United States Government
Department of Energy Memorandum
 
       DATE:  April 1, 1997
  
   REPLY TO
   ATTN  OF:  IG-1
 
 
    SUBJECT:  INFORMATION:   "Audit of the Management of the Department
                              of Energy's Leased Administrative Facilities"
               
         TO:  The Secretary
     
 BACKGROUND:
 
 
 The Department is accountable for a large inventory of real
 property made up of owned, leased, and government-controlled
 property.  The Office of Human Resources and Administration and
 the Office of Field Management are responsible for the
 Department's real property leasing program.  These two
 offices, in conjunction with the Operations Offices in the
 field, procure space or authorize the procurement of space by
 contractors.  Departmental records from Fiscal Year 1996 showed
 that approximately $136 million was spent on leased facilities.
 Of this amount, $60 million was for leases in the Washington,
 DC metropolitan area and $76 million for leased facilities in
 the field.  The policies governing leasing require that all
 real property holdings be managed efficiently and economically.
 The objective of the audit was to determine if the Department
 was using good business practices to manage its leased space.
 
 
 DISCUSSION:
 
 The Department was not applying good business practices in its
 management of leased administrative facilities.  Specifically,
 the Department leased more office space than it used and it
 could not determine its future leased space needs.  These
 problems occurred because the Department did not have an
 effective management system that included comprehensive site
 development plans and an accurate Departmentwide database.  For
 example, leased space was identified during the audit that was
 not previously reported by real estate specialists or included
 in the Department's database.  In addition, the offices
 responsible for leasing did not coordinate their leasing
 efforts with each other.  We reviewed approximately 25 percent
 of the total square footage leased and identified vacant office
 space costing over $5.6 million annually.  We anticipate
 similar findings at the facilities not included in the review.
                  
 The Office of Field Management provided consolidated
 Departmental comments.  In its comments, management questioned
 the finding which served as the foundation for the audit
 conclusions.  Management agreed with the recommendations and
 stated that it had initiated corrective action.  However, we
 concluded that the majority of proposed corrective actions do
 not meet the intent of the recommendations.
 
                                  (Signed)
 
                              John C. Layton
                              Inspector General
                              
 
Attachment
 
 
cc:  Deputy Secretary
     Under Secretary
     Associate Deputy Secretary for Field Management
     Assistant Secretary for Human Resources and Administration
 
 
                                
                                
                    U.S. DEPARTMENT OF ENERGY
                   OFFICE OF INSPECTOR GENERAL
                                
                                
                                
                                
                                
      AUDIT OF THE MANAGEMENT OF THE DEPARTMENT OF ENERGY'S
                LEASED ADMINISTRATIVE FACILITIES
                                
                                
                                
                                
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                        gopher.hr.doe.gov
                                
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                       http://www.hr.doe.gov/ig
 
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         Customer Response Form attached to the report.
                                
              This report can be obtained from the
                    U.S. Department of Energy
         Office of Scientific and Technical Information
                           P.O. Box 62
                   Oak Ridge, Tennessee  37831
 
                                
                                
                                
                                
                                
Report Number:  DOE/IG-0402          Capital Regional Audit Office
Date of Issue:  April 1, 1997        Germantown, Maryland  20874
                                
      
      
      AUDIT OF THE MANAGEMENT OF THE DEPARTMENT OF ENERGY'S
                LEASED ADMINISTRATIVE FACILITIES
 
                                
                        TABLE OF CONTENTS
 
 
                                                      Page
 
SUMMARY ..........................................     1
 
PART I   -  APPROACH AND OVERVIEW ................     2
 
            Introduction ........................      2
 
            Scope and Methodology ................     2
 
            Background ...........................     3
 
PART II   - FINDING AND RECOMMENDATIONS ............   5
 
            Management of the Department of Energy's
            Leased Administrative Facilities.........  5
 
PART III - MANAGEMENT AND AUDITOR COMMENTS..........  12
 
PART IV -  APPENDICES ..............................  16
 
           A.  Related Reports Issued by the Department of
               Energy's Office of Inspector General.. 16
 
           B.  Office of Human Resources and Administration 
               Chart ................................ 17
 
 
 
 
                   U.S. DEPARTMENT OF ENERGY
                   OFFICE OF INSPECTOR GENERAL
                    OFFICE OF AUDIT SERVICES
                                
      AUDIT OF THE MANAGEMENT OF THE DEPARTMENT OF ENERGY'S
                LEASED ADMINISTRATIVE FACILITIES
                                
 
Audit Report Number: DOE/IG-0402
 
                             SUMMARY
                                
     Department of Energy (Department) records from Fiscal Year
1996 showed that approximately $136 million was spent on leased
facilities.  These facilities were leased through contracts with
the Department, the Department's management and operating
contractors, and the General Services Administration.  The
policies governing leasing require that all real property
holdings be managed efficiently and economically.  The audit was
performed to determine if the Department was managing its leased
space in accordance with good business practices.
 
     The audit disclosed that the Department leased more office
space than it used and that it could not determine future space
needs.  These problems occurred because the Department did not
have an effective management system that included comprehensive
site development plans and an accurate Departmentwide database
for managing its leased facilities.  For example, leased space
was identified during the audit that was not previously reported
by real estate specialists or included in the Department's
database.  In addition, the offices responsible for leasing did
not coordinate their leasing efforts with each other.  We
reviewed approximately 25 percent of the total square footage
leased and identified vacant office space costing over $5.6
million annually.  We anticipate similar findings at Departmental
facilities not included in our review.
 
     We recommended that the Associate Deputy Secretary for Field
Management, in conjunction with the Assistant Secretary for Human
Resources and Administration, and the Department's Operations
Offices limit leased space to the minimum amount necessary to
perform the Department's mission by developing comprehensive site
development plans for all geographic locations.  We also
recommended that the Department maintain an accurate
Departmentwide database that includes all leased property and
that real estate specialists coordinate all leasing efforts with
each of the Departmental offices that maintain space in the
proposed area.
 
 
 
 
 
_____(Signed)________________
Office of Inspector General
                             
                             
                             
                             
                             PART I
                                
                      APPROACH AND OVERVIEW
 
INTRODUCTION
 
     Departmental records from Fiscal Year 1996 showed that
approximately $136 million was spent on leased facilities.  Of
this amount, $60 million was for leases in the Washington, DC
metropolitan area and $76 million for leased facilities in the
field.  These facilities are leased through contracts with the
Department, the Department's management and operating
contractors, and the General Services Administration (GSA).  The
policies governing leasing require that all real property
holdings be managed efficiently and economically.  The objective
of the audit was to determine if the Department was using good
business practices to manage its leased space.
 
SCOPE AND METHODOLOGY
 
     The audit was performed from February 1 through August 5,
1996, at the Albuquerque, Nevada, Richland, and Oak Ridge
Operations Offices and Headquarters.  The sites visited were
selected judgmentally because they represented approximately 33
percent of the estimated $136 million in annual lease costs and
25 percent of the total square footage leased.  Additional
information was solicited from certified real estate specialists
in the Department's operations and field offices.  A data request
to identify total leased space was sent to real estate
specialists responsible for 28 of the Department's sites.  Data
was also obtained from personnel in the Offices of Field
Management and Human Resources and Administration.
 
     The estimated value of the leases may be understated because
leased space may exist that was not identified or quantified
during our review, such as space controlled by subcontractors or
support service contractors.  Also, during the review we
identified leased space that was not on the Department's property
records.  This space had not been identified by the management
and operating contractors or the Department.
 
     The audit was performed in accordance with generally
accepted Government auditing standards for performance audits.
It included tests of internal controls and compliance with laws
and regulations necessary to satisfy the audit objective.  We
assessed the significant internal controls to determine whether
the Department's Headquarters and field organizations had
exercised adequate management control over its leasing
operations.  Because our review was limited, it would not
necessarily have disclosed all internal control deficiencies that
may have existed.
 
     Although we did not fully examine the reliability of the
various databases maintained to monitor leased property, we did
determine that computer-processed data was not complete or
accurate.  Therefore, we did not rely extensively on computer-
processed data to accomplish our audit objective.  The report
includes a recommendation for actions to remedy the problems
disclosed regarding pertinent databases.
 
     A review was made of applicable laws and Departmental
orders, related Inspector General and General Accounting Office
reports, implementing procedures and practices, and the active
lease files at each site visited.  We also reviewed the
initiation and termination procedures for leases, the tracking
systems used by each site and Headquarters, and the site
development plans maintained at the Operations Offices.  To
identify leased space either completely or partially vacant, we
physically observed 90 leased facilities (conducted walk-
throughs) at the 5 different Departmental locations.  In most
cases, we were accompanied by site representatives.  The walk-
throughs focused on both Department and contractor leased space
and verified the annual lease cost, square footage, personnel
level, and the amount of unused office space.  We calculated the
utilization of the office facilities at each location using
square footage provided by the site or by assigning an average
square footage to each vacant office identified.  A shortcoming
in planning for leased office space in trailers was previously
identified in the "Audit of Leased Facilities at Los Alamos
National Laboratory" (WR-B-95-02) dated January 1995.  Further,
the "Audit of the Department of Energy Program Offices' Use of
Management and Operating Contractor Employees," (IG-0392) dated
July 1996, discussed the use of laboratory personnel in
Headquarters.  Therefore, we did not address the need for the
personnel who occupied the leased space.  A listing of related
audit reports issued by the Inspector General's office can be
found in Appendix A.
 
BACKGROUND
 
     The Department is accountable for a large inventory of real
property that is made up of owned, leased, and government-
controlled property.  The Office of Human Resources and
Administration (HR) and the Office of Field Management (FM) are
responsible for the Department's leasing program.  These two
offices, in conjunction with the Operations Offices and field
offices, may procure space or authorize the procurement of space
by contractors.  HR has management responsibilities for the
National Capital Area, while FM's responsibilities cover the
field facilities.  Most Operations Offices retain a real estate
specialist (a Departmental employee certified through FM) who is
responsible for that office's real property including leases.
 
     Over the last 4 years, the Department reported a decrease in
its total Federal and contractor personnel.  However, during this
same time period, the total square feet of leased space
increased.  This is illustrated in the following chart:
                               
             TOTAL LEASED SPACE VS. TOTAL EMPLOYEES
                            1992-1995
 
             (The chart is not available the internet) 
    
    As the chart indicates, the level of staffing decreased from
about 168,000 in 1992 to about 140,000 in 1995, a decrease of
16.7 percent, while the amount of leased space increased from
about 5.5 million square feet in 1992 to over 7.3 million square
feet in 1995, an increase of 32.7 percent.  We did note, however,
that the amount of leased space decreased slightly in 1994 and
1995.
 
     To control its real property, the Department and its sites
are required to develop and maintain an approved plan for
managing real property.  This plan aids in the acquisition,
development, utilization, and disposal of facilities and land
owned, leased, or controlled by the Department.  It identifies
current and future site missions, determines and quantifies
facility requirements to accomplish the missions of the sites,
and formulates alternatives to satisfy the facility requirements.
The plan should identify owned or leased land and buildings,
define and quantify long-range program mission projections in
terms of numbers of personnel, and determine facility and land
requirements that will support the program mission projections
and resource requirements.  The plan also should compare facility
requirements with the identified assets of the site to determine
need and excess.
 
     The Office of Human Resources and Administration issued an
implementation plan that discussed facilities it leased for the
Department's Headquarters program offices.  This plan outlined
the future plans for the facilities including proposals to
terminate several leases.  The plan was developed as part of the
Secretary's Strategic Alignment Initiative.
 
     To track its real property, the Department developed the
Facility Information Management System (FIMS).  The Department's
"corporate" database was developed to provide users with access
to up-to-date real property information, assist management
decisions regarding real property, and automate the preparation
of the property reports for the GSA and the Congress.  To ensure
that field and contractor organizations participated in
implementing the Department's "corporate" database, policy
officials included specific requirements for its maintenance,
use, and reconciliation of the database in their revised
Departmental orders.
 
     This report contains a finding that addresses underutilized
office space that should be considered by management in preparing
the yearend assurance memorandum on management controls.  Part II
of this report provides details on our finding and
recommendations.  Part III includes detailed management and
auditor comments.
                                
                                
                             PART II
                                
                   FINDING AND RECOMMENDATIONS
                                
 Management of the Department of Energy's Leased Administrative
                           Facilities
 
FINDING
 
     The Department of Energy is required to manage its leased
property efficiently and economically including the planning,
acquiring, operating, maintaining, and disposing of its physical
assets as valuable national resources.  In addition, the
Department is required to limit leasing of office space to the
minimum amount necessary to perform its mission.  However, the
Department was leasing more space than necessary and could not
determine how much space would be needed in the future.  These
conditions occurred because the Department did not have an
effective management system that included comprehensive site
development plans and an accurate Departmentwide database.  In
addition, the offices responsible for leasing did not coordinate
their leasing efforts.  Our review of approximately 25 percent of
the Department's leased office space identified over 249,000
square feet of vacant space costing the Department about $5.6
million annually.
 
RECOMMENDATIONS
 
     We recommend that the Associate Deputy Secretary for Field
Management, in conjunction with the Assistant Secretary for Human
Resources and Administration, and the Department's Operations
Offices:
 
     1. Limit leased space to the minimum amount necessary to
        perform the Department's mission by developing compre-
        hensive site development plans for all geographic
        locations, including Headquarters, that would:
 
             o  identify all space leased at that location whether 
                by Headquarters or the field;
             
             o  justify the need for current lease holdings;
             
             o  identify future needs for leased space; and
             
             o  terminate leases that are no longer needed.
 
     2. Maintain an accurate Departmentwide database for all
        leased property, including property leased from the 
        General Services Administration, that contains, at a
        minimum, the lease address, annual cost, square footage, 
        lease term, occupancy level, and capacity.
 
     3. Require real estate specialists to coordinate all new
        leasing activity with each of the Departmental offices 
        that maintain space in the proposed leasing area.
 
MANAGEMENT REACTION
 
     Management expressed disagreement with many of the audit
conclusions.  Management, however, generally agreed with the
recommendations and stated that it had initiated corrective
action.  Our analysis of the proposed corrective actions
indicated that the majority of the actions did not meet the
intent of the recommendations.  Detailed management comments and
auditor response can be found in Part III.
 
 
                       DETAILS OF FINDING
                                
                                
PROPERTY MANAGEMENT REQUIREMENTS
 
     The Department of Energy is required to manage its leased
property efficiently and economically.  This includes planning,
acquiring, operating, maintaining, and disposing of its physical
assets as valuable national resources.  Specifically, the
Department and its contractors are required to establish a
management system based on effective management practices.  Such
management practices include maintaining a Departmentwide
database containing a complete and current inventory of the
Department's physical assets.
 
     The Code of Federal Regulations requires the Department to
continually study and survey space occupied to ensure efficient
and economical utilization of space.  Departmental orders require
it to limit its leased space to the minimum amount necessary to
perform its mission.  To ensure the efficient and economic
management of the Department's leases, orders also require that
all Departmental sites develop and maintain an approved site
development plan for managing real property.  This plan aids in
the acquisition, development, utilization, and disposal of
facilities and land owned, leased, or controlled by the
Department.  It identifies current and future site missions,
determines and quantifies facility requirements to accomplish the
missions of the sites, and formulates alternatives to satisfy the
facility requirements.  In addition, the plan should identify
owned or leased land and buildings, define and quantify long-
range program mission projections in terms of numbers of
personnel, and determine facility and land requirements that will
support the program mission projections and resource
requirements.  The plan also should compare facility requirements
with the identified assets of the site to determine need and
excess.
 
     GSA established and issued standards to determine the
appropriate amount of office space per employee.  The Department
is required to use these standards along with projections of
personnel numbers to determine facility requirements and minimize
leasing needs.  These standards set the average office space at
125 square feet per person plus 22 percent for office support
area space (153 square feet total).  Typical support areas
include reception areas, workstations, conference rooms, storage
areas, processing areas, libraries, and file areas.
 
DEPARTMENTAL LEASED SPACE
 
     The Department leased more office space than it used and it
could not determine its future space needs.  Walk-throughs of 90
leased facilities located in Headquarters, Albuquerque, Oak
Ridge, Richland, and Nevada identified large amounts of vacant
office space.  Also, most Departmental field elements had not
developed comprehensive plans that included current and future
leased space needs.
 
Utilization of Space
 
     The Department leased more space than it used at
Headquarters, Albuquerque, Oak Ridge, Richland, and Nevada.  At
Headquarters, approximately 11 percent of the space leased by HR
was vacant.  In addition, more than 24 percent of the space
leased by field sites in the Washington, DC area was vacant.
 
     The Office of Human Resources and Administration leased 11
office facilities through GSA for the Headquarters program
offices in the Washington, DC area.  The annual lease cost for
these facilities was over $54 million.  Although HR had a plan in
place to close many of the existing facilities and improve the
utilization in the others, vacant office space existed in almost
all of its leased facilities.  For example, two facilities, the
main Germantown facility and the Century Boulevard facility, had
over 28,000 and 11,800 square feet vacant, respectively.  A walk-
through was not conducted at the Forrestal facility.
 
     The Department's field sites also leased a significant
amount of office space in the Washington, DC area for their
contractor personnel.  These leases, with an annual cost to the
Department of over $6 million, augmented the office space leased
for the Department by HR.  Overall, Departmental records showed
that 8 field sites maintained 19 leased facilities in the
Washington, DC area.  Walk-throughs of the 19 facilities showed
that many were not fully utilized and contained excessive
vacancies.  For example, one field site leased a 1,480 square
foot suite costing about $26,380 a year that was occupied by only
one person.  Another site leased a 4,560 square foot facility at
a cost of about $82,140 a year that was occupied by only 4
people.  A third site leased a 720 square foot suite which had
not been occupied from the date of acquisition to the date of our
walk-through.  Followup revealed that the space was not occupied
at any time during the 5-month lease period.
 
     Walk-throughs of 61 leased facilities at the Albuquerque,
Richland, Oak Ridge, and Nevada sites also showed large
vacancies.  For example, one site leased over 92,000 square feet
of office space of which about 21,400 square feet was vacant.
Another site leased over 3,600 square feet costing about $54,800
annually that had over 1,100 vacant square feet.  Further, at
another site, the Department leased four separate office spaces
within a building; two of these spaces were entirely vacant,
while the other two were partially vacant.
 
 
     The following chart summarizes the information gathered
during our walk-throughs.  It  shows the number of leases, annual
lease costs, number of facilities observed, amount of vacant
square feet, and the average vacancy rate.  Nevada was excluded
from the chart because not all of the office buildings were
observed during the site visit.
 
                                                          
                                       # OF    VACANT  AVERAGE
        SITE        # OF    ANNUAL   FACILITIE SQUARE  VACANCY
                   LEASES LEASE COST     S     FOOTAGE  RATE
                                     OBSERVED
   Field Space                                               
   in the            19   $6,115,039   19      51,100  24.4%
   Washington DC                                 
   Area
                                                             
   Headquarters                                              
   Program Space     11  $54,119,000   10      71,220  11.2%
                          
                                                             
   Albuquerque       62  $11,855,948   13       9,444   4.1%
                          
                                                             
   Oak Ridge         41  $8,894,920    25      43,844  14.1%
                           
                                                             
   Richland          34  $13,072,293   19      73,897  12.0%
                         
     The facilities observed were only those buildings actually
located in and around the particular site rather than all office
space under the Operations Office cognizance.  For example, space
leased by the Albuquerque Operations Office, but located in Los
Alamos, New Mexico, was not included in the observation.
 
Future Needs for Space
 
     While the Department requires sites to identify future
needs, few sites maintained formal goals and objectives relating
to facility planning.  Most sites did not have an outline showing
which facilities would be kept and which would be terminated this
year or over the next 5 years.  Without this information,
managers could not effectively minimize the amount of space
currently leased or plan for future needs.  Situations existed in
the field that may have been avoided had site development plans
been maintained.  For example, one site had entered into three
long-term leases even though it could not fill the buildings and
did not have any future plans to fill the buildings.  For the
last several years, another site had placed Departmental
employees in contractor leased space, which is a violation of
Departmental orders.  Still another site moved employees from
building to building without informing the real estate
specialists who were responsible for determining space
requirements.  In our judgment, site development plans would have
enabled managers to better plan for future space requirements.
 
REASONS FOR CURRENT MANAGEMENT PROBLEMS
 
     The Department was not effectively managing its leased space
because it did not have an effective management system that
included comprehensive site development plans and an accurate
Departmentwide database.  In addition, the offices responsible
for leasing did not coordinate their leasing efforts.
 
Comprehensive Site Development Planning
 
     The majority of the Department's field sites did not
maintain site development plans that defined and quantified long-
range program mission projections and identified the numbers of
personnel needing to be housed during that time period.  Such
plans should compare facility requirements with the existing
assets of the site to determine excesses and deficiencies in
corresponding classes of facilities.  Of the 28 sites surveyed,
only 6 had submitted a current site development plan and these
plans generally did not include data on leasing needs.  Only
Savannah River's plan considered the future of its leased
facilities.
 
     A detailed plan for downsizing the number of buildings held
by the Department (through GSA) in the Washington, DC area was
published by the Assistant Secretary for Human Resources and
Administration.  However, it was not comprehensive in that it
excluded facilities leased by the field in the same area.
Nineteen facilities are leased in the metropolitan area by
various field offices.  The inclusion of these facilities in a
more comprehensive Departmentwide space requirements plan for the
Washington, DC area could, in our judgment, (1) allow for the
consolidation of leased facilities in the Washington area and (2)
minimize the amount of vacant leased space through better
coordination of available facilities.  Given the cost of leasing
administrative space in the Washington, DC area, we concluded
that the cost savings to the Department of such action would be
significant.
 
Tracking Space Leased by the Department
 
     The Department did not maintain an accurate Departmentwide
real property database.  Although the Department's Headquarters
and field sites had spent an estimated $1.8 million on the
development and implementation of the Facility Information
Management System (FIMS), none of the sites visited were using
FIMS as their current real property information system.
 
     In March 1996, officials from the Nevada Operations Office
indicated that they planned to implement and use FIMS in the near
future.  In May, the Nevada Operations Office issued a memorandum
stating that they were planning to have FIMS operating and its
data validated by June 30, 1996.1  In August 1996, a real estate
official informed us that they still had not begun using FIMS.
Richland officials informed us that they had no plans to use FIMS
as their primary real property information system because they
believed the implementation and maintenance of FIMS provided
little or no benefit to their operation.  While the Albuquerque
Operations Office had personnel assigned to the maintenance of
FIMS, the system was not maintained as its current real property
information system.  An Oak Ridge official informed us that they
did not use FIMS to manage their real property holdings.
Instead, Oak Ridge assigned responsibility for maintaining the
information in FIMS to their management and operating contractor.
But, contractor officials had only entered the data for the cost
of their real property holdings and not the data for most of the
more than 200 other fields in FIMS.
 
     While we did not visit other Departmental sites, we
requested information from real estate specialists on their
current leased facilities and on their use of FIMS.  The majority
of Departmental real estate specialists responded that FIMS was
their primary source for real property information; however,
their assertions were not supported by the lease information they
provided.  In most cases, the lease information disagreed
significantly with that tracked in FIMS.  Further, after pointing
out these inaccuracies, we found that several field organizations
took little or no action to update FIMS lease information to
ensure that FIMS data agreed with their actual leased facilities.
 
     Despite the fact that most contractors also maintained site
specific real property databases, real estate specialists were
not using or relying on these systems to identify and track
leased space.  For example, using leasing information in
Departmental and contractor databases, we identified additional
leases at each of the sites that were not previously reported by
the real estate specialists.  Two leases were identified using
accounts payable records and several others were discovered by
comparing the Department's system list to the site's list of
leased space.  Others were identified during our walk-throughs of
the leased facilities.  Without the ability to accurately track
active leases, the Department cannot monitor and regulate its
current space or plan for its future needs.
 
Leasing Responsibilities
 
     Responsibility for leasing within the Department was
decentralized.  No one office had responsibility for all leases
at a geographic location.  Two offices in Headquarters and many
offices in the field had the authority to lease space for the
Department.  HR was responsible only for space leased in the
Washington, DC area for the Headquarters program offices, while
FM was responsible for the space leased by the field including
some space in the metropolitan area.  Each of the Operations
Offices also had at least one real estate specialist who could
acquire space or authorize the procurement of space by
contractors.  No single group existed to monitor the total space
leased by the Department and communication or coordination
between the numerous responsible offices was very limited.
 
IMPACT OF CURRENT LEASING PRACTICES
 
     In Fiscal Year 1996, the Department paid at least $136
million for leased space.  Although total personnel employed by
the Department and its contractors decreased in the last 4 years,
the total square feet of leased space increased.  We reviewed
approximately 25 percent of the square footage leased and
identified vacant office space costing over $5.6 million
annually.  We anticipate similar findings at those Departmental
facilities which were not included in the review.
 
     The cost to the Department for underutilization of space was
not included in our savings calculation, but if leased space is
fully utilized, significant additional savings could result. The
Department's overall utilization rate exceeded the GSA standard
of 153 square feet per person by about 49 percent.  For example,
one facility in the Washington, DC area had a utilization rate of
297 square feet per person and a per square foot cost of $50.48.
The annual cost of exceeding the GSA standard in this facility
was over $787,000 or about $7,200 per person.  In some
Departmental facilities, the standard was exceeded by as much as
300 percent.
 
     The Department's Headquarters and field sites had also paid
an estimated $1.8 million to develop and implement a
Departmentwide database, while at the same time the contractors
were maintaining their own duplicative databases.  Since none of
the systems seemed to track the property accurately, the expense
of maintaining duplicative systems appears unnecessary.
 
     The Department is in a period of significant downsizing with
personnel reductions anticipated throughout the complex.  In this
environment, it is important that the Department apply good
business practices in its management of leased administrative
space with the goal of reducing leased facilities expense to the
minimum practical level.
                            PART III
                                
                 MANAGEMENT AND AUDITOR COMMENTS
                                
     In responding to the initial draft report, the Office of the
Associate Deputy Secretary for Field Management summarized and
consolidated comments received from the Assistant Secretary for
Human Resources and Administration and the Departmental field
sites.  A summary of management's comments and our response
follows.
 
GENERAL COMMENTS
 
     Management disagreed with the finding, and stated that
leasing is a dynamic process.  Further, much of the vacant space
identified was in transition and the sites reviewed were not
representative.  Management also advised that many of the field
sites have finely tuned leasing programs in place.  Overall,
management generally agreed with the recommendations and stated
that it had initiated corrective action.  However, the majority
of initiated corrective actions do not meet the intent of the
recommendations.  Formal action plans, with target dates that
addressed the recommendations, were not prepared.
 
     Management Comments.  The Office of Human Resources and
Administration provided their schedule to reduce space into the
year 2000 based on the Department's Strategic Alignment
Initiative.  A summary table that shows the projected space
utilized per person will decline to 172 square feet by the year
2000 is in Appendix B.
 
     Auditor Comments.  While a decrease in office space is
planned, the large amount of vacant space throughout the
Washington, DC area and the possibility of further reductions in
staffing levels shows a continuing need for comprehensive site
development plans.  In addition, the projected utilization rate
of 172 square feet per person is well above the GSA standard of
153 square feet.  We believe management should strive to achieve
the GSA standard.
 
     Management Comments.  Comments from eight Operations
Offices, two field offices, and one area office were summarized
by the Office of Field Management.  A number of field sites did
not agree with the finding which served as the foundation for the
conclusions reached.  They also objected to the complex-wide
assumptions made based on a visit to only five sites and stated
that there were instances where the report identified:
 
     o vacant space that appeared to be corporate space for which
       the Department had no responsibility;
     
     o estimates of vacant square footage that differed from what
       the field had on record or where the field believed there 
       was no vacant space; and
     
     o instances where space was in transition towards termination
       or subsequent occupancy.
 
     Management expressed concern that the report did not reflect 
the true nature of the space acquisition, utilization, or termination
process and the actual state of vacant space.  The field
activities also plan to cancel some existing leases, let other
leases expire, and consider transition needs in making future
decisions.  Based on the available records, some sites expressed
the opinion that they were not aware of any vacant space.
 
     Auditor Comments.  We recognize that our review was limited
to five sites and that vacant square footage was identified at a
point-in-time.  However, the space discussed in the report
represented about 25 percent of square footage leased by the
Department.  Furthermore, the amounts of vacant space were not
based on estimates, but were based on walk-throughs of the space
using floor plans.  In addition, onsite representatives guided us
through the facilities in most cases.  We fully considered any
transition, termination, or subsequent plans for facilities at
the sites visited by reviewing the lease agreements and any
available plans that set out future needs for the next 5 years.
Specific comments regarding management's concerns follow:
 
     o The leases that the Department stated were corporate 
       leases were not corporate leases at the time the Office 
       of Inspector General auditors conducted the walk-throughs 
       in June 1996.  These leases did not become corporate 
       leases until October 1996.  Nevertheless, since the 
       Department pays its share of a corporate lease through 
       an overhead account, it should be aware of any
       vacant space within a given facility.
     
     o The audit report identified many instances related to 
       the inaccuracy of the Departmental records.  Therefore, 
       we are not surprised that the field's records reflecting 
       vacant square footage did not agree with the information 
       gathered during actual observation of the facilities.  
       However, since our walk-throughs were conducted at a 
       point-in-time, improvements may have been made in back-
       filling or terminating the space.  Further, the fact
       that the field's records show no vacancies does not refute 
       the evidence obtained during actual walk-throughs of the 
       facilities.
     
     o Terminating leases that contain excess space is responsive
       to our recommendations and the reevaluation of need is
       beneficial.  However, since plans were not provided that 
       would have identified future terminations of space, the 
       positive steps the Department has taken subsequent to this 
       audit could not be previously recognized.
     
     The fact that subsequent to our walk-throughs, management
terminated leased space and is reevaluating the need for other
space clearly indicates that the Department had more space than
it needed and that vacant space did exist.
 
     Management Comments.  Management disagreed with our use of
153 square feet per person as a standard for office space
utilization.  They stated that the 153 square feet is not a goal
but a threshold below which GSA will automatically approve an
agency's request for space.  Above that threshold, GSA will
examine the request for space in more detail.  Ultimately, it is
the requesting agency that establishes its requirement for space.
Management added that the GSA threshold is only measured on the
office space portion of the total space, and GSA excludes all
storage and special types of space from the utilization
calculation.
 
     Auditor Comments.  While the report does not state that the
153 square feet per person (125 square feet + 22% support space)
level is a goal, GSA temporary regulation D-76 and the DOE
Leasing Handbook label it as such in its discussion of the
reduction from the original 135 square feet of primary office
space "goal."  The wording used in the report is consistent with
wording used by field personnel and GSA.  It is our contention
that while the 153 square feet may only be a threshold, it is a
meaningful standard to measure DOE's average usage.  In addition,
when we calculated utilization rates, we excluded, as much as
possible, the square footage allocated to storage facilities,
laboratories, computer rooms, etc.  All sites were asked to
differentiate space usage in our written requests and during walk-
throughs of the facilities.
 
RECOMMENDATIONS
 
     We recommend that the Associate Deputy Secretary for Field
Management, in conjunction with the Assistant Secretary for Human
Resources and Administration, and the Operations Offices:
 
     1.   Limit leased space to the minimum amount necessary to
perform the Department's mission by developing comprehensive site 
development plans for all geographic locations, including Headquarters, 
that would:
 
          o identify all space leased at that location whether by
            Headquarters or the field;
     
          o justify the need for current lease holdings;
     
          o identify future needs for leased space; and
     
          o terminate leases that are no longer needed.
 
     Management Comments.  Management agreed and stated that
there are already in place, throughout the field, performance
objectives, criteria, and measures in the comprehensive planning
and leasing area that are a first step to satisfy this
recommendation.  DOE Order 430.1, Life Cycle Asset Management,
provides the basis for these performance measures and seeks to
promote efficiency through performance, not process.  They stated
that they will be reviewing these performance measures and
strengthening them where appropriate to achieve desired results.
Management emphasized that leasing is a highly complex, dynamic
process that is bound in contract law, and many factors, not the
least of which are sometimes political, impact their ability to
maximize an optimum mix of government-owned and leased space at
any given point in time.
 
     Auditor Comments.  Although they agreed with the
recommendation, managementms proposed action to review
performance measures and strengthen them where appropriate does
not meet the intent of our recommendation.  Regardless of whether
sites have adopted DOE Order 430.1, they still have not developed
plans that identify all leased space, justify the need for
current lease holdings, identify future needs for leased space,
or terminate leases that are no longer needed.  The fact that
leasing is a highly complex, dynamic process does not eliminate
the need to plan for optimum use of leased space and to reduce or
eliminate space not needed.
 
     Management Comments.  Management added that comprehensive
planning represents a culture change for some field offices.
Immediate results cannot be expected.  Management can request
that the Certified Realty Specialists in the field responsible
for leasing have a heightened awareness of their responsibilities
in executing their leasing program and management can continue to
champion the need for comprehensive planning.
 
     Auditor Comments.  Regardless of whether comprehensive
planning is a "culture change" for field offices, Certified
Realty Specialists should be able to identify all the space
leased under their cognizance, the need for that lease now and in
the future, and the time when the lease is no longer needed.  We
found that the Certified Realty Specialists at the sites visited
could not provide this information in any form, whether in a
Comprehensive Plan, a Site Development Plan, or in their own
version of such a document.
 
     2.   Maintain an accurate Departmentwide database for all
leased property, including property leased from the General 
Services Administration, that contains, at a minimum, the lease 
address, annual cost, square footage, lease term, occupancy level, 
and capacity.
 
     Management Comments.  Management generally agreed with the
recommendation and stated that the Facility Information
Management System (FIMS) is already designed to accept data
regarding GSA assigned space on a site basis.  However, GSA is
currently revising its database and has indicated that agencies
will have "read only" access to data on space they occupy.
Management will balance the cost to populate the FIMS database
and its ease of access against accessing the GSA database.  In
the meantime, they stated that the Department will examine the
leasing portion of the FIMS database and determine what, if any,
new data elements are necessary.
 
     Auditor Comments.  Management's action to examine the
leasing portion of FIMS is a positive step.  However, our concern
with the contents of FIMS was primarily related to the accuracy
and completeness of the data in the system already, not with
whether or not it has enough data elements.  In addition, without
the information on the property leased from GSA, the system is
incomplete.  During our review, we found that none of the sites
visited used FIMS as their primary database and that the
information for leased facilities tracked in FIMS disagreed
significantly with the validated lease facility information
provided by the Departmental real estate specialists.
 
     3.   Require real estate specialists to coordinate all new
leasing activity with each of the Departmental offices that 
maintain space in the proposed leasing area.
 
           Management Comments.  Management agreed with the
thrust of the recommendation and directed that all future and
renewal requirements for contractor leased space in the National
Capital Region be approved by the Office of Field Management
prior to execution.  This process will allow coordination with HR
and ensure that the utilization of Department controlled
contractor leased space, including Department leased space, as
well as space assigned to the Department by GSA, is maximized.
In addition, management believes that many of the DOE operations
or area offices already coordinate any new leasing requirement
with all DOE offices that maintain space within the proposed
leasing area.
 
     Auditor Comments.  The guidance forthcoming from FM should
encourage regular coordination among real estate specialists, FM,
and HR for the space in the Washington, DC area.  Additional 
coordination must take place between real estate specialists to 
avoid overlap at other sites.  We are aware that some offices are 
beginning to see the benefits of co-locating their personnel.  For 
example, Richland and Sandia have recently decided to share space 
in Germantown, and Chicago stated that they had arranged to backfill 
unused GSA space on at least one occasion.
                                                       
                                                       APPENDIX A
                                
                                
                             PART IV
                                
      Related Reports Issued by the Department of Energy's
                   Office of Inspector General
 
 
Report Number                   Report Title
 
IG-0392        Audit of the Department of Energy Program Offices'
               Use of Management and Operating Contractor
               Employees
 
WR-B-95-02     Audit of Leased Facilities at Los Alamos
               National Laboratory
 
IG-0288        Leased Office Space for the Yucca Mountain Project
 
IG-0279        Administrative Facility Requirements at the
               Savannah River Site
 
IG-0270        Management and Operating Contractors' Support
               Services at McCarran International Airport, Las
               Vegas, Nevada
 
WR-L-87-27     Review of Office Space Utilization at the
               Albuquerque Operations Office and Selected M&O
               Contractors
 
WR-L-87-26     Review of Office Space Utilization at the
               Bonneville Power Administration
 
WR-L-87-25     Review of Office Space Utilization at the
               Idaho Operations Office and Selected M&O 
               Contractors
 
WR-L-87-24     Review of Office Space Utilization at the
               Richland Operations Office and Selected M&O
               Contractors
 
 
 
                                            APPENDIX B
 
       OFFICE OF HUMAN RESOURCES AND ADMINISTRATION CHART
 
      TOTAL OFFICE SPACE LEASED THRU GSA VS. TOTAL PERSONNEL
      AT HEADQUARTERS
       
             (APPENDIX B NOT AVAILABLE ON THE INTERNET)
                                  
                                  
                                  
                                  IG Report No.  DOE/IG-0402
                                                            
                                           
                                
                                
                     CUSTOMER RESPONSE FORM
                                
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          understanding this report?
 
     2.   What additional information related to
          findings and recommendations could have been
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          in implementing corrective actions?
 
     3.   What format, stylistic, or organizational changes
          might have made this report's overall message more
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     4.   What additional actions could the Office of
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When you have completed this form, you may telefax it to the
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     Office of Inspector General (IG-1)
     U.S. Department of Energy
     Washington, D.C. 20585
     ATTN:  Customer Relations
 
If you wish to discuss this report or your comments with a
staff member of the Office of Inspector General, please
contact Wilma Slaughter at (202) 586-1924.
 
 
 
 
_______________________________
1see W/P ID-8