FEDERAL REAL 

PROPERTY 

Greater Transparency 

and Strategic Focus 

Needed for High-Value 

GSA Leases 

Report to the Committee on Homeland 

Security and Governmental Affairs, 

U.S. Senate 

September 2013 

GAO-13-744 

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-744, a report to the 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate

September 2013

FEDERAL REAL PROPERTY

Greater Transparency and Strategic Focus Needed 

for High-Value GSA Leases

Why GAO Did This Study

Overreliance on costly leasing is one 

reason that federal real property has 

remained on GAO’s high-risk list.

GAO’s work has shown that building 

ownership often costs less than 

leasing, especially for long-term space 

needs. For leases with a net annual 

rent above a threshold—$2.79 million 

in fiscal year 2012—GSA is required to 

submit a prospectus, or proposal, to 

Congress. GAO was asked to review 

these high-value leases. This report (1) 

identifies their characteristics and what 

GSA has done to reduce their cost and 

(2) assesses the extent to which GSA’s 

capital-planning approach supports

informed leasing decisions. GAO 

reviewed GSA data for all 218 active 

high-value leases as of November 

2012 and selected 12 leases for case 

studies based on expiration dates, 

locations, and tenant agencies. GAO 

reviewed relevant legislation and 

guidance, interviewed agency officials,

and compared GSA actions to leading 

practices. 

What GAO Recommends

GSA should enhance the transparency 

of decision making for high-value 

leases by (1) including more 

information in the prospectus to 

Congress, such as the agency’s prior 

and future need for the space, major 

investments needed, and an 

appropriate analysis of the cost of 

leasing versus the cost of ownership; 

(2) reporting to congressional 

committees about certain leases 

without a prospectus; and (3) 

prioritizing potential ownership 

solutions for current high-value leases

to help create a long-term strategy for 

targeted ownership investments. GSA 

concurred with the recommendations.

What GAO Found

The General Services Administration’s (GSA) 218 high-value leases GAO 

reviewed represented only about 3 percent of the total number of GSA leases, 

yet made up about one-third of its leased portfolio in terms of cost and size. GSA 

has reduced the costs of its high-value leases in line with the administration’s 

goal to reduce real property costs. GSA’s efforts include helping agencies 

improve space utilization. However, for leases nearing expiration, GSA and 

tenant agencies have faced challenges in funding space renovations and moving

costs. This lack of funds has contributed to delays and some cases in which GSA 

continues to occupy space after the lease expires.

GSA officials stated that for most high-value leases, federal ownership would be 

more cost effective over the long term, but GSA did not have the funding 

available to purchase, renovate, or construct a building. GAO found that GSA’s 

capital-planning approach lacks transparency and a strategic focus that could 

support more informed decision making in this area. Specifically, GSA does not 

follow capital-planning practices involving alternatives evaluation, project

prioritization, and long-term capital planning:

• GSA’s lease prospectuses do not discuss the length of time of the space 

need or alternative approaches to meeting it—which are key to 

understanding whether leasing or owning would be more cost-effective. 

Twenty-seven of the prospectuses (for leases expiring from 2012 through 

2027) contained an analysis that showed potential savings of over $866 

million if the spaces were owned rather than leased. GSA and OMB have 

decided the analysis is no longer necessary in light of the lack of capital 

funding for acquisitions and construction. GAO’s case studies highlighted 

long-term, mission critical space needs, such as a lease for the 

Environmental Protection Agency in Seattle for space it has occupied for 

over 40 years. Another high-value lease is for the State Department’s 

diplomatic security bureau in Virginia. State invested at least $80 million in 

security upgrades into a facility that GSA leased for 10 years. 

• Further, GAO found that nine ongoing high-value leases did not go through 

the prospectus process. For example, GSA mistakenly did not prepare a 

prospectus for a 10-year Los Angeles lease for the U.S. Army Corps of 

Engineers. GSA did not notify Congress of these leases, further limiting 

transparency.

• GSA has not systematically prioritized which space needs currently in highvalue leases it would be most beneficial to move to federally-owned 

solutions. GSA has not incorporated space needs that are the highest priority 

for ownership investment into a long-term capital plan.

This lack of information on the long-term consequences, including costs and 

risks, of high-value leases could inadvertently contribute to the federal 

government’s overspending on long-term space needs. In contrast, a strategic 

vision incorporating leading practices for capital decision making could better 

position the government to save money over time. Increased transparency could 

promote collaboration with decision makers, which could help GSA address 

challenges and identify cost savings opportunities as leases expire.

View GAO-13-744. For more information, 

contact David Wise at (202) 512-2834 or 

wised@gao.gov.
Page i GAO-13-744 GSA High-Value Leases

Letter 1

Background 4

High-Value Leases Are about One Third of GSA’s Net Annual Rent 

Costs, and GSA Has Worked with Agencies to Reduce Their 

Costs 9

GSA’s Capital-Planning Approach Does Not Promote Informed 

Decision Making about Leasing versus Ownership 19

Conclusions 33

Recommendations 35

Agency Comments and Our Evaluation 35

Appendix I Objectives, Scope, and Methodology 38

Appendix II Comments from the General Services Administration 41

Appendix III GAO Contact and Staff Acknowledgments 43

Related GAO Products 44

Table

Table 1: GSA High-Value Leases without a Prospectus, as of 

November 2012 29

Figures

Figure 1: Percentage of High-Value Leases in GSA’s Leased Real 

Property Portfolio, by Number, Size, and Cost, as of 

November 2012 10

Figure 2: Location and Rentable Square Feet of the 218 High-Value 

Leases by State, as of November 2012 11

Figure 3: GSA’s Top 5 High-Value Lease Tenants by Total Rentable 

Square Feet, as of November 2012 12

Figure 4: GSA and FAA Are Working to Reduce Leased Space 

Needs for FAA in Renton, Washington 15

Contents
Page ii GAO-13-744 GSA High-Value Leases

Abbreviations

CILP Capital Investment and Leasing Program 

EPA Environmental Protection Agency 

FAA Federal Aviation Administration

GSA General Services Administration 

HHS Department of Health and Human Services 

OMB Office of Management and Budget

REXUS Real Estate Across the United States database

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-744 GSA High-Value Leases

441 G St. N.W.

Washington, DC 20548

September 19, 2013

The Honorable Thomas R. Carper

Chairman

The Honorable Tom Coburn

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

Overreliance on costly leasing is one of the major reasons that federal 

real property management remains on GAO’s high-risk list.1 Under certain 

conditions, such as fulfilling short-term needs for office space, leasing 

may be a lower-cost option than ownership. However, our work over the 

years has shown that building ownership often costs less than operating 

leases, especially for long-term needs for space. In a series of reports 

since 1995, we found that for 67 of 89 General Services Administration 

(GSA) leases we examined, the government could have saved almost $1 

billion if it had constructed rather than leased space for federal agencies.2

 1

GAO, High-Risk Series: An Update, 

As we have examined only a small number of GSA’s total leasing actions 

since 1995, the potential savings from construction rather than leasing is 

likely to have been even higher. Recently, we found that the federal 

government owns facilities that are underutilized in locations where it also 

GAO-13-283 (Washington, D.C., February 2013). 

Other reasons for the designation included unreliable data, excess and deteriorating 

property, and challenges associated with protecting assets against the threat of terrorism.

2

In 1995, we found that 55 of 73 operating leases that GSA had entered into cost a total of 

$700 million more than construction. In 1999, we reported that for eight of nine major 

operating lease acquisitions GSA had proposed, construction would have saved the 

government $126 million over 30 years. In 2008, we found that for four of seven GSA 

operating leases we analyzed, construction rather than leasing would have saved an 

estimated $83.3 million over 30 years. See GAO, Federal Real Property: Strategy Needed 

to Address Agencies’ Long-standing Reliance on Costly Leasing, GAO-08-197 

(Washington, D.C.: Jan. 24, 2008), GAO, General Services Administration: Comparison of 

Space Acquisition Alternatives—Leasing to Lease-Purchase and Leasing to Construction, 

GAO/GGD-99-49R (Washington, D.C.: Mar. 12, 1999; General Services Administration: 

Opportunities For Cost Savings in the Public Buildings Area, GAO/T-GGD-95-149, 

(Washington, D.C.: July 13, 1995); and General Services Administration: Comparison of 

Space Acquisition Alternatives—Leasing to Lease-Purchase and Leasing to Construction, 

GAO/GGD-99-49R (Washington, D.C.: Mar. 12, 1999.
Page 2 GAO-13-744 GSA High-Value Leases

leases space. In some cases, space within these government-owned 

properties could be occupied by other government agencies.3

GSA manages real property for many civilian federal agencies, and has a 

large portfolio of owned and leased properties that it rents to its federal 

agency customers.4 As of fiscal year 2011, the most recent year for which 

GSA published portfolio information, GSA had a total of 374.6 million 

rentable square feet in its inventory, of which 192.7 million—slightly more 

than half—were leased. (GSA typically reports square feet in terms of

rentable square feet, which includes the square footage of areas 

occupied by customers plus a prorated share of common areas such as 

elevator lobbies, building corridors, and the ground floor entrance lobby.)5

GSA is authorized to enter into lease agreements for real property for a 

term not to exceed 20 years to accommodate federal agencies’ needs for 

space.6 For leases with a net annual rent7 above a threshold—$2.79 

million in fiscal year 2012—GSA is required to submit a prospectus, or 

proposal, to the House and Senate authorizing committees for their 

review and approval.8

 3

GAO, Federal Real Property: Strategic Partnerships and Local Coordination Could Help 

Agencies Better Utilize Space, 

The prospectus is to provide basic information on 

the proposed lease—including the purpose, location, and cost—to assist 

Congress in overseeing GSA’s management of its real property portfolio.

You asked us to review GSA’s management of its prospectus-level 

GAO-12-779 (Washington, D.C.: July 25, 2012.)

4

Some agencies have their own independent leasing authority.

5

GSA adopted the definition of rentable square footage as defined in Building Owners and 

Managers Association (BOMA)/American National Standards Institute (ANSI) Standard 

Z65.1-1996. This standard was adopted in accordance with GSA’s interest in conforming 

its practices to nationally recognized industry standards to the extent possible. Rentable 

square footage generally includes square footage of areas occupied by customers plus a

prorated share of floor common areas such as elevator lobbies, building corridors, public 

restrooms, utility closets, and machine rooms. Rentable square footage also includes a 

prorated share of building common areas located throughout the building. Examples of 

building common space include ground floor entrance lobby, enclosed atrium, loading 

dock, and mail room.

6

40 U.S.C. § 585(a).

7

GSA defines net annual rent as total operating rent minus operating expenses paid 

directly to the lessor in its PBS Leasing Desk Guide.

8

40 U.S.C. § 3307(a), (h). GSA’s authorizing committees are the Senate Committee on 

Environment and Public Works and the House Committee on Transportation and 

Infrastructure.
Page 3 GAO-13-744 GSA High-Value Leases

leases, which we have termed “high-value” leases. This report (1) 

identifies the characteristics of GSA’s high-value leases and what actions, 

if any, GSA has taken to reduce their cost; and (2) assesses the extent to 

which GSA’s capital planning approach promotes informed decision 

making about leasing versus ownership.

To address these objectives, we analyzed data provided by GSA from its 

Real Estate Across the United States (REXUS) database to determine 

the number of active leases as of November 30, 2012, including those 

with a net annual rent at or above the fiscal year 2012 prospectus 

threshold of $2.79 million. We determined that 218 of GSA’s leases met 

these criteria. We defined these 218 leases as our universe of high-value 

leases. We reviewed the prospectuses of these leases and selected a 

non-generalizable sample of 12 to examine more closely. For these 12 

high-value lease case studies, we also reviewed analyses that 

accompanied the prospectuses, the lease contracts, and other 

documentation; conducted site visits; and interviewed local GSA officials, 

tenant agencies, and lessors. For the 12 case studies, we selected leases 

that were nearing expiration or had recently been entered into9 and 

provided space for 14 different federal tenants. Because about 60 percent 

of high-value leases are located in GSA’s National Capital Region, we 

selected six of the leases from that region. We selected the other six from 

the Northwest/Arctic, Pacific Rim, and Greater Southwest Regions for 

geographical diversity. While not generalizable to the universe of highvalue leases, the information obtained from our case studies provides 

examples of broader issues faced by GSA in managing its high-value 

lease portfolio. In addition to our case study work, we reviewed relevant 

legislation, regulations, Office of Management and Budget (OMB) 

guidance, our prior work, GSA guidance, and industry reports and studies 

and interviewed GSA headquarters officials and private sector officials 

with experience leasing to GSA. We identified leading practices for 

making capital investment decisions from GAO’s Executive Guide10

 9

We selected leases that were nearing expiration or had recently been entered into in 

order to be able to discuss with GSA its decisionmaking process for these leases.

and 

10 GAO, Executive Guide: Leading Practices in Capital Decision-Making, 

GAO/AIMD-99-32 (Washington, D.C.: Dec. 1998). In assisting with the development of 

OMB’s Capital Programming Guide, we identified leading practices in capital decision 

making used by state and local governments and private sector organizations. 
Page 4 GAO-13-744 GSA High-Value Leases

OMB’s Capital Programming Guide,11 and assessed GSA’s efforts to 

incorporate such leading practices into its decision making on leasing 

versus ownership. We conducted this performance audit from September 

2012 to September 2013 in accordance with generally accepted 

government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide 

a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives. For 

more information on our scope and methodology, see appendix I.

Within the vast portfolio of government owned and leased assets, GSA 

plays the role of broker and property manager to many civilian agencies 

of the U.S. government. Although some agencies have independent 

authority related to real property, many rely on GSA for much of their real 

property needs. GSA’s federally-owned and leased assets include office 

and warehouse space and courthouses. GSA charges rent to federal 

tenant agencies occupying federally-owned and -leased space at rates 

that are approximately the same as commercial rates for comparable 

space and services. According to GSA’s most recent State of the Portfolio

publication, as of fiscal year 2011, GSA had a total of 374.6 million 

rentable square feet in its inventory, of which 192.7 million—slightly more 

half—were leased.12 In this State of the Portfolio, GSA states that its 

overarching goal for its portfolio is to maximize the use of its governmentowned inventory while reducing the GSA-managed real estate footprint 

overall. GSA must also follow federal requirements in implementing its 

leasing program. Federal management regulations specify that when 

seeking to acquire space for an agency, GSA is to first seek space in 

government-owned and government-leased buildings. If suitable 

government-controlled space is unavailable, GSA is to acquire space in 

an efficient and cost effective manner.13

 11OMB, Capital Programming Guide, Supplement to Office of Management and Budget 

Circular A-11, Part 7: Planning, Budgeting, and Acquisition of Capital Assets (June 2006).

GSA’s Office of Portfolio 

Management is responsible for establishing the strategies and policies for 

GSA’s real property portfolio, while GSA’s 11 regional offices are 

12GSA Public Buildings Service, FY2011 State of the Portfolio, (Washington, D.C., 2011.)

13GSA must first seek space in government-controlled space, including space controlled 

by the U.S. Postal Service. 41 C.F.R. §§ 102-73.10, 102-73.20.

Background
Page 5 GAO-13-744 GSA High-Value Leases

generally responsible for conducting day-to-day real property 

management activities, including leasing, in each of its regions.

GSA is required by statute to provide a prospectus, or proposal, for real 

property leases above the prospectus threshold to House and Senate 

authorizing committees for their review and approval.14

Federal real property management has been on GAO’s high-risk list due 

to many complex and long-standing problems, including excess and 

underutilized property, challenges related to protecting federal facilities, 

and an overreliance on costly leasing.

The prospectus 

should include basic information about the space to be leased, including 

the location, an estimate of the maximum cost to the government of the 

space, and a statement of rent currently being paid by the government for 

federal agencies to be housed in the space. While these items are 

required by law to be in the prospectus, GSA is not prohibited from 

including other information in the lease prospectuses, and at various 

times has incorporated additional information. For example, prior to the 

mid 1990s, GSA routinely included an analysis that compared the longterm costs of leasing versus ownership. At times, GSA includes 

information on space utilization rates (i.e., the number of usable square 

feet per person). By statute, GSA is also required to provide authorizing 

committees a prospectus for each proposed capital project over the 

prospectus threshold, including both new construction and repair and 

alteration projects. Typically, prospectuses are drafted in the GSA 

regional offices and reviewed and approved by GSA’s Office of Portfolio 

Management. The prospectuses are then reviewed and approved by 

OMB prior to being provided to congressional authorizing committees—

the Senate Committee on Environment and Public Works and the House 

Committee on Transportation and Infrastructure.

15 In past work, we have found that 

GSA relies heavily on costly operating leases to meet new long-term 

needs because it typically lacks the upfront funding needed to purchase 

buildings or space. For example, in 2007,16

 1440 U.S.C. § 3307.

we reported that although 

building ownership options through construction or purchase are 

15GAO-03-122 and GAO-13-283.

16GAO. Federal Real Property: Progress Made Towards Addressing Problems, but 

Underlying Obstacles Continue to Hamper Reform, GAO-07-349 (Washington, D.C.: Apr. 

13, 2007.)
Page 6 GAO-13-744 GSA High-Value Leases

generally the least expensive ways to meet agencies’ long-term space 

needs, GSA relied heavily on operating leases to meet new long-term 

needs because it lacked funds to pursue ownership. Budget scorekeeping 

rules were established based on the Budget Enforcement Act of 1990. 

The purpose of these rules is to ensure that the House and Senate 

Budget Committees, the Congressional Budget Office, and OMB measure 

the effects of legislation consistently and meet specific legal 

requirements. They are also used by OMB for determining amounts to be 

recognized in the budget when an agency signs a contract or enters into 

a lease. Upfront funding is the best way to ensure recognition of 

commitments embodied in budgeting decisions and maintain governmentwide fiscal control. Under these rules, for a construction or purchase 

project or a capital lease, the full cost of the project must be recorded in 

the budget in the year in which the budget authority is to be made 

available. Operating leases were intended for short-term needs, and thus, 

under the scorekeeping rules, only the amount needed to cover the first 

year’s lease payments plus cancellation costs needs to be recorded in the 

budget. For operating leases funded by GSA’s Federal Buildings Fund 

(which is self-insuring), only the budget authority needed to cover the 

annual payments is required to be scored. GSA does not have to include 

cancellation costs.17

 17OMB Circular A-11, App. B. Budget authority authorizes an agency to enter into financial 

obligations that will result in immediate or future outlays involving federal government 

funds. See GAO, A Glossary of Terms Used in the Federal Budget Process, 

Thus, an operating lease may potentially appear 

“cheaper” in the budget than a construction or purchase project, or a 

capital lease, even though it may cost more over time. Using an operating 

lease—or successive operating leases—for a long-term space need may 

result in resource allocation decisions for which the budgeting process 

may not have considered the full financial commitment over the full length 

of time the space need exists. Consequently, costly operating leases may 

be preferred over less-costly alternatives such as major construction or 

renovation projects that must compete for full funding.

GAO-05-734SP (Washington, D.C.: Sept. 2005).
Page 7 GAO-13-744 GSA High-Value Leases

A number of OMB-defined criteria must be met for a lease to be 

considered an operating lease.18

If the project scores as a capital lease, the net present value of the total 

cost of the lease is recorded in the budget in the year the lease is entered 

into by the federal government. In the above examples, the 7-year 

operating lease with a minimum annual rent of $100,000 would result in 

$100,000 being scored against GSA’s budget authority for each of the 

next 7 years. For the capital lease, the net present value of the total lease 

costs (about $1.7 million) would be scored against GSA’s fiscal year 

budget authority in the year lease payments began.

Among other things, the lease must 

“score” as an operating lease rather than a capital lease, meaning that 

the present value of the minimum lease payments over the life of the 

lease does not exceed 90 percent of the fair market value of the asset at 

the inception of the lease. Because the scoring seeks to compare a 

present day fair market value to the value of minimum lease payments 

made over time, a discount rate must be used in calculating the total cost 

of the minimum lease payments over the lease term. GSA uses the 

discount rates determined annually by OMB, rates that vary depending on 

the length of time being considered in the calculation. For example, if the 

fair market value of an asset is $1 million, and the lease has a minimum 

annual lease payment of $100,000 with a term of 7 years, then the 

calculation of the total value of the minimum lease payments over the 7 

years (applying OMB’s 2012 7-year discount rate of 0.7 percent) would be 

about $680,000. This total value of $680,000 is 68 percent of the fair 

market value of $1 million—which, at less than 90 percent, would result in 

the lease being scored as an operating lease. However, if the lease term 

was 20 years, the calculation of the total value of the minimum lease 

payments of $100,000 over the 20 years (applying OMB’s 2012 20-year 

discount rate of 1.7 percent) would be about $1.7 million. Since $1.7 

million is more than 90 percent of $1 million, the score would exceed the 

90 percent threshold and result in the lease being scored as a capital 

lease.

 18In addition to the scoring criteria described above, to be considered an operating lease, 

all of the following criteria must be met: (1) ownership of the asset remains with the lessor 

during the term of the lease and is not transferred to the government at, or shortly after, 

the end of the lease period; (2) the lease does not contain a bargain-price purchase 

option. (3) the lease term does not exceed 75 percent of the estimated economic life of 

the asset; (4) the asset is a general purpose asset rather than being for a special purpose 

of the government and is not built to the unique specification of the government as lessee; 

and (5) there is a private-sector market for the asset. OMB Circular A-11. App. B.
Page 8 GAO-13-744 GSA High-Value Leases

Over the years, we have reported on numerous examples of operating 

leases that GSA and the U.S. Postal Service entered into even though 

they were more costly over time than ownership. For example, in 2008, 

we found that in 10 GSA and U.S. Postal Service leases, decisions to 

lease space that would be more cost-effective to own were driven by the 

limited availability of capital for building ownership and other 

considerations, such as operational efficiency and security.19

Specifically, in June 2010, the President directed agencies to achieve $3 

billion in real property cost savings by the end of fiscal year 2012 through 

a number of measures, including disposing of excess real property and 

reducing leasing through consolidations and increased space utilization.

We found 

that for four of the seven GSA leases GAO analyzed, leasing was more 

costly over time than construction—by an estimated $83.3 million over 30 

years. At that time, we stated that while the administration had made 

progress in addressing long-standing real property problems, efforts to 

address the leasing challenge had been limited. Some alternative 

approaches had been discussed by various stakeholders, such as the 

President’s Commission to Study Capital Budgeting and us, including the 

approach of scoring operating leases the same as capital leases, which 

would make them comparable in the budget to direct federal ownership, 

but none had been implemented. In 2008, we recommended that OMB, in 

conjunction with other stakeholders, develop a strategy to reduce 

agencies’ reliance on leased space for long-term needs when ownership 

would be less costly. OMB generally agreed with our report and 

recommendation and stated that it would be useful to consider how to 

identify instances where operating leases are most likely to be to the 

government’s long-term financial detriment. While OMB did not develop 

the strategy we described, OMB staff said that they have emphasized in 

guidance issued over the past several years that agencies should reduce 

space needs, including for leased space, through increases in space 

efficiency.

20

 19

In May 2012, OMB issued a memorandum directing agencies to not 

increase the size of their civilian real estate inventory, stating that 

increases in an agency’s total square footage of civilian property must be 

GAO-08-197. 

20Presidential Memorandum—Disposing of Unneeded Federal Real Estate—Increasing 

Sale Proceeds, Cutting Operations Costs, and Improving Energy Efficiency, 75 Fed. Reg. 

33987 (June 16, 2010).
Page 9 GAO-13-744 GSA High-Value Leases

offset through consolidation, co-location, or disposal of space from the 

inventory of that agency.21 This policy became known as “freeze the 

footprint.” In March 2013, OMB issued a memorandum establishing 

implementation procedures for its “freeze the footprint” policy. This 

memorandum clarified that agencies were not to increase the total square 

footage of their domestic office and warehouse inventory compared to a 

fiscal year 2012 baseline. It also directed agencies to use various 

strategies to accomplish this goal, including consulting with GSA about 

how to use technology and space management to consolidate, increase 

occupancy rates in facilities, and eliminate lease arrangements that are 

not cost or space effective.22

As of November 2012, GSA’s 218 high-value leases had a total net 

annual rent of over $1.5 billion—36 percent of the approximately $4.2 

billion net annual rent of GSA’s leased portfolio. In recent years, GSA has 

taken steps to reduce the costs of its high-value leased portfolio. For 

example, GSA has helped agencies reduce their space needs and 

consolidate space as high-value leases expire. Challenges related to 

reducing lease costs include a lack of funding to renovate space and 

delays that can result in costly short-term extensions or “holdover”

situations, in which the agency remains in the space past the lease’s 

expiration date without a new lease agreement.

As of November 2012, GSA’s 218 high-value leases represented only 

about 3 percent of the total number of GSA leases, yet made up about 

one-third of GSA’s leased portfolio in terms of cost and size. Together, 

these 218 leases have a net annual rent of over $1.5 billion, or 36 percent 

of the roughly $4.2 billion total net annual rent of GSA’s leased portfolio.

Similarly, the 218 leases include over 54 million rentable square feet, or 

almost 30 percent of the roughly 188 million rentable square feet in GSA’s 

leased portfolio. (See fig. 1.)

 21 OMB, Memorandum to the Heads of Executive Departments and Agencies: Promoting 

Efficient Spending to Support Agency Operations (May 11, 2012).

22OMB, Management Procedures Memorandum No. 2013-02 (Mar. 14, 2013).

High-Value Leases Are 

about One Third of 

GSA’s Net Annual 

Rent Costs, and GSA 

Has Worked with 

Agencies to Reduce 

Their Costs

Characteristics of HighValue Leases
Page 10 GAO-13-744 GSA High-Value Leases

Figure 1: Percentage of High-Value Leases in GSA’s Leased Real Property Portfolio, by Number, Size, and Cost, as of 

November 2012

The average size of the 218 leases is 249,000 rentable square feet, 

ranging from about 57,000 rentable square feet for a lease for the 

Department of Justice in Miami, Florida, to the largest and most 

expensive of the high-value leases—a Department of Commerce lease in 

Alexandria, Virginia, that is about 2.4 million rentable square feet and has 

a net annual rent of $60 million. The average net annual rent for the highvalue leases is about $7 million. About 60 percent of the high-value 

leases are located in GSA’s National Capital Region—which includes 

Washington, D.C., and portions of Northern Virginia and suburban 

Maryland. The rest are spread throughout the United States, with 

concentrations in other major urban areas such as New York, Seattle, 

and Dallas. (See fig.2.)
Page 11 GAO-13-744 GSA High-Value Leases

Figure 2: Location and Rentable Square Feet of the 218 High-Value Leases by State, as of November 2012

High-value leases house a microcosm of the federal tenants for whom 

GSA provides leased space. The tenants of these leases include 41 

federal agencies and departments. The Departments of Justice, Treasury, 

and Commerce have the largest amount of space among the 218 highvalue-leases. For example, the high-value leases include 9.4 million 

rentable square feet for the Department of Justice, representing 17 

percent of the over 54 million rentable square feet in the 218 leases. (See 

fig. 3).
Page 12 GAO-13-744 GSA High-Value Leases

Figure 3: GSA’s Top 5 High-Value Lease Tenants by Total Rentable Square Feet, as 

of November 2012

Most of the high-value leases have lease terms of at least 10 years. The 

majority—55 percent—have lease terms of more than 10 years, and 31 

percent, or 68 leases, have lease terms of 20 years.

23

 23Approximately 45 percent of the high-value leases had terms from 1 to 10 years. 

While lease 

expiration dates ranged from 2012 through 2032, over 60 percent of the 

leases will expire by 2018. For instance, FAA officials told us that they 

have several high-value leases in their Southwest, Northwest Mountain, 

and Southern regions—providing space for about 1,500 employees at 

each location—that expire from 2013 through 2017. Employees at these 

regional headquarters work for various FAA lines of business, such as 

Aircraft Certification, Flight Standards, and Air Traffic Organization. 

According to GSA’s leasing program officials, these upcoming lease 

expirations provide opportunities to help meet administration goals for 
Page 13 GAO-13-744 GSA High-Value Leases

cost savings through reducing costly leases—via space consolidations or 

moving from leased to owned space—although as discussed later in this 

report, GSA and tenant agencies may face funding and other challenges 

in doing so.

GSA has taken steps to reduce the costs of its high-value leased portfolio 

in recent years in line with administration goals to reduce real property 

holdings. First, GSA officials stated that, as required by regulation, GSA 

always looks first to federally owned or existing leased space to fill space 

needs. GSA officials stated that all of GSA’s high-value leases represent 

space needs that could not be accommodated in existing federally owned 

space and that they review the federally owned inventory as high-value 

leases expire to see if there is any new potential to move the federal 

tenant into an owned situation. For example, a regional GSA official 

stated that GSA currently has 127,000 rentable square feet of vacant 

space in a Los Angeles federal building. Among other options, GSA is 

considering the potential to move the Army Corps of Engineers in Los 

Angeles from a high-value lease with a net annual rent of $3.2 million in 

which the Army Corps is occupying about 118,000 rentable square feet 

into this federal space when the lease expires in 2016.24

Another way in which GSA has worked in recent years to reduce costs of 

high-value leases is through efforts to help agencies reduce the amount 

of space they occupy. Among other things, GSA has worked with OMB 

and agencies to reduce the amount of space per employee (the space 

utilization rate) in recently submitted lease prospectuses—including at 

times, revising draft prospectuses to decrease the space utilization rate 

and thereby the overall amount of space requested. For example, OMB 

officials stated that they noticed that a recent draft prospectus for a law 

enforcement agency’s field office—an environment in which many staff 

However, 

according to GSA officials, GSA often does not have large enough vacant 

spaces in federally owned buildings to meet agencies’ high-value space 

needs—particularly without major, costly renovations.

 24According to GSA’s data, this lease has a total of 145,653 rentable square feet; 

however, according to GSA, the Army Corps of Engineers reduced its space to 

approximately 118,000 rentable square feet after giving GSA 120 days notice, leaving 

GSA with vacant space for which GSA must pay rent until it finds a different federal tenant 

to move into the space. At the time of our review, GSA officials said that GSA was building 

out the space in order to rent it to the U.S. Trustees.

GSA’s Efforts to Reduce 

Costs of High-Value Leases
Page 14 GAO-13-744 GSA High-Value Leases

are away from their desks much of the time—had the same proposed 

utilization rate as a space request from an administrative agency in 

Washington, D.C., where most employees work at their desks. OMB and 

GSA worked with the law enforcement agency to come to an agreement 

on a reduced utilization rate before submitting the prospectus to the 

congressional authorizing committees.

Furthermore, GSA officials stated that GSA and tenant agencies have 

worked in recent years to reduce the square footage of new leases even 

when a larger amount of space had already been approved through the 

prospectus process. For example, in 2008, GSA submitted a prospectus 

for a new FAA lease to consolidate FAA’s Northwest Mountain Region 

headquarters in the Seattle suburb of Renton, Washington, from multiple 

leases into one lease of up to 519,000 rentable square feet. The 

prospectus was approved by Senate and House authorizing committees 

in 2008 and 2009, respectively, prior to the 2010 presidential 

memorandum and 2013 OMB memorandum focusing on reducing space 

needs. According to GSA and FAA officials, the subsequent push to 

reduce space needs led GSA and FAA to reduce the lease proposal by 

about 40 percent. According to agency officials, for the most part, FAA 

plans to adapt its needs to this smaller space by improving space 

utilization through greater use of open office space and increased 

teleworking, although it will also maintain some additional small 

warehouse leases it had initially hoped to consolidate. GSA worked 

closely with FAA to help FAA plan for improved space utilization—

including having FAA staff tour GSA’s regional and local offices in the 

area, both of which have been redesigned with open floor plans that can 

accommodate more staff per square foot. (See fig. 4.)
Page 15 GAO-13-744 GSA High-Value Leases

Figure 4: GSA and FAA Are Working to Reduce Leased Space Needs for FAA in Renton, Washington

According to GSA officials, another way that GSA has worked to reduce 

lease costs is through improved customer real-property portfolio planning.

According to GSA’s fiscal year 2011 annual performance report, customer 

portfolio plans have been completed for three of GSA’s top 20 customers, 

including the Department of Health and Human Services (HHS), and GSA 

expects to have an additional 9 completed by the end of fiscal year 2014.

The customer portfolio plans attempt to optimize real property portfolios 

by agency, including cost savings and space reductions. For example, the 
Page 16 GAO-13-744 GSA High-Value Leases

September 2012 HHS customer portfolio plan describes GSA’s efforts to 

optimize its suburban Maryland portfolio for HHS, which includes a 

combination of high-value and smaller leases. According to the plan, GSA 

negotiated for more than 1.2 million rentable square feet in suburban 

Maryland with an estimated annual lease cost reduction for National 

Institutes of Health (an Operating Division within HHS) of $4.4 million.

The plan also describes planned consolidations into, and improvements 

to, a high-value suburban Maryland lease that would improve HHS’s 

utilization rate and increase the number of staff in the space by about 50 

percent—and that has estimated savings of over $10 million in annual 

rent through lease terminations. Future opportunities described in the 

customer portfolio plan include efforts to implement these types of 

consolidations and cost savings in other properties in HHS’s portfolio.

GSA also faces challenges related to reducing lease costs by shrinking 

the leased footprint through changes in space allocated to individuals—

i.e., through reducing the number of square feet per person. Most of 

these challenges stem from broad funding issues faced by agencies 

government-wide, as agencies with shrinking budgets struggle to 

determine how to fund costs associated with moving or retrofitting space 

in order to improve space efficiency. In most cases, as the expiration date 

for an existing lease approaches, GSA issues a call for competitive bids 

for a new lease, for which the existing lessor can compete along with 

other lessors. Because a goal of the competitive process is for GSA to get 

the best deal for the new lease, agencies must commit to moving after 

their current lease expires if GSA determines that a different location will 

be less expensive over the term of the new lease. Agencies therefore 

must budget for potential moving costs in their annual budgets. Moving 

costs may include funds for the physical move, telecommunication 

network services and other technology needs, security features, new 

Challenges Related to 

Reducing Lease Costs
Page 17 GAO-13-744 GSA High-Value Leases

furniture and cubicle divisions, relocation management, and special 

consulting services.25

Even if an agency remains in the same location, reducing space by 

increasing space efficiency is likely to incur costs from technological and 

material build outs, such as new technology, furniture and cubicle walls.

These costs must be paid up front from the agency’s annual budget 

rather than being rolled into the monthly lease costs. According to GSA 

officials, in the past few years, agency uncertainty about future needs and 

a lack of funding to pay for moving costs or costs associated with 

reducing the square feet per person in the same location have at times 

made it difficult for GSA to get a commitment from an agency for a future 

space requirement. According to GSA officials, GSA typically begins 

planning for the next space need for a high-value lease 3 to 5 years 

ahead of the expiration date. They noted that this should provide GSA 

sufficient time in which to work with the tenant agency to understand its 

future space needs, draft the prospectus, have the prospectus reviewed 

and approved by OMB and congressional authorizing committees, and 

enter into a new lease. However, in recent years, agencies’ delays due to 

a lack of funding to commit to a new space requirement sometimes led to 

the need for short-term extensions or—if the landlord is unwilling to meet 

GSA’s negotiations—”holdovers.”

According to GSA, holdovers are risky for the government because the 

government continues to occupy space to which it has no contractual 

rights. According to several private sector officials we spoke to, holdovers 

are problematic for the lessor because often a lessor’s financing 

agreement for the building’s mortgage depends upon having a signed 

lease, and the uncertainty of having a lease in holdover status can make 

it difficult or impossible to secure needed financing for the building. 

Several real estate experts we spoke with stated that if a private tenant 

goes into holdover status, the tenant must pay a substantial rent 

increase—such as a 200 percent increase in the rental rate during the 

 25According to GSA’s policy, GSA must take relocation costs into account when 

considering whether to do a succeeding lease in the same space or a new lease in a 

different space. When comparing offers, GSA amortizes relocation costs over the full term 

of the lease in order to determine whether, after taking relocation costs into account, an 

offer in a new space would result in savings to the government over an offer to continue in 

the existing space. According to GSA officials, if the new space is chosen, the agency 

must pay for the move costs up front in the year they are incurred—and so must budget 

for them prior to committing for new space requirements to GSA.
Page 18 GAO-13-744 GSA High-Value Leases

period of time the lease is in holdover status—as a penalty. Typically, the 

federal government does not pay such a penalty. In several specific 

cases we inquired about, GSA was continuing to pay the rent as stated in 

the expired lease without penalties. We found that 14, or 6 percent, of the 

218 high-value leases were in holdover status as of November 2012.26

GSA attempts to avoid holdovers by getting short-term extensions in 

place when it cannot move forward with a new long-term lease. However, 

at times, GSA and the lessor cannot reach agreement on a short-term 

extension, and the lease enters into holdover status. The three leases 

among our 12 case studies that were in holdover status illustrate some of 

the interrelated challenges that can lead to holdovers. While all of the 

tenant agencies in these three cases plan to remain in the same location 

and GSA is paying the same rental rate as it did during the lease term, 

various combinations of factors—many of them external to GSA—

precipitated and exacerbate the holdovers. For example, in one case, the 

lease initially entered holdover because GSA was awaiting congressional 

approval of a prospectus, but remained in holdover because of protracted 

negotiations with the landlord over lease term and price. In another case, 

it appears that GSA’s attempt to execute separate leases for agencies 

that had once been in a combined lease was a factor in the holdover, 

while difficult negotiations with the lessor over the terms of the new lease 

lengthened the period of time the lease remained in holdover status. GSA 

officials stated that the current environment of reduced funding 

government-wide, and expectations that agencies will work to reduce 

space needs without necessarily having the funding to reconfigure their 

space, has resulted in a situation with no easy solutions. In this 

challenging environment, GSA, in its role as the manager of real property 

for many civilian agencies, has the opportunity to set forth a vision and 

strategy for federal real property that encompasses the needs of multiple 

federal agencies and balances real property priorities across the civilian 

federal government—a vision that could help mitigate these complex 

challenges over the long-term. The next section of this report explores 

GSA’s long-term capital planning approach for its high-value leased 

portfolio, which could be used to communicate such a vision to federal 

decision makers.

 26Holdovers do not just occur with high-value leases. According to GSA data, as of 

November 2012, 190 of a total of 8,884 leases were in holdover status—about 2 percent 

of all leases.
Page 19 GAO-13-744 GSA High-Value Leases

Although GSA officials stated that for most high-value leases, 

constructing federally-owned space would be more cost effective over 

time than continuing to lease, GSA’s capital planning approach lacks a 

strategic focus that addresses its reliance on high-value leases. We 

identified three leading practices that characterize sound capital 

investment decision making and pertain to GSA’s high-value leased 

portfolio:27 (1) alternatives evaluation, (2) project prioritization, and (3) 

creating a long-term capital plan. We found that GSA’s lease 

prospectuses lack transparency on key information that would help 

decision makers understand the extent to which these high-value leases 

are the best alternatives to meet agencies’ long-term space needs. GSA 

also has not systematically prioritized which high-value leases have the 

most cost-saving potential if they were instead pursued as capital 

projects. Furthermore, GSA has not incorporated those high-value leases 

that should be the highest priority for ownership into a long-term capital 

plan.

According to our work on leading practices in capital decision making, 

vision and leadership are crucial to the success of leading organizations’

capital-planning efforts.28

 27GAO, Federal Buildings Fund: Improved Transparency and Long-term Plan Needed to 

Clarify Capital Funding Priorities, 

Many headquarters and regional GSA officials, 

including assistant commissioners in GSA’s leasing program, stated that 

the optimal way to manage GSA’s high-value lease portfolio in line with its 

long-term portfolio goals would be to transfer many of the housing needs 

that are currently in high-value leases into federally owned property. This 

transfer could be accomplished either by shifting personnel into existing 

GAO-12-646 (Washington, D.C.: July 12, 2012). In this 

report, we identified four leading practices for using information to make capital investment 

decisions, primarily from GAO’s Executive Guide and OMB’s Capital Programming Guide.

However, the first leading practice, a comprehensive needs assessment, pertains to an 

agency’s owned portfolio and we therefore are not including it in our analysis of GSA’s 

high-value leases. Also see OMB, Capital Programming Guide, Supplement to Office of 

Management and Budget Circular A-11, Part 7: Planning, Budgeting, and Acquisition of 

Capital Assets (June 2006) and GAO, Executive Guide: Leading Practices in Capital 

Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: December 1998). In our Federal 

Buildings Fund report, we also drew from leading capital investment practices identified by 

the National Research Council. (National Research Council of the National Academies, 

Predicting Outcomes from Investments in Maintenance and Repair for Federal Facilities

(Washington, D.C.: 2011).

28GAO. Leading Practices in Capital Decision-Making, GAO/AIMD-99-32 (Washington, 

D.C., December 1998).

GSA’s CapitalPlanning Approach 

Does Not Promote 

Informed Decision 

Making about Leasing 

versus Ownership

According to GSA 

Officials, Most High-Value 

Leases Are for Space 

Needs that Should Be In 

Federally-Owned Property
Page 20 GAO-13-744 GSA High-Value Leases

federally owned space—a shift that could, however, often require major 

renovations—or by purchasing or constructing new space. GSA officials 

stated that some high-value leases represent short-term or unstable 

space needs—such as a 5-year lease providing space for an agency that 

plans to move into a federally-owned space when renovations are 

completed. In such cases, leasing is the most appropriate solution.

However, officials concurred that most of the high-value leases consist of 

long-term, relatively stable, mission-central needs for federal agencies—

space needs that in many cases are likely to exist for longer than 20 

years—and that in these cases, ownership is the most cost-effective 

solution over time. However, GSA officials stated that limited availability 

of existing federal space and funding for its capital program have given 

GSA no choice but to continue to lease space for these government 

needs—including some space needs that have existed for the past 40 

years or more and have been met by leasing through multiple competitive 

procurements.

Although many of the high-value leases are candidates for ownership, 

GSA does not include any analysis of such alternatives in its lease 

prospectuses. According to capital-planning principles, alternatives 

evaluation should be done for all major capital assets, including leases.

The lease prospectuses also lack other information that could help 

decision makers consider the wisdom of continuing to lease and better 

inform their decision making. In addition, we found that nine high-value 

leases did not go through the prospectus process.

OMB’s Circular A-94 requires that all leases of capital assets must be 

justified as preferable to direct government purchase and ownership; for 

major acquisitions, this should be done through an analysis of the costs 

over time of leasing versus owning the asset. The purpose of this 

requirement is to promote efficient resource allocation through wellinformed decision-making by the federal government. Because the 

prospectus is to be reviewed and approved by both OMB and 

congressional authorizing committees prior to GSA’s entering into the 

lease, it is a key document for communicating GSA’s decision-making 

process. GSA is not required by law to include the results of these 

analyses in the prospectus; however, according to GSA officials, GSA 

includes the results of an alternatives analysis in its prospectuses for 

capital construction and renovation projects but does not do so in its 

Lack of Transparency in 

Lease Prospectuses Limits 

Alternatives Analysis

Prospectuses Lack 

Transparency on Alternative 

Approaches to Meeting Space 

Needs
Page 21 GAO-13-744 GSA High-Value Leases

prospectuses for leases. In the 1980s and early 1990s, GSA did include 

such an analysis in its lease prospectuses.29

OMB staff stated that they advised GSA officials to stop including the 

results of a lease versus purchase analysis in lease prospectuses 

because OMB had determined that the scoring analysis—in which, for an 

operating lease, it is shown that the present value of the minimum lease 

payments over the life of the lease does not exceed 90 percent of the fair 

market value of the asset at the inception of the lease—was sufficient 

information to demonstrate that leasing was the most cost effective option 

over the term of the lease. GSA officials stated that there was also a 

sense that in an environment of scarce capital resources for purchase or 

construction, there was no benefit in performing a lease versus purchase 

analysis—which often showed that ownership would be more cost 

effective than leasing over 30 years—since GSA did not expect to receive 

funding for capital construction or acquisition. GSA officials stated that in 

light of a significant decline in funding for new federal construction, even if 

a lease versus purchase analysis showed that ownership was less 

expensive, the lack of availability of funding for construction meant that 

GSA considered this a non-viable alternative.

However, in the mid-1990s, 

according to GSA officials, these analyses were discontinued for lease 

prospectuses in the context of the limited availability of funding for most 

construction or purchase alternatives to leasing.

The decision to halt a formal lease versus purchase alternatives analysis 

for high-value leases has limited the transparency of the prospectus 

process. First, the lack of a lease versus purchase analysis in the 

prospectus means that government decision makers do not have 

information on the extent to which the proposed lease is more costly than 

owning over the long-term. When GSA did perform the 30-year-netpresent-value analysis for lease prospectuses, there were times when the 

analysis showed that leasing was the most cost effective option. For 

example, in our case studies for this review, 30-year present value 

analyses were completed for two 20-year FAA leases, which became 

 29GSA had been performing a 30-year net present value analysis, which measures the 

multiyear cash flows in present-dollar terms, so the value of a dollar received today can be 

compared against the value of a dollar received in the future. Such an analysis allows 

managers to compare the cost of a multiyear lease, with payments spread over a number 

of years, with ownership, which requires up-front obligation of funds.
Page 22 GAO-13-744 GSA High-Value Leases

effective in 1989 and 1992.30

Second, while the scoring analysis may allow the government to ensure 

that lease payments over the lease term are less than the fair market 

value of the asset, and thus that ownership of the asset stays with the 

lessor over the course of the lease, it does not help decision makers 

evaluate whether leasing is the preferred solution to an agency’s space 

need. The scoring analysis is based on the lease term, not on the 

projected length of the government’s space need. GSA officials stated 

that, given its limited access to capital funds, GSA works to ensure that all 

of its leases score as operating leases, because, as explained previously, 

for operating leases, only the amount needed to cover the minimum rent 

payment for 1 year must be scored against GSA’s fiscal year budget 

authority. For a lease to score as an operating lease, the present value of 

cumulative minimum lease payments over the lease term must be no 

more than 90 percent of the fair market value of the asset.

In one instance, the analysis estimated it 

was more cost effective to lease (a $3.3 million savings in Washington 

state). The other analysis estimated that it was more cost effective to own 

(a $2.1 million savings in Texas). Of the 218 leases in our review, 27 had 

prospectuses that included a 30-year-net present value analysis of 

leasing versus owning. Overall, across these 27 prospectuses, we found 

that over 30 years, the government would spend an estimated additional 

$866 million by leasing instead of owning, or approximately 18 percent of 

the total expected cost. While these prospectuses were all developed 

from 1986 through 1993, when GSA was regularly including such 

analyses in the prospectuses, due in part to some gaps of several years 

between the prospectus and the date the related lease became effective, 

the related leases have expiration dates ranging from 2012 to 2027.

Without such information on more recently proposed high-value leases, 

GSA and federal decision makers, including Congress, lack information 

on the long-term cost consequences of decisions to lease rather than own 

that were proposed after GSA stopped including such an analysis in 

prospectuses.

31

 30According to GSA officials, while each individual lease agreement has a maximum term 

of 20 years, at times renewal options or extensions can lead to the total time of occupancy 

related to the lease exceeding 20 years.

According to 

GSA officials, there are cases in which GSA has negotiated a shorter 

31To perform this scoring analysis, GSA uses established criteria to determine the fair 

market value of the asset at the inception of the lease and then compares this amount to 

annual lease payments multiplied by the number of years in the lease term.
Page 23 GAO-13-744 GSA High-Value Leases

term—such as 5 or 10 years—for a high-value lease for operational 

flexibility, such as when GSA is working on renovating federal space that 

it plans to move the personnel occupying the lease into when the 

renovations are complete. However, GSA officials stated that at times, 

GSA has had to negotiate shorter lease terms primarily because that will 

ensure that the lease will score as an operating lease—regardless of how 

long the agency expects to need the space. As a result, while the lease 

term established represents the legal responsibility of the government to 

pay for the lease, it may not reflect the length of the need for the space or 

therefore the true cost of long-term leasing. Furthermore, some GSA and

private sector officials stated that, at times, limiting the length of a lease 

term to ensure that the lease will score as an operating lease can be 

costly. For example, because lessors prefer the certainty of a long-term 

lease, they may be willing to negotiate lower annual payments for longer 

terms. In another example, in cases when the commercial real estate 

market is struggling, GSA may not be able to take advantage of economic 

conditions by locking in a low annual rent for as long as possible.

In addition to the limitations of the scoring analysis for analyzing whether 

leasing is the best alternative, prospectuses are developed as a 

“snapshot” in time, covering one lease term, and do not indicate the 

extent to which the agency has had a history in the current location or the 

expected duration of the agency’s space need. As a result, decision 

makers have no context with which to make fully informed decisions 

regarding the most cost effective way for the space need to be 

addressed. According to GSA officials, when there is a short-term need 

for a high-value lease, GSA may know how long the agency will need the 

space, and in those cases, may have included this information in the 

prospectus. However, GSA officials stated that in many cases neither 

GSA nor the agency knows how long the agency will need the space, as 

changes to an agency’s mission and technology over time can affect 

space needs. Nevertheless, in our review, we found that 9 of our 12 case 

study leases included space for long-term or mission critical space needs 

for tenant agencies. Some of the tenant agencies in these leases have 

been housed in successive operating leases far longer than GSA’s 

maximum 20-year lease term—situations that would lend themselves to 

an analysis of the extent to which it would be more cost effective for the 

government to own rather than lease. For example:

• One high-value lease we examined provides space for the 

Environmental Protection Agency’s (EPA) 10th Region headquarters 

in Seattle, Washington. EPA was the first tenant in the building when 

it was constructed over 40 years ago. At the time of our review, GSA 
Page 24 GAO-13-744 GSA High-Value Leases

was negotiating a new 10-year lease in the same space. However, the 

prospectus provides no indication of how long EPA has been in the 

building or EPA’s expected future need for the space. The new lease, 

if completed, will therefore result in 50 years of continuous occupation 

of this leased space in downtown Seattle—with no analysis of the cost 

implications of doing so and no recent consideration of the alternative 

of constructing owned space. According to GSA officials, there is no 

federally-owned vacant space in Seattle that would meet EPA’s 

needs.

• Another high-value lease we examined provides space for HHS in 

Rockville, Maryland. According to GSA officials, the building was built 

for HHS in 1970 and has been continuously occupied by HHS for over 

40 years. A new 15-year lease for the same building begins in July 

2015 and will expire in 2030—at which point HHS will have occupied 

the same building for close to 60 years. The new lease results in a 

space reduction at that location of about 28 percent. In this case, the 

lessor’s most recent proposal, which GSA selected for the new lease 

through a competitive bid process, included a complete renovation of 

the existing building. GSA officials stated that the financing of 

renovations in a leased building is the lessor’s responsibility.

According to several private sector officials, one advantage of GSA’s 

leasing rather than owning is that the private sector can often finance 

major renovations for which the public sector would have difficulty 

securing funding. In the case of the HHS building, the renovation is 

currently ongoing with plans to be completed in 2016. According to 

the lessor, in this case, the major renovations were financed based on 

the strength and security of the lessor having a long-term government 

lease. The challenge of funding renovations of federally owned space 

is something we have discussed in previous work.32

 32GAO. Federal Real Property: Improved Data Needed to Strategically Manage Historic 

Buildings, Address Multiple Challenges, 

However, GSA 

officials noted that generally, a lessor’s investments into building 

renovations—including financing costs—are passed on to the 

leaseholder through the cost of the monthly lease payments over 

time—and the financing costs are likely to be higher than the costs to 

the government of borrowing money from the Treasury.

Considerations of such trade-offs could be factored into an analysis of 

whether the government should own or lease such high-value space 

needs, but the prospectus for this lease did not consider alternatives 

to continuing to lease this long-term space need.

GAO-13-35 (Washington, D.C.: Dec. 11, 2012).
Page 25 GAO-13-744 GSA High-Value Leases

In addition to the lack of an analysis of the long-term costs of leasing 

versus owning, lease prospectuses also lack transparency regarding the 

costs of tenant agency investments needed to meet mission-critical 

needs. These investments constitute a risk to the government, and risk is 

one of the factors managers in leading organizations consider when 

approving investment proposals. High-value-leases often house missioncritical activities for tenant agencies, such as the national headquarters 

for the Department of Transportation in Washington, D.C., and the 

command center for Department of State’s (State) diplomatic security 

operations in Rosslyn, Virginia. As such, tenant agencies at times have 

particular mission-related needs for the space that can add to the 

complexity and cost of the lease. GSA officials stated that when GSA 

submits a prospectus, GSA may not know which building the agency will 

occupy, since that is generally determined through a competitive process. 

However, GSA and the agency are likely to have general information on 

the complexity and likely costs of an agency’s mission-related needs for 

the space, and the lack of such information in the prospectus reduces the 

transparency of the process. Moreover, according to GSA officials, 

tenant improvements depreciate over time and agency requirements can 

change. Nevertheless, when an agency makes a significant investment 

into a leased facility or GSA leases a space for an agency primarily due to 

a mission-related need for a very specific geographical location, there is a 

risk that when the lease expires, the agency may have to move and reinvest time and money into replicating the investment in a different facility 

or that the lessor may ask for a higher rent in the next lease knowing that 

any competitor will have to incorporate the costs of replicating the 

investment into its offer33

• One high-value lease of about 350,000 rentable square feet houses 

State’s Bureau of Diplomatic Security in Rosslyn, Virginia.

or that there may be no competitors within a 

very narrow geographic range. Examples in our case studies of such 

situations include the following:

34

 33When GSA runs a competitive-bidding process for a lease that currently exists in a 

leased space, the existing landlord’s offer must include the costs of the new lease, while 

any competing landlords must incorporate the costs of replicating any build out and other 

facility investments that will have to be replicated into the new space into their rental rate 

offer.

State 

considers the Rosslyn location essential because of its proximity to 

State’s headquarters in Washington, D.C., and to other State leases 

34This lease was authorized in legislation and so was not accompanied by a prospectus.

Prospectuses Lack 

Transparency on Costly Agency 

Investments Needed for Leased

Space
Page 26 GAO-13-744 GSA High-Value Leases

in Rosslyn. The building was constructed to State’s security 

specifications, including a hardened lobby and exterior and extra 

security features in the parking garage. In addition, according to State 

officials, State invested an additional $80 to $100 million in secure 

technology and conference rooms with technologically advanced 

security features. However, GSA signed this as a 10 year lease, 

mostly, according to GSA officials, so that it would score as an 

operating lease. In this case, a 10 year lease scored at 83 percent of 

the fair market value—and, according to GSA officials, was the 

longest term GSA could get for the lease without risking that the lease 

would score as a capital lease. As the 10-year lease’s expiration 

came up in 2012, GSA initially opened the competition for this 

requirement to a wider geographical area than Rosslyn. However, due 

to State’s concerns about potentially having to move farther away 

from State’s headquarters—which State sees as compromising to its 

mission—plus the difficulty and expense of replicating all of the 

security-related technology invested in this building, State asked that 

the competition be canceled. In June 2013, GSA renewed this lease 

for 5 years, with an option to purchase the building at a market rate 

after the 3rd year. According to State officials, the 5-year extension 

with purchase option will provide the government time to find and 

evaluate government-owned solutions to this long-term requirement. 

GSA officials agreed that the government should consider ownership 

when a large investment is required to move or replicate the current 

space.

• In another example, a high-value lease for two smaller agency 

headquarters—the Federal Maritime Commission and the National 

Archives and Records Administration, in Washington, D.C., took up

much of an entirely federally-leased building across the street from 

the Government Printing Office. As the January 2013 expiration date 

for this lease approached, GSA decided that going forward, each 

agency would have its own lease, each of which would be below the 

prospectus threshold. However, both agencies ended up staying in 

the same building. According to GSA officials, because the National 

Archives and Records Administration communicates remotely via 

laser links with the Government Printing Office in order to complete a 

mission-required activity of daily printing of The Federal Register, it 

needed to remain within a half mile of the Government Printing Office.

When the lease came up for expiration, GSA did a competitive bidding 

process within a very narrowly defined geographical area that resulted 

in no satisfactory offers from anyone other than the current landlord—

resulting in difficult renegotiations with the landlord to remain in the 

same building at a rate GSA considered acceptable.
Page 27 GAO-13-744 GSA High-Value Leases

Another element that represents a risk for the government and may be 

relevant in considering which of the high-value leases would be the most 

cost-effective to target for ownership but that is not explored in the 

prospectus process is the extent to which GSA is leasing entire buildings.

We found that almost half of GSA’s high-value leases are either for an 

entire building or almost an entire building, or are in buildings where GSA 

has other leases so that GSA is effectively leasing the entire building. 

Specifically, 48 percent of these leases are in buildings that are 90 

percent or more federally leased, and almost 60 percent are in buildings 

that are at least 75 percent federally leased. For example, GSA currently 

leases an entire building of about 300,000 rentable square feet in Ft. 

Worth, Texas, for two agencies—FAA occupies the majority of the space 

and the FBI occupies the rest. Both agencies have occupied this space 

for the past 20 years. As the expiration date for this lease approached, 

FAA indicated a requirement for increased square footage in order to 

consolidate staff into this lease from other nearby leased locations. As a 

result, GSA, through a competitive bidding process, has selected a 

developer to build a facility to meet FAA’s needs that GSA has agreed to 

lease for 20 years and that FAA plans to fully occupy.

According to GSA officials, the prospectuses typically provide information 

only on the space needs for the particular lease (or in some case, leases) 

being proposed in the prospectus, and do not include information on any 

other leases that may be ongoing in the same building, or on the 

percentage of the entire building that GSA is leasing. Without this 

disclosure, decision makers have no way to fully assess the investment 

GSA is proposing. For example, for one of our case study leases in 

Washington, D.C., the prospectus proposed a replacement lease for up to 

294,000 rentable square feet for several agencies currently located in a 

number of leases in one building—without mentioning that another GSA 

lease was also in that same building. The prospectus also did not include 

the information that together these two leases covered about 65 percent 

of the entire building, which is in a prime location in Washington, D.C., 

near the White House. According to our analysis of GSA data, in 6 other 

cases, high-value leases are in a building with either one or two other 

GSA leases so that altogether GSA’s leases encompass over 90 percent 

of the building’s occupancy. The lack of this contextual information in the 

prospectus further reduces the transparency with which GSA presents its 

leasing portfolio to government decision makers.

Prospectuses Lack 

Transparency on Extent to 

Which GSA Is Leasing Entire 

Buildings
Page 28 GAO-13-744 GSA High-Value Leases

Most of the 218 high-value leases had a prospectus or separate 

legislative authority indicating congressional committees’ approval of the 

lease. However, for 9 of these leases—involving a total net annual rent of 

about $50.2 million—GSA officials could not provide documentation 

showing congressional committees’ approval or legislative authority.35

In four cases, the lease started below the prospectus threshold, but over 

time new space was added in supplemental lease agreements that put 

the lease over the prospectus threshold. GSA officials stated that this 

occurred due to subsequent expansion to meet unforeseen agency 

needs. For example, this occurred with three of the Washington, D.C., 

metro area high-value leases. When this occurs, GSA officials stated that 

generally, GSA does not go back to Congress with a prospectus for 

approval until the lease approaches expiration. At that point, if the 

continuing space need is over the prospectus threshold, GSA will provide 

a prospectus to Congress. The result of these situations is a further 

limitation on the transparency of the prospectus process in providing 

According to GSA officials, in three of these cases, GSA mistakenly did 

not provide a prospectus to Congress. For example, one of our case 

study leases, a 146,000 square foot lease in Los Angeles that houses the 

U.S. Army Corps of Engineers, has a 10-year term (from May 3, 2006 

through May 2, 2016) with a net annual rent of $3.2 million, thus over the 

fiscal year 2012 prospectus threshold of $2.79 million. However, GSA did 

not submit a prospectus for this project prior to the beginning of the lease 

term or otherwise notify or obtain approval from the congressional 

authorizing committees. According to GSA officials, GSA’s regional office 

in San Francisco, California, did not take the proper steps in analyzing 

lease costs to determine whether a prospectus was needed for the 

project. Since 2006, GSA headquarters has substantially revised and 

standardized its guidance on prospectus-level leases, a revision that GSA 

officials in three regions told us was helpful in preventing such mistakes.

 35One of these leases, with a net annual rent of $25.8 million, accounts for over half of this 

net annual rent. According to a GSA official, no prospectus was formulated for this lease 

when it commenced in the early 1990s, but GSA had briefed Congress before entering 

into this lease. The lease enabled the redevelopment of the property, the main Post Office 

near Union Station in Washington, D.C. The lease runs from 1992 to 2022. Moreover, 

according to GSA, one of these leases was not a prospectus-level lease because in year 

16 of the 20 year lease, the rent is significantly reduced for 42 months. In computing 

whether the net annual rent of a lease exceeds the prospectus threshold, GSA computes 

a levelized rent over the period of the lease term. In this case, the reduced rent late in the 

lease term meant that the net annual rent over the 20 years did not exceed the prospectus 

threshold.

Some High-Value Leases Did 

Not Go Through the Prospectus 

Process, Further Limiting 

Transparency
Page 29 GAO-13-744 GSA High-Value Leases

decision makers information on the full scope of GSA’s high-value leased 

portfolio—information that could be used to analyze the extent to which 

leasing is the best alternative in these cases. Not submitting a prospectus 

for congressional approval hinders the ability of the appropriate 

congressional committees to fulfill their oversight responsibilities for all 

prospectus-level leases. According to GSA officials, although violations of 

process and policy are relatively rare, GSA plans to enhance its internal 

controls to reduce instances of prospectus-level leases not going through 

the proper process in the future. Table 1 provides a summary of the highvalue leases we identified that did not have a prospectus or other 

legislative approval.

Table 1: GSA High-Value Leases without a Prospectus, as of November 2012

Dollars in millions

Tenant agency/location Lease term

Net annual 

rent (2012)

Rentable 

square feet 

GSA’s stated reason for lack of 

prospectus

Architect of the Capitol, Department of 

Labor, and GSA

Washington, DC

1992-2022 $25.80 992,546 Congressional briefing before lease 

award

Department of Homeland Security/CBP

Long Beach, CA

2001-2021 $3.21 143,732 GSA omission

Drug Enforcement Administration

St. Louis, MO

2002-2022 $3.42 87,824 Lease’s net annual rent was below the 

prospectus threshold when the lease 

was signed, but because of increases 

in space incorporated through 

supplemental lease agreements, it 

eventually exceeded the prospectus 

threshold

Department of Homeland Security

Arlington, VA

2006-2016 $2.86 89,451 Lease’s net annual rent was below the 

prospectus threshold when the lease 

was signed, but because of increases 

in space incorporated through 

supplemental lease agreements, it 

eventually exceeded the prospectus 

threshold

U.S. Army Corps of Engineers

Los Angeles, CA

2006-2016 $3.23 145,653 GSA omission

Department of Homeland Security/ICE

Atlanta, GA

2007-2022 $2.98 90,688 GSA omission
Page 30 GAO-13-744 GSA High-Value Leases

Dollars in millions

Tenant agency/location Lease term

Net annual 

rent (2012)

Rentable 

square feet 

GSA’s stated reason for lack of 

prospectus

Not shown

Arlington, VA

2008-2018 $2.83 79,070 Lease’s net annual rent was below the 

prospectus threshold when the lease 

was signed, but because of increases 

in space incorporated through 

supplemental lease agreements, it 

eventually exceeded the prospectus 

threshold

Department of the Treasury

Washington, DC

2010-2014 $3.02 81,088 Lease’s net annual rent was below the 

prospectus threshold when the lease 

was signed, but because of increases 

in space incorporated through 

supplemental lease agreements, it 

eventually exceeded the prospectus 

threshold

Department of the Treasury

Franklin, TNa

2012-2032 $2.85 135,373 The rent was significantly reduced in 

later years of the lease, so the 

“levelized” net annual renta never 

exceeded prospectus level

Total $50.20b 1,845,425

Source: GAO analysis of GSA data.

a

This lease met our criteria as a high-value lease because its fiscal year 2012 net annual rent 

exceeded the fiscal year 2012 prospectus threshold of $2.79 million. However, unlike our 

methodology for identifying high-value leases, GSA’s calculations to determine whether a lease 

exceeds the prospectus threshold involve levelizing the rent over the term of the lease. According to 

GSA officials, in this case, the levelized net annual rent (a computation of the net annual rent each 

year if the lease were to be paid in equal annual payments throughout the lease term) is below the 

prospectus threshold.

b

Net annual rent does not total due to rounding.

Without evaluating alternatives to continuing to lease its high-value 

leases, GSA does not have information that it could use to prioritize 

potential capital projects for those space needs currently in high-value 

leases for which it would most benefit the federal government to own 

rather than lease. According to our and OMB’s analysis of leading capital 

planning practices, leading organizations have processes in which 

proposed capital investments are compared to one another to create a 

portfolio of major assets ranked in priority order. In our July 2012 report 

on GSA’s Federal Buildings Fund,36

 36

we found that GSA’s project 

prioritization process for its capital program partially met leading practices 

but that it lacked transparency in that we were unable to determine how 

GAO-12-646.

GSA Has Not Prioritized 

Lease Projects for 

Ownership
Page 31 GAO-13-744 GSA High-Value Leases

GSA used its criteria to prioritize major projects. We recommended that 

GSA document in its annual budget request to OMB how it uses its 

prioritization criteria to generate its annual and 5-year lists of prioritized 

projects to ensure that Congress understands the rationale behind the 

prioritized project lists and that GSA is maximizing return on Federal 

Buildings Fund investments. According to GSA officials, GSA is currently 

working to develop a document that will accompany its new capital plan 

and clarify its prioritization process for decision makers.

GSA officials told us that, with regard to high-value leases, GSA 

addresses its portfolio on an asset-by-asset basis. While it has not 

performed a systematic analysis to determine which space needs 

represented by high-value leases would be most beneficial to move to 

federal ownership—or prioritized these space needs for ownership 

accordingly—in some cases, GSA has turned leased space into federallyowned space. For example, GSA determined it would be more costeffective to purchase rather than continue leasing the Columbia Plaza 

Building, which is occupied by State in Washington, D.C. A purchase 

option had been included in the 1992 lease at the request of Congress, 

and when exercised, it allowed GSA to purchase the building for about 

$100 million, well below the 2006 appraised value of $190 million. In 

2009, Congress made funds available from the Federal Buildings Fund 

for the purchase. GSA officials stated that pursuing this purchase was 

clearly beneficial to the federal government, since the high-priority tenant 

was already in residence and committed to a long-term occupancy, 

leasing elsewhere would be costly, and the building would immediately 

become an income-generating asset. These types of considerations could 

be appropriate criteria for GSA to use in considering which of the agency 

space needs currently occupying high-value leases should be prioritized 

for a federally-owned solution. However, without a portfolio approach in 

which high-value leases are systematically evaluated to determine which 

space needs should be the highest priority for transferring to federal 

ownership, GSA has no documentation to help it or government decisionmakers determine how best to invest limited capital funds.

Two elements further limit the vision and comprehensiveness of GSA’s

strategic capital planning process—GSA’s lack of consideration in its 

capital-planning process of the extent to which the existing high-value 

leases should be targeted for ownership and the lack of criteria to analyze 

and prioritize these projects among the other projects GSA considers for 

capital funding. Without a transparent prioritization of all major projects 

that would be more cost effective to own than to lease over the long term, 

GSA’s analysis of its portfolio is incomplete and is lacking core 
Page 32 GAO-13-744 GSA High-Value Leases

information to help decision makers work with GSA to manage its portfolio 

in a cost effective manner.

Both OMB and GAO guidance emphasize the importance of developing a 

long-term capital plan to guide the implementation of organizational goals 

and state that making informed capital investment decisions requires full 

information about an agency’s current and long-term needs, alternative 

courses of action, and how potential projects compare among each 

other.37 Without having taken these steps for high-value leases, GSA has 

not incorporated the high-value leases that should be the highest priority 

for ownership into a long-term capital plan. Since 1991, we have reported 

that GSA would benefit from a comprehensive capital plan, stating that a 

capital plan could provide information on the potential benefits and cost 

savings of competing capital projects and provide a better context for 

making capital investment decisions.38 Recently, in our 2012 report on 

GSA’s Federal Buildings Fund, we found that GSA’s long-term capital 

plan minimally conformed to leading practices in that it did not incorporate 

the following: a baseline needs assessment including where there might 

be gaps in what GSA’s real property portfolio provides; an explanation of 

why projects selected are the best alternative; and alternatives to meeting 

project goals.39

Instead, among other things, in July 2012, we found that GSA did not 

rank all of its proposed projects together—instead ranking courthouse 

and land port-of-entry projects in their own list—making it difficult to 

compare GSA’s prioritization of projects across its portfolio. We found that 

a comprehensive long-term capital plan could further GSA’s ability to 

make informed choices about long-term investment decisions and 

recommended that GSA (1) document in its budget submission how it 

prioritizes capital investments and (2) develop and annually submit a 5-

year long-term capital plan to OMB and Congress. GSA agreed with our 

 37OMB, Capital Programming Guide, Supplement to Office of Management and Budget 

Circular A-11, Part 7: Planning, Budgeting, and Acquisition of Capital Assets (July 2012), 

and GAO, Executive Guide: Leading Practices in Capital Decision-Making, 

GAO/AIMD-99-32 (Washington, D.C.: December 1998).

38GAO. Real Property Management Issues Facing GSA and Congress, GAO/T-GGD-92-4 

(Washington, D.C.: Oct. 30, 1991).

39GAO-12-646. 

GSA Has Not Incorporated 

High-Value Leasing into a 

Long-term Capital Plan
Page 33 GAO-13-744 GSA High-Value Leases

recommendations. As of May 2013, GSA officials stated that GSA was 

undertaking a major revision of its capital plan to implement these 

recommendations.

Just as GSA’s current capital plan does not prioritize all of its proposed 

capital projects in the same list or clearly explain why projects selected 

are the best alternative, GSA does not have a documented analysis of 

which, if any, of its high-value leases should be targeted for ownership 

and how such ownership might compare cost-wise to other capital 

projects it has included in its capital plan or budget request. The leasingrelated strategic documents that GSA provided to us focus on optimizing 

the portfolio at the agency level through GSA’s recent customer portfolio 

planning effort. While this effort may improve GSA’s leased portfolio, it 

does not allow decision makers to compare the financial implications of 

GSA’s high-value leases portfolio-wide—across agencies and against 

capital projects. This lack of information on the long-term consequences 

of high-value leases could inadvertently contribute to the federal 

government’s overspending on agencies’ long-term space needs—even 

as the federal government tries to trim costs through reducing its leased 

footprint. In contrast, a strategic vision for these leases that incorporates 

leading practices of capital decision making could better position the 

federal government to save money over time. Such a vision could take 

into account agencies’ current efforts to reduce space needs. For 

example, in considering the potential to move an agency division currently 

occupying leased space into federally owned space, GSA could 

incorporate into its analysis the extent to which additional leases, 

particularly smaller leases for the same agency in the same area, could 

be brought into newly constructed facilities if space needs continued to 

contract over time. Increased transparency could also promote 

collaboration with decision makers and better position GSA and tenant 

agencies to address funding and other challenges that are impeding 

progress in GSA’s efforts to reduce the federal real property footprint 

through improved space utilization as leases expire. According to GSA 

officials, GSA would welcome the opportunity to convert some of its highvalue leases to federal ownership, stating that its reliance on costly 

operating leases has increased in recent years as a result of constraints 

on the Federal Buildings Fund and the budget scoring of leases.

By focusing on cost savings through limiting the federal real property 

footprint, GSA’s efforts to proactively work with federal agencies to 

consolidate high-value and smaller leases as they expire, to move some 

high-value leases into government-owned space, and to help agencies 

Conclusions
Page 34 GAO-13-744 GSA High-Value Leases

increase space efficiency through such efforts as more open floor plans 

and increased telework have had some positive results. GSA’s work to 

optimize federal agency real property portfolios through better planning is 

also a step in a right direction. So far, these efforts are done for the most 

part on a lease-by-lease or agency-by-agency basis. Our work on leading 

practices in capital decision making has emphasized that vision and 

leadership are crucial to the success of leading organizations. GSA, in its 

role as manager of real property for many civilian federal agencies, has 

the potential to set a vision and strategy for federal real property that 

addresses needs and priorities across federal agencies. However, with 

regard to high-value leases, which include space needs for over 40 

federal agencies and departments and represent about one-third of 

GSA’s total net annual rent for leased facilities, GSA lacks a strategic 

focus for determining which should be converted to ownership.

Indeed, as agencies work to shrink their footprint through increased 

space efficiency and telework, it could be an ideal time to make carefully 

targeted investments into owned facilities that would help move the 

federal government out of long-term, high-value leases and into efficient, 

federally owned space with lower long-term costs. However, the lack of 

transparency in GSA’s lease prospectuses means that Congress may not 

fully understand the length of an agency’s space needs and the costs of 

continuing to handle these long-term needs through leasing rather than 

ownership. In addition, if the transparency of the prospectuses is 

improved, Congress would still be considering each leasing action 

separately; to strategically manage these leases, it is important to 

consider them in the context of GSA’s entire real property portfolio, 

whether at the regional level for space planning or the national level for 

considering where to invest scarce federal funds. GSA lacks analysis of 

the effect of these long-term leases on its portfolio and on the tenant 

agency in line with capital-planning principles—and it therefore cannot 

share this information with Congress, for example, by incorporating 

proposals for those space needs currently housed in high-value leases for 

which it would be most beneficial to transfer to an ownership solution into 

the capital plan we recommended that GSA develop in 2012.

Moreover, cases in which high-value leases lack a prospectus further 

reduce the transparency of GSA’s full portfolio. Although these leases 

have been in effect for several years, it is nonetheless important that 

information on them be submitted to the appropriate committees to 

maintain GSA’s accountability to Congress in this area and allow the 

committees to exercise their oversight responsibility. Such information 

would provide GSA, OMB, and congressional decision makers with 
Page 35 GAO-13-744 GSA High-Value Leases

critical, transparent information on how to strategically manage GSA’s 

real property portfolio.

To enhance transparency and allow for more informed decision making 

related to the appropriate role of leasing in GSA’s real property portfolio, 

we recommend that the Administrator of GSA take the following three 

actions:

• Include in the lease prospectus a description of the length of time that 

an agency estimates it will need the space, an historical account of 

how long the agency has been in the particular building it is occupying 

at the time of the prospectus, and any major investments the agency 

will have to make to the leased space to meet its mission. For those 

spaces for which the agency has a long-term projected need, also 

include an appropriate form of cost-to-lease versus cost-to-own 

analysis.

• Report to the appropriate congressional committees any leases above 

the prospectus-threshold that did not follow the congressional 

prospectus process.

• Develop and use criteria to rank and prioritize potential long-term 

ownership solutions to current high-value leases among other capital 

investments. Use this ranking to create a long-term, cross-agency 

strategy that facilitates consideration of targeted investments in 

ownership. This strategy could be incorporated initially as a separate 

but related part of the capital plan we previously recommended that 

GSA develop in 2012, or integrated into the capital plan itself.

We provided a draft of this report for review and comment to GSA and 

OMB. We also provided a draft of this report for review and comment to 

several other agencies we spoke with during the engagement because 

they are tenants of GSA leases, including EPA, HHS, the U.S. 

Department of Agriculture (USDA), Department of Defense (DOD), 

Department of Justice (DOJ), and Department of Transportation (DOT). 

GSA concurred with our recommendations and provided technical 

clarifications, which we incorporated as appropriate. GSA’s comments 

are discussed in more detail below. GSA’s letter is reprinted in appendix 

Recommendations

Agency Comments

and Our Evaluation
Page 36 GAO-13-744 GSA High-Value Leases

II.40

GSA agreed with the report’s recommendations and stated that it will take 

action to implement them. GSA stated that it remains committed to 

sharing all available client and market information with Congress in the 

prospectus process. However, GSA raised the concern that some 

information may not be included in prospectuses due to requirements of 

GSA’s competitive real estate procurement process and today’s uncertain 

budget environment. We agree that GSA must adhere to the 

requirements of its competitive procurement process in carrying out the 

prospectus process. However, in most cases, the additional information 

we recommended be incorporated into prospectuses either has been 

included in prospectuses in the past—such as a lease versus purchase 

analysis—or is general information. Moreover, the information we 

recommended be included, even if it was modified to some degree to 

ensure adherence to GSA’s competitive procurement process, would 

provide valuable information to Congress that could help inform its 

decisionmaking in this area. Regarding the uncertain budget environment, 

we reiterate that as agencies work to cut costs through increased space 

efficiency and telework, it could be an ideal time to make carefully 

targeted investments into owned facilities that wouldhelp move the federal 

government out of long-term, high-value leases and into efficient, 

federally owned space with lower long-term costs. Improved 

transparency in GSA’s lease prospectuses could help Congress fully 

understand the length of an agency’s space needs and the costs of 

continuing to handle these long-term needs through leasing rather than 

ownership.

 OMB did not comment on the draft report or recommendations but 

provided technical clarifications, which we incorporated where 

appropriate. EPA, HHS, USDA, DOD, DOJ, and DOT did not provide 

comments on the draft report.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Director of the Office 

of Management and Budget; the Administrators of General Services and 

Environmental Protection; and the Secretaries of Agriculture, Defense, 

 40 GSA’s letter also included an enclosure that contained the agency’s technical 

comments. The enclosure is not reprinted in Appendix II.
Page 37 GAO-13-744 GSA High-Value Leases

Health and Human Services, Justice, Transportation, and State. In 

addition, the report will be available at no charge on GAO’s website at 

http://www.gao.gov.

If you or your staff have any questions, please contact me at (202) 512-

2834 or wised@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made key contributions to this report are listed in appendix 

III.

David J. Wise

Director, Physical Infrastructure Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-13-744 GSA High-Value Leases

Our objectives were to (1) identify the characteristics of the General 

Services Administration’s (GSA) high-value leases and what actions, if 

any, GSA has taken to reduce their cost, and (2) assess the extent to 

which GSA’s capital-planning approach promotes informed decision 

making about leasing versus ownership.

To identify the characteristics of GSA’s high-value leases, we analyzed 

data provided by GSA from GSA’s Real Estate Across the United States 

(REXUS) database to determine the number of active leases as of 

November 30, 2012, including those with a net annual rent at or above 

the fiscal year 2012 prospectus threshold of $2.79 million. We determined 

that 218 of GSA’s leases met the criteria of being at or over this 

prospectus threshold, and we defined these as high-value leases for 

purposes of this report. We used data from GSA’s central data system 

provided in building, space, lease, and rent files in our analysis to select 

and characterize the population of high-value leases. To determine 

whether these data were of sufficient reliability for our analysis, we 

reviewed the program documentation associated with the files and 

discussed various data elements with GSA staff responsible for the data. 

We also conducted our own electronic testing to check the consistency of 

the data and to reconcile the accuracy of certain lease numbers. We did 

not attempt to evaluate or test all of the aspects of the GSA data files, but 

instead focused on the high-value leases. As a result of our review and 

discussions, we determined that the data in the files provided by GSA 

were of sufficient reliability to be used in our analysis and for the 

purposes of this report.

We analyzed data on each of these assets to describe characteristics of 

these leases, including the amount of leased space, net annual rent, 

rentable square footage, lease term, and tenant. We also analyzed GSA 

data to determine the total number, square footage, and cost of all of its 

leases. We also reviewed the prospectuses or other legislative authority 

for the 218 high-value leases. For the 9 of the 218 high-value leases that 

did not have a prospectus, we obtained additional clarification from GSA 

officials. In addition, we reviewed GSA documents such as The State of 

the FY2011 Portfolio to obtain general information on the agency’s real 

property portfolio.

To inform both objectives, we selected a non-generalizable sample of 12 

high-value leases from the list of 218 we had identified to examine more 

closely as case studies. In selecting the 12 case study leases, we 

focused on leases that were near expiration or had recently been entered 

into in order to facilitate discussions with GSA on its decision-making 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-13-744 GSA High-Value Leases

process for these leases. We also focused on leases that were in 

holdover status, represented a variety of tenant agencies, and had a 

variety of net annual rents from close to the prospectus threshold of $2.79 

million to significantly above the prospectus threshold. Because the 

majority of high-value leases are located in GSA’s National Capital 

Region (representing Washington, D.C., and parts of Northern Virginia 

and suburban Maryland), we selected six of the leases from that region. 

We selected the other six leases from the Northwest/Arctic, Pacific Rim, 

and Greater Southwest Regions because these regions were 

geographically diverse and had a relatively large portfolio of high-value 

leases. These 12 selected leases represented space for 14 different 

federal tenants, with rentable square feet ranging from over 99,000 to 

almost 802,000. Their net annual rent ranged from about $2.9 million to 

almost $20 million. For these leases, we reviewed numerous documents, 

including the lease contract and supplemental lease agreements, 

prospectus, House and Senate authorizing committees’ resolutions 

approving the prospectus, scoring analysis, and space plan. We also 

interviewed officials most knowledgeable about these leases from GSA 

regional and local offices and from the tenant agencies. In addition, we 

reached out to the lessors and, to the extent that they were willing, 

interviewed them about their experience working with GSA on the lease.

We toured several of these buildings to inform our discussion of these 

leases. Our findings from these case studies cannot be generalized to the 

universe of 218 high-value leases we identified or to GSA’s leased 

portfolio. However, they illustrate examples of broader challenges and 

opportunities GSA faces in managing its high-value lease portfolio. In 

addition, we reviewed relevant legislation, GSA guidance, our prior work, 

and industry reports and studies related to federal leasing of real 

property. We interviewed GSA headquarters officials and regional officials 

in the National Capital, Northwest/Arctic, Pacific Rim, and Greater 

Southwest Regions. Together, these regions have more than 70 percent 

of the 218 high-value leases we identified. We also interviewed OMB 

staff, GSA Inspector General Office officials, and numerous private sector 

officials with experience in working with GSA on high-value leases.

To assess the extent to which GSA’s capital planning approach promotes 

informed decision making about leasing versus ownership, in addition to 

the above steps, we analyzed our and OMB’s work on leading practices 

in capital planning. We identified leading practices for using information to 
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-13-744 GSA High-Value Leases

make capital investment decisions from GAO’s Executive Guide1 and 

OMB’s Capital Programming Guide.

2 We also drew from the National 

Research Council’s research in this area. In addition, we reviewed our 

recent work on capital planning in the context of GSA’s Federal Buildings 

Fund.3

We conducted this performance audit from September 2012 to 

September 2013 in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

We assessed whether GSA’s guidance practices conformed to the 

criteria established in these guides in the areas of alternatives evaluation, 

project prioritization, and long-term capital planning. We reviewed GSA 

documents, including its Leasing Desk Guide, budget requests for the 4 

fiscal years, most recent capital plan (fiscal year 2011), most recent call 

to regions regarding prospectus level leases—the Capital Investment and 

Leasing Program (CILP plan), criteria for ranking proposed capital 

projects, and GSA data and information on holdovers in 2012 and lease 

losses for fiscal years 2005 through 2011. We also interviewed GSA 

officials in the Office of Portfolio Management to understand GSA’s 

perspective on capital planning in the context of its high-value leased 

portfolio.

 1

GAO, Executive Guide: Leading Practices in Capital Decision-Making, GAO/AIMD-99-32 

(Washington, D.C.: December 1998).

2

OMB, Capital Programming Guide, Supplement to Office of Management and Budget 

Circular A-11, Part 7: Planning, Budgeting, and Acquisition of Capital Assets (June 2006).

3

GAO-12-646.
Appendix II: Comments from the General 

Services Administration

Page 41 GAO-13-744 GSA High-Value Leases

Appendix II: Comments from the General 

Services Administration
Appendix II: Comments from the General 

Services Administration

Page 42 GAO-13-744 GSA High-Value Leases
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 43 GAO-13-744 GSA High-Value Leases

David J. Wise, (202) 512-2834 or wised@gao.gov

In addition to the contact named above, David Sausville (Assistant 

Director), Carol Henn, Joshua Ormond, Kelly Rubin, Larry Thomas, Jim 

Ungvarsky, Pamela Vines, Crystal Wesco, Alwynne Wilbur, and Jade 

Winfree made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 44 GAO-13-744 GSA High-Value Leases

High-Risk Series: An Update. GAO-13-283. Washington, D.C. February 

2013.

Federal Real Property: Improved Data Needed to Strategically Manage 

Historic Buildings, Address Multiple Challenges. GAO-13-35. Washington, 

D.C.: December 11, 2012.

Federal Real Property: Strategic Partnerships and Local Coordination 

Could Help Agencies Better Utilize Space. GAO-12-779. Washington, 

D.C.: July 25, 2012.

Federal Buildings Fund: Improved Transparency and Long-term Plan 

Needed to Clarify Capital Funding Priorities. GAO-12-646. Washington, 

D.C.: July 12, 2012.

Federal Real Property: National Strategy and Better Data Needed to 

Improve Management of Excess and Underutilized Property. 

GAO-12-645. Washington, D.C.: June 20, 2012.

Federal Real Property: Overreliance on Leasing Contributed to High-Risk 

Designation. GAO-11-879T. Washington, D.C.: August 4, 2011.

Federal Real Property: Progress Made on Planning and Data, but 

Unneeded Owned and Leased Facilities Remain. GAO-11-520T. 

Washington, D.C.: April 6, 2011.

Federal Real Property: Strategy Needed to Address Agencies’ 

Longstanding Reliance on Costly Leasing. GAO-08-197. Washington, 

D.C.: January 24, 2008.

Federal Real Property: Progress Made Toward Addressing Problems, but 

Underlying Obstacles Continue to Hamper Reform. GAO-07-349. 

Washington, D.C.: April 13, 2007.

Executive Guide: Leading Practices in Capital Decision-Making,

GAO/AIMD-99-32. Washington, D.C.: December 1998.

Real Property Management Issues Facing GSA and Congress. 

GAO/T-GGD-92-4. Washington, D.C.: October 30, 1991.

Related GAO Products

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