employee relocation costs. USDA asked the

states to verify the accuracy of these data elements. USDA generally accepted the

verified data as presented by the states.

USDA did not require the states to submit estimates of some relevant costs. For

example, most employees who leave the agencies are entitled to severance pay, and

all are entitled to a lump sum payment of annual leave. USDA estimated that 67

percent of the affected employees would not relocate but did not estimate the cost of

severance pay or the lump sum annual leave payment for them. Agency officials told

us about increased costs, such as severance pay, lump sum annual leave payments,

and training costs, that could be associated with some or all of those who do not

relocate. However, USDA did not include estimates of these cost elements in

projecting total one-time collocation costs. By ignoring these factors, USDA has

understated the cost of collocation.

Furthermore, USDA made across-the-board adjustments to the estimated employee

relocation costs that tended to overstate its estimate of overall savings from the

collocation effort. For example, USDA estimated that 33 percent of employees would

move and that the cost of each move would be $32,000 or less, and adjusted the statesubmitted cost estimates accordingly. This adjustment reduced USDA’s estimated

one-time cost of relocating employees from $12 million to $4.3 million. However, the

adjustment did not take into account the fact that, in all likelihood, USDA would have

to incur relocation costs for relocating the experienced personnel necessary to

replace those who chose not to relocate. USDA state office officials said the state

office positions typically require employees who are experienced in administering the

agencies’ programs, and the positions generally are not filled at an entry level. As a

result, when one employee chooses not to move, the agency frequently must relocate

another person from a district or county office or from another state to fill the

position. If this is the case, then the costs for relocating personnel could increase

from the $4.3 million that USDA currently estimates up to as much as the states

originally estimated, $12 million, depending on how many employees have to be

reimbursed for relocation expenses.

Competition Can Help Agencies Reduce Costs

We found no recent examples in which communities offered financial benefits as

incentives for locating federal facilities or offices in their communities. However, in

our 1990 report on GSA’s facility location policy,3

we noted one instance in which a

federal agency—the Bureau of Engraving and Printing—was able to generate

widespread competition among communities that were interested in meeting the

agency’s space needs and was able to obtain considerable savings for the taxpayers

3

Facilities Location Policy: GSA Should Propose A More Consistent and Businesslike Approach

(GAO/GGD-90-109, Sept. 28, 1990).
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as a result. The Bureau received expressions of interest from 82 localities for an

expansion facility, 4 of which offered no-cost land and buildings. It ultimately

selected the Fort Worth, Texas, offer. The 100 acres of land and a building shell that

the city offered in exchange for locating the federal facilities in it were valued at over

$12 million. Bureau officials were confident that similar benefits could be obtained

by other agencies if they sought them because of the willingness of communities to

develop employment opportunities.

We recommended that GSA develop a location policy that would require agencies, in

meeting their needs, to maximize competition and select sites that offer the best

overall value to the government. GSA did not act on the recommendation, citing a

view that agencies are better able than GSA to determine their facility needs. In fact,

GSA subsequently revised the Federal Property Management Regulations to remove

the suggestion that agencies consider incentives from local governments when

establishing the area to be considered for locating federal offices.

USDA did not encourage competition among communities in selecting sites for

collocation. USDA was concerned about the legality of accepting certain types of

incentives that had been suggested by interested communities—such as employee

relocation expenses, job placement services, or job training funds. USDA viewed the

acceptance of other types of incentives, such as reduced or free rent, to be legal but

not sound public policy if used to select between competing communities. USDA

officials said that encouraging competition among communities would ultimately

inappropriately shift the funding burden from the federal government to local

governments. USDA’s policy is that economic incentives will not be considered in

selecting the city for collocation, but they can be accepted once the city is

determined.4

Observations

Well-founded USDA collocation decisions are important because they will

significantly affect how effectively and efficiently the Department carries out its

mission for many years to come. We did not determine the validity of the individual

collocation decisions that USDA made—this was beyond the scope of our study.

However, the process used to reach these decisions raises doubt about whether the

chosen collocation sites put USDA in the best position to meet its mission over the

long term. In particular, USDA’s process did not include developing procedures that

provided guidance on how to weigh the relative importance of cost and missionrelated factors. Furthermore, the process did not incorporate all relevant costs in

estimating costs associated with collocated sites. Finally, USDA’s process did not

allow communities to compete for state office locations by offering economic

incentives for locating offices in their communities. The problems we identified raise

doubts about the adequacy of the basis for its collocation decisions—especially for

4

For a number of years, USDA accepted free space under cooperative agreements with various local

governments, universities, and soil and water districts. In this regard, USDA reports that it currently

accepts free space in over 200 sites across the country.
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those eight decisions involving major relocations of employees and their families

(office relocations of more than 50 miles).

Agency Comments

We provided USDA with a draft of this report for its review and comment. USDA said

that the draft report was incorrect in stating that USDA established 10 criteria to be

considered in making collocation decisions. According to our review of USDA’s

guidance to the states, it is clear to us that USDA established 10 criteria. The tenth

criteria—one-time costs/savings for collocation—was listed separately from the other

nine criteria, but it was included in the guidance. USDA also expressed concern that

the draft implied that USDA downplayed or ignored regulatory or programmatic

criteria in favor of cost considerations. USDA said the documentation may not have

clearly established the weight given to the non-cost criteria but stated that the degree

of involvement by the state leaders and agency heads in the process provides some

indication that these factors were considered and evaluated. We agree that there is

some evidence that state leaders and agency heads considered non-cost criteria, but

such evidence was not adequate to show the extent to which the cost and non-cost

criteria were used to make the decisions. More importantly, however, USDA did not

establish guidance to ensure that the various factors were applied consistently in

making the collocation decisions. USDA also expressed concern that the Bureau of

Engraving and Printing example in the draft was different from the situation facing

USDA in that the example related to an expansion of a production facility rather than

the relocation of a professional and managerial facility. Our intent was not to imply

that the situation was identical but merely to provide an example of a federal

agency’s successful use of competition. USDA also provided technical clarifications,

which we incorporated as appropriate. USDA’s comments and our responses are

presented in detail in enclosure II.

Scope and Methodology

We reviewed relevant documents and interviewed cognizant USDA headquarters

officials to obtain information on USDA’s collocation site selection process. To

obtain perspective on the issues and to better understand the state submissions, we

visited the FSA, RD, and NRCS state offices in Illinois, Kansas, and Texas. To obtain

information about policies and practices for locating federal facilities, we interviewed
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GSA headquarters officials. We performed our work from March through June 2000

in accordance with generally accepted government auditing standards.

----

Please call me at (202) 512-5138 if you or your staff have any questions about this

report. Key contributors to this report were Ronald E. Maxon, Jr.; Robert R. Seely,

Jr.; and Dale A. Wolden.

Robert E. Robertson

Associate Director, Food

and Agriculture Issues

Enclosures - 2
Enclosure I

9 GAO/RCED-00-208R State Office Collocation

USDA State Office Collocation Sites

State Current locations USDA-selected collocation site

Alabamaa Farm Service Agency

(FSA)—Montgomery

Natural Resources

Conservation Service

(NRCS)—Auburn

Rural Development (RD)—

Montgomery

Montgomery

AlaskabFSA—Palmer

NRCS—Anchorage

RD—Palmer

Palmer

ArizonabFSA—Phoenix

NRCS—Phoenix

RD—Phoenix

Phoenix

ConnecticutbFSA—Windsor

NRCS—Storrs

Storrs

DelawarebFSA—Dover

NRCS—Dover

RD—Camden

Dover

HawaiiaFSA—Honolulu

NRCS—Honolulu

RD—Hilo

Honolulu

IllinoisaFSA—Springfield

NRCS—Champaign

RD—Champaign

Champaign

IowabFSA—Des Moines

NRCS—Des Moines

RD—Des Moines

Des Moines

KansasaFSA—Manhattan

NRCS—Salina

RD—Topeka

Manhattan

Marylandb FSA—Columbia

NRCS—Annapolis

Annapolis

MississippibFSA—Jackson

NRCS—Jackson

RD—Jackson

Jackson

Montanab FSA—Bozeman

NRCS—Bozeman

RD—Bozeman

Bozeman

NebraskabFSA—Lincoln

NRCS—Lincoln

RD—Lincoln

Lincoln

Nevadab FSA—Reno

NRCS—Reno

RD—Carson City

Reno

New HampshirebFSA—Concord

NRCS—Durham

Durham

New JerseybFSA—Bordentown

NRCS—Somerset

RD—Mt. Holly

Trenton

North DakotaaFSA—Fargo

NRCS—Bismarck

RD—Bismarck

Bismarck

OregonbFSA—Tualatin

NRCS—Portland

RD—Portland

Portland

Puerto RicobFSA—Santurce Hato Rey
Enclosure I

10 GAO/RCED-00-208R State Office Collocation

NRCS—Hato Rey

RD—Hato Rey

South CarolinabFSA—Columbia

NRCS—Columbia

RD—Columbia

Columbia

Tennesseeb FSA—Nashville

NRCS—Nashville

RD—Nashville

Nashville

TexasaFSA—College Station

NRCS—Temple

RD—Temple

Temple

VermontbFSA—Burlington

NRCS—Winooski

Burlington

WashingtonaFSA—Spokane

NRCS—Spokane

RD—Olympia

Spokane

Wisconsina FSA—Madison

NRCS—Madison

RD—Stevens Point

Madison

WyomingbFSA—Casper

NRCS—Casper

RD—Casper

Casper

a

Collocation of sites more than 50 miles apart.

b Collocation of sites located 50 miles or less apart, including at one site within a metropolitan area from multiple

locations within the area.

Source: USDA.
Enclosure II

11 GAO/RCED-00-208R State Office Collocation

Comments From the U.S. Department of Agriculture

Note: GAO comments

supplementing those in

the report text appear

at the end of this enclosure.
Enclosure II

12 GAO/RCED-00-208R State Office Collocation
Enclosure II

13 GAO/RCED-00-208R State Office Collocation
Enclosure II

14 GAO/RCED-00-208R State Office Collocation
Enclosure II

15 GAO/RCED-00-208R State Office Collocation

GAO Comments

1. We deleted reference to USDA’s relocation reimbursement policy, and we revised our

discussion to reflect that USDA’s guidance separated the non-collocated states into two

groups, with those 50 miles or less apart scheduled for earlier collocation action than

those more than 50 miles apart.

2. We revised the report to clarify that USDA’s legal concerns related to the acceptance

of certain types of incentives and not to the issue of competition between communities.

3. We disagree that the draft was incorrect in stating that USDA established 10 criteria.

On the basis of our review of USDA’s guidance to the states, it is clear to us that USDA

established 10 criteria. The tenth criteria—one-time costs and savings for collocation—

was listed separately from the other nine criteria, but it was included in the guidance.

4. We revised our discussion to reflect that these costs could be associated with some or

all of those who do not relocate.

5. We revised the report to reflect that the costs could increase up to as much as the

states originally estimated, depending on how many employees have to be reimbursed

for relocation expenses.

6. We revised our report to make it clear that our intent was not to imply that the

situation faced by USDA was identical to the example, but rather to simply provide an

example of a federal agency that had successfully used competition.

7. We revised our report to include the information that the General Services

Administration revised the Federal Property Management Regulations to remove

suggestions that agencies consider incentives from local governments when establishing

the area to be considered for locating federal offices.

8. We disagree that our report places a negative connotation on USDA’s level of concern

with cost factors. The report simply notes that USDA focused on costs in making

collocation decisions.

9. We revised our report to note our agreement that there is some evidence that state

leaders and agency heads considered non-cost criteria. However, such evidence was not

adequate to show the extent to which the cost and non-cost criteria were used to make

the decisions. More importantly, USDA did not establish guidance to ensure the various

factors were applied consistently in making the collocation decisions.

10. We did not change the location of the statement in the report because we believe it is

appropriately placed.

(150185)