General Services Administration: Improvements Needed in Managing Delegated Authority of Real Property Activities
Published: 2007-09-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The General Services Administration (GSA) issues different types of delegations, whereby agencies may request authority to perform certain real property activities, such as leasing space and maintaining property. Effective management of the program is critical to ensuring that federal dollars are well spent and adequate workspace is provided. GAO was asked to determine (1) what real property authority GSA has delegated to its tenant agencies, (2) what policies GSA used to manage delegated authority, and (3) reasons the tenant agencies requested delegated authority. GAO reviewed the law, federal regulations, and GSA policies relating to six types of delegated authority and interviewed GSA officials and officials from six select tenant agencies. GAO analyzed GSA data on delegations issued from fiscal years 1996 to 2006.
section_title: What GAO Found
paragraphs: GSA delegated authority for operations and maintenance, utility services, lease management, administrative contracting officer, repair and alteration activities, and real estate leasing to its tenant agencies. However, GSA did not have complete or consistent data for key delegations. GSA officials believe the lack of complete data for repair and alteration delegations up to $100,000 was not problematic because they involve relatively small projects with limited program risk, and GSA has not noticed a pattern of problems that would warrant increased oversight. Regarding delegations of authority for real estate leasing, two offices within GSA collected separate sets of data. One office collected data on the number of general purpose lease delegations issued while another collected data on the number of lease delegations exercised for three different types of lease delegations (including general purpose, categorical, and special purpose). One office said its data are likely an undercount, and the different sets of data have not been reconciled. GSA is currently implementing several changes to improve its data collection for lease delegations and will issue separate oversight procedures that include a requirement to reconcile the two sources of lease delegation data. However, it is unclear when the oversight procedures will be issued. It is important to have accurate data on lease delegations because these delegations appear to be used more frequently than other delegation types. Federal agencies using these delegations may lack experience in acquiring office space, which could result in the government not receiving the best deal. We found that GSA had written policies and procedures for managing the six types of delegations we reviewed, but the guidance was not always current. GSA officials acknowledged the need to update some of its guidance and said the updates are in process, but it is unclear when these updates will be finalized. Further, GSA officials stated they did not always use mandated cost-effectiveness criteria when deciding to delegate authority for certain delegations due, in part, to staffing constraints. In addition, the procedures used for assessing cost-effectiveness were not always included in written guidance. The lack of updated guidance and limited use of mandated criteria inhibits GSA's ability to manage its delegations and determine if they are in the best interests of the government. According to the six tenant agencies we interviewed, the main reasons agencies sought delegations were the ability to complete their delegated real property activities in a timely manner and prioritize their own service requests, particularly in those cases where GSA's knowledge and expertise were less critical. Most of the six agencies we contacted plan to seek delegations in the future.

section_title: Letter
paragraphs: The General Services Administration (GSA) serves as the federal  government’s landlord and designs, builds, manages, and leases the  facilities supporting the needs of other federal agencies throughout the  government. Although GSA is responsible for managing over 8,000  government-owned and leased buildings, GSA’s customer agencies may  request authority to perform for themselves certain real property  activities, such as leasing and maintaining their own space. GSA can  delegate the requested authority to the agencies. For example, in 1996,  GSA began a program to offer what are known as general purpose lease  delegations. Under this program, called “Can’t Beat GSA Leasing,” federal  agencies have the choice of using GSA as their leasing agent or assuming  responsibility of their own leasing. The program was an outgrowth of  GSA’s commitment to streamline its leasing operations, respond to the  government’s changing needs, and address recommendations from client  agencies. When GSA delegates its real property authority, the delegations  require the agencies to comply with the applicable laws, regulations, and  terms of the delegations. Under the delegations, GSA can review the  agency’s performance to determine whether the agency is meeting its  responsibilities. If federal agencies do not perform their delegated  responsibilities efficiently, they could, for example, pay more than GSA  would charge for space, provide substandard space for their employees, or  damage the quality or value of the space. Effective management of its  delegations is critical for GSA to help ensure that federal dollars are well- spent and adequate workspace is provided for federal employees.
Given your interest in GSA’s use of real property delegations of authority,  you asked us to determine (1) what real property authority GSA has  delegated to its tenant agencies, (2) what policies and procedures GSA  used to manage delegated real property authority, and (3) reasons the  tenant agencies requested delegated authority. To meet these objectives,  we reviewed the law, federal management regulations, and GSA’s existing  policies and procedures for delegating real property authority. We also  interviewed GSA officials from the Public Buildings Service (PBS), which  is responsible for managing the delegations. In addition, we interviewed  officials from GSA’s Office of Governmentwide Policy (OGP), which  provides oversight for delegations of real estate leasing authority. We  limited our review to the types of delegations issued to and exercised by  GSA’s top 10 customers (its tenant agencies) between fiscal years 1996 to  2006. Delegations are issued when GSA grants authority to another agency  to perform real property activities and exercised when the agency actually  uses the authority. Further, we interviewed six tenant agencies with the  highest number of delegations to obtain information on their views and  experiences with the delegations. These six agencies are the Departments  of Commerce, Defense, Interior, and Justice; the Social Security  Administration, and the Environmental Protection Agency (EPA). We also  contacted Judiciary officials from the Administrative Office of the U.S.  Courts to discuss their decision to terminate certain delegations. In  addition, we obtained data from PBS and OGP on delegations issued and  exercised. We conducted data reliability testing and determined that the  data used in this report were sufficiently reliable for our purposes. A more  detailed discussion of our scope and methodology appears in appendix I.  We performed our review from August 2006 through June 2007 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: Congress created GSA in 1949 through the Federal Property and  Administrative Services Act to serve as a centralized property  management agency with one of its responsibilities to provide space to  federal agencies as economical as possible. The GSA Administrator may  delegate and may authorize successive redelegations of the real property  authority vested in the Administrator to any federal agency. Federal  agencies must exercise delegated real property authority and functions  according to the parameters described in each delegation of authority  document, and the agencies may only exercise the authority of the  Administrator that is specifically provided within the delegation of  authority. GSA officials told us the ability of the GSA Administrator to  delegate real property authority is a tool provided by Congress to enable  GSA to carry out its various real property responsibilities. The delegations  are not managed as a single program, rather the various delegations, once  granted, are managed and administered in the appropriate PBS business  line. According to federal regulations, GSA may delegate authority to  federal agencies to conduct the following activities:Real estate leasing authority: This authority allows agencies to perform  all functions necessary to acquire leased space, including procurement  and administering, managing and enforcing the leases. Agencies have the  option to use one of three types of delegations of real estate leasing  authority granted by the GSA Administrator: general purpose, categorical,  and special purpose. See table 1 for a description of the types of real  estate leasing authority delegations.
In May 2005, GSA issued guidance that reemphasized and modified certain  procedures associated with the use of the general purpose, categorical,  and special purpose leasing delegations. GSA requires agencies to meet  several general conditions to use the real estate leasing authority  delegations, including (1) the agency must receive written confirmation  from the appropriate Assistant Regional Administrator that suitable  government-controlled space is not available before relocating  government employees from GSA controlled space; (2) the average annual  rent is below the prospectus level, as previously described; (3) agency  staff using the authority must meet the relevant contracting experience  and training requirements; (4) the agency must acquire and use the space  in accordance with all applicable laws and regulations for federal space  acquisition activities; (5) the agency must have the capacity to perform all  delegated leasing activities; and (6) the agency must provide semi-annual  reports to OGP on April 30 and October 31 that detail the leasing activities  conducted under the delegations. GSA retains the right to review each  lease and the capacity of the agency to perform the delegation and, if  necessary, to revoke the delegation. Agencies using the general purpose  leasing delegation are also required to provide the following information  to the appropriate GSA regional office: upon award of the lease, provide  notification of the award date and location of the property, including  documentation that the negotiated rental rate is within the prevailing  market rental rate for the class of building leased and provide 18 months  advance notice of lease expiration if there is a continuing need for the  space and the agency wishes to use the delegation again.
Administrative contracting officer authority: This authority allows the  agencies to manage the administration of one or more lease contracts  awarded by GSA and perform such duties as paying and withholding rent  and modifying lease provisions that do not change the length of the lease  or the amount of space under the lease. To obtain this delegation, an  agency must occupy at least 90 percent of the building’s GSA-controlled  space or have the written concurrence of 100 percent of rent-paying  occupants covered under the lease, and have the technical capability to  perform the lease. Agencies seeking a delegation must submit a written  request to the regional headquarters where the building is located. If PBS  staff at the region concurs with the request, an agreement is drafted for the  delegation of administrative contracting officer authority and sent to the  PBS Commissioner and the GSA Administrator for approval. An  administrative contracting officer delegation lasts until the lease expires,  or the space reverts to GSA unless the agency or GSA agrees to terminate  the delegation.
Lease management authority: This authority allows agencies to manage  the administration of one or more lease contracts awarded by GSA. To  obtain this delegation, an agency must occupy at least 90 percent of the  building’s GSA-controlled space or have the written concurrence of 100  percent of rent-paying occupants covered under the lease, and have the  technical capability to perform the lease. Agencies seeking a delegation  must submit a written request to the regional headquarters where the  building is located. If PBS staff at the region concurs with the request, a  memorandum of understanding is drafted and sent to the PBS  Commissioner and the GSA Administrator for approval. The term of the  delegation lasts until the lease expires and either agency is free to  terminate at any time. In addition to this process, GSA’s contracting  officers can delegate lease management authority to qualified individuals,  upon request, for specific leases.
Operations and maintenance authority: This authority, which was  established in 1983, allows agencies to manage and operate GSA-owned  and leased buildings on a day-to-day basis. Delegated functions may  include among others, maintenance, recurring repairs, and minor  alterations. To obtain this type of delegation, an agency must occupy at  least 90 percent of the space in the GSA-controlled facility or (1) have the  concurrence of 100 percent of the rent-paying occupants to perform these  functions, (2) demonstrate that it can perform the delegated  responsibilities, and (3) document that the delegation will be cost  effective. Agencies seeking this authority must first notify the region  where the space is located by submitting a formal request. After regional  staff has reviewed the request, it is forwarded to the GSA Administrator  for a final decision. The Administrator can then grant or decline the  request, with concurrence from applicable program offices. A delegation  of authority generally lasts until the space is returned to GSA or the space  is no longer needed. Delegation agreements allow for either the agency or  GSA to terminate a delegation in full or in part.
Repair and alteration project authority: This authority allows agencies to  perform repair and alteration projects. With respect to repair and  alteration delegations, there is a statute relating to the delegation of repair  and alteration projects of $100,000 or less. This statute provides that in  accordance with standards prescribed by the GSA Administrator, the  Administrator shall delegate requests to an agency for projects in public  buildings when the estimated cost does not exceed $100,000. Under  GSA’s general authority to delegate its real property activities at 40 U.S.C.  § 121, in January 1997, the GSA Administrator granted blanket delegation  authority in leased space for repair and alteration projects up to $100,000  for an indefinite term. According to GSA officials, the regions are  responsible for managing these delegations. The statute further provides  that the GSA Administrator may delegate to an agency projects that are  estimated to cost more than $100,000 when the Administrator determines  the delegation promotes efficiency and economy. According to the Federal  Management Regulation, GSA can delegate individual alteration projects  greater than $100,000 when the agency demonstrates the ability to perform  the delegated repair and alteration project responsibilities and when such  a delegation promotes efficiency and economy. According to GSA  officials, individual requests for delegations of repair and alteration  project authority greater than $100,000, which are rarely received by GSA,  are granted only by the Administrator of GSA. The scope of the intended  project must be included in an agency’s request for a delegation and is  reviewed first by the relevant GSA region and then by PBS central office  staff before being submitted to the Administrator with a recommendation  either to grant or refuse authorizing the delegation. The term of  delegation is for the duration of the project and either party can terminate  the delegation at any time. If a delegated repair and alteration project is  expected to exceed the prospectus level, GSA will submit the proposed  project to its authorizing committees for review and approval.
Utility services authority: This authority allows agencies to negotiate and  execute utility services contracts for periods of more than 1 year but not  exceeding 10 years for their use and benefit. Agencies also have the  authority to intervene in utility rate proceedings to represent the  consumer interests of the federal government, if so provided in the  delegation of authority. Agencies seeking utility delegations are required  to submit their request to PBS’s Energy Center of Expertise, which  procures utility services for GSA’s customer agencies. The requests must  include a certification from the acquiring agency’s senior procurement  executive that the agency has an established acquisition program,  personnel technically qualified to deal with specialized utilities problems,  and the ability to accomplish certain contracting requirements. The  Energy Center reviews the request for compliance with the requirements  and conducts an internal analysis of federal utility needs in the specified  area. Upon approval of the agency’s qualifications to perform the  delegation, and a determination that there is minimal if any additional  federal utility needs in the service area, a formal delegation of authority  for a utility acquisition letter is then prepared for the GSA Administrator’s  signature.
section_title: GSA Delegated Most Types of Real Property Authority but Did Not Have Consistent or Complete Data for Certain Delegated Activities
paragraphs: GSA delegated authority for operations and maintenance, utility services,  lease management, administrative contracting officer activities, repair and  alterations, and real estate leasing to its tenant agencies. However, as  shown in table 2, GSA did not have complete or consistent data on the  number of delegations of repair and alteration project authority up to  $100,000 and real estate leasing authority. GSA generally requires agencies  to seek its approval before using delegations of real property authority.  However, GSA is required by law to issue delegations to requesting  agencies for repair and alteration projects in public buildings that are not  expected to exceed $100,000; in leased space, GSA has issued a standing  delegation under its general authority for these types of projects.  Additionally, GSA issued standing delegations to allow agencies to enter  into certain types of leases without having to first obtain its approval. GSA  officials told us that they believe the lack of complete data for delegations  of repair and alteration project authority up to $100,000 was not  problematic. GSA said these delegations are for small projects with limited  program risk; and according to GSA officials, the GSA regional offices  would identify and report any potential problems to the central office.  However, real estate lease delegations involve more risk, and without  accurate data on the number of leases awarded using these delegations,  GSA is missing an important management control to assess their impact.
Operations and maintenance authority: GSA reported that its tenant  agencies exercised 43 delegations of operations and maintenance  authority from fiscal years 1996 to 2006, representing 203 buildings. As  shown in figure 1, the Department of Defense had the most delegations,  representing 84 buildings and approximately 4 million square feet.
PBS officials did not have exact issuance dates for these delegations;  however, they estimated that the majority of the delegations were  originally issued on or before 1989 for a term of 5 years and subsequently  redelegated without defined terms. PBS officials said they rarely receive  requests for new operations and maintenance delegations. Since 2000,  GSA issued only one new delegation of this type to the agencies included  in our review. PBS officials also said that they rarely decline requests for  delegations of operations and maintenance authority because PBS works  with the agencies to determine that they meet the requirements before  they formally submit the request.
Utility services authority: GSA also reported 52 utility services  delegations from fiscal years 1996 to 2006 to agencies that had custody or  control of their facilities. As shown in figure 2, the Department of Interior  had the most delegations, all of which were for remote sites of the Bureau  of Indian Affairs and the Bureau of Reclamation.
Lease management authority: GSA reported that, for fiscal years 1996 to  2006, it delegated lease management authority for 16 leases to its tenant  agencies. GSA does not require the regional offices to report these  delegations to the central office, and the central office does not routinely  request or monitor information on these activities. GSA officials said these  delegations are self-correcting — meaning the limited authority provided  under these delegations is controlled by the GSA contracting officer,  which minimizes the risk that the agency could exceed the authority of the  delegation. Additionally, GSA officials said they had not seen a pattern of  problems that would indicate a need for more oversight of these  delegations.
Administrative contracting officer authority: GSA reported that, for  fiscal years 2000 to 2006, it delegated administrative contracting officer  authority for 136 leases to its tenant agencies. But GSA did not have data  for fiscal years 1996 to 1999 because the database used to track these  delegations did not have historical data before fiscal year 2000. As shown  in figure 3, all of the delegations went to the Department of Commerce, the  Department of Defense, and the EPA. In addition, most of the delegated  activity was in the National Capital Region.
Repair and alteration project authority: GSA reported granting one  individual repair and alteration delegation above $100,000 to the EPA, but  did not have data for its blanket delegations of repair and alteration  authority up to $100,000 as these delegations are managed at the regional  level, and GSA does not require the regional offices to report these  delegations to the central office. GSA officials said that regional staff  would report to the central office any significant issues or problems  resulting from the blanket delegations, and based on anecdotal evidence,  they have not seen a pattern of problems that would indicate a need for  more oversight of these delegations.
Real estate leasing authority: Two separate offices in GSA collect  disparate sets of data on delegations of real estate leasing authority. PBS  requires the regional offices to report how many general purpose leasing  delegation requests are received and how many are issued, which may or  may not ultimately result in the requesting agency actually awarding a  lease. PBS reported that, for fiscal years 2001 to 2006, it issued 190 lease  delegations to its tenant agencies. However, PBS did not have data from  fiscal years 1996 through 2000 because, according to PBS officials, the  data were misplaced through various internal reorganizations. In addition,  PBS did not collect data on categorical and special purpose delegations.  Agencies are not required to notify GSA prior to using the categorical lease  delegation, except for leases above the prospectus threshold as previously  described and leases for parking. Special purpose delegations also do not  require GSA approval unless the space exceeds 2,500 square feet. PBS  officials stated that they focus their management efforts on the general  purpose lease delegations because they have the authority to approve or  disapprove use of this delegation type, whereas agencies can generally use  the categorical and special purpose lease delegations without GSA  approval. Lastly, previous reviews of the general purpose lease delegation  program by OGP found, among other things, several instances where  federal agencies did not notify the relevant PBS office of its intent to  exercise the delegation of authority, making it difficult for PBS to track  these delegations.
The data that PBS has on real estate lease delegations are inconsistent  with the data that OGP collects. In 1996, OGP was asked to provide an  oversight role, serving as an “honest broker” between PBS and the federal  agencies. PBS officials told us the Office of Management and Budget  (OMB) and Congress, at the time, wanted independent oversight of the  delegations because they were concerned that agencies may not have the  expertise to obtain the best deal for the government. They also viewed  PBS as having an inherent conflict of interest when deciding delegations.  In other words, OMB and Congress believed that PBS could stand to lose a  significant amount of its leasing business due to the delegations and  therefore did not view PBS as an independent overseer of the delegation  program. According to GSA’s guidance on delegations of real estate  leasing authority, federal agencies are to report to OGP every 6 months on  their delegated leasing activity for all three types of lease delegations.  OGP reported that GSA’s tenant agencies entered into 594 leases using the  three different leasing authorities from fiscal year 1996 through fiscal year  2006. However, OGP said the data likely undercount the number of  exercised lease delegations because the guidance did not define whether  agencies were to report all current delegations or only those awarded  within the 6 months of any given reporting period. In other words, some  agencies reported only those delegations issued during the 6-month period  and others reported all current delegations.
Both PBS and OGP acknowledged that their data were inconsistent, as  shown in figure 4. OGP and PBS did not review each other’s lease  delegation data to determine an accurate count of the number of leases  awarded using the real estate leasing delegations.
According to PBS guidance for delegations of real estate leasing authority,  OGP compares the information that the agencies report against delegation  information provided by the PBS regions to determine any underreporting  by agencies. However, an OGP official told us that OGP is not required to  follow PBS guidance and in fact does not compare its data with that  provided by PBS. PBS officials acknowledged that OGP is not bound by  PBS’s guidance for delegations of real estate leasing authority, but it noted  that OGP was involved in drafting the guidance.
GSA is implementing several changes to improve its data collection for  lease delegations. First, the Federal Real Property Council accepted  OGP’s recommendation to add a data field to the governmentwide Federal  Real Property Profile inventory system to track the leasing authority used  for space acquisition. Agencies are now required to report real property  assets by building and to specify whether that asset is owned or leased. If  the agency designates the latter, it now must designate the authority under  which the asset is leased. According to GSA officials, this requirement is  effective for fiscal year 2007 and was included in guidance issued in June  2007. The information will allow the Federal Real Property Council and  GSA to better understand the level of delegated leasing that occurs in the  federal government using the categorical, special purpose, and general  purpose leasing delegations. Additionally, according to GSA’s draft leasing  guidance that is scheduled to be issued in September 2007, GSA will no  longer require the biannual reporting to OGP of general purpose,  categorical, and special purpose lease delegations. In its place, OGP will  accept the agency submissions for the Federal Real Property Profile  inventory, which, according to GSA officials, should eliminate the agency  confusion about the reporting period. GSA has also committed to  implementing recommendations from the August 2007 Inspector General  report on the lease delegation program.
PBS is also drafting separate oversight procedures for delegations of real  estate leasing authority. According to PBS officials, the procedures will  include a requirement to reconcile the two sources of lease delegation  data: the Federal Real Property Inventory Report and PBS. OGP will  annually provide a listing of all delegation activity from the Federal Real  Property Profile database, and PBS will compare that information with its  centralized records. GSA officials said these oversight procedures would  be issued in September 2007.
According to GAO’s Standards for Internal Controls, managers need  program data to determine whether they are meeting their agencies’ goals  for accountability for effective and efficient use of resources. GSA  officials told us that they believe the lack of complete data for delegations  of repair and alteration project authority up to $100,000 was not  problematic. Repair and alteration delegations that do not exceed  $100,000 involve what GSA considers to be small projects with limited  program risk, and any potential problems would be identified and reported  to the central office by the regions. Additionally, GSA officials said they  had not seen a pattern of problems with these delegations that would  indicate a need for more oversight. However, based on the data provided,  agencies use the lease delegations more often than other types of  delegations. Federal agencies using these delegations may lack experience  in acquiring office space, which could result in offices being housed in  substandard buildings and the government not receiving the best deal.  Without accurate data on the number of leases awarded using the real  estate leasing delegations, GSA is missing an important management  control to evaluate whether the delegation of real estate leasing authority  is operating as intended.
section_title: GSA’s Written Policies and Procedures for Managing Certain Delegations Were Not Always Current, and the Agency Did Not Always Use Mandated Cost-Effectiveness Criteria
paragraphs: Although GSA had written policies and procedures for managing all types  of delegations we reviewed, the policies and procedures in certain  documents were not always current. In addition, GSA did not always use  mandated criteria stated in the Federal Management Regulation—namely  determining whether a delegation would be cost effective for the  government—when deciding to delegate real property activities. GSA said  it used mandated criteria when delegating utility services and for the most  recent delegations of individual repair and alteration authority above  $100,000 and operations and maintenance authority. However, GSA did  not use the criteria when delegating real estate leasing and administrative  contracting officer authority and could not determine if it used mandated  criteria when delegating lease management authority. GSA’s procedures  for assessing cost-effectiveness were not always documented in GSA’s  written guidance, which could limit GSA’s ability to determine if the  delegations are in the best interests of the government in certain cases.
subsections: section_title: GSA Policies and Procedures for Managing Certain Delegations Were Not Always Current
paragraphs: We found that GSA had written policies and procedures for managing all  types of delegations, but the policies and procedures were not always  current. GSA’s policies and procedures for issuing and managing  delegations are described in the following documents:    Federal regulations and internal GSA policy letters and memorandums,    GSA’s “Desk Guide — Delegations of Authority for Real Property  Management and Operating and Leasing,” which states that it “is a  reference guide on policies, procedures, and practices for individuals  engaged in implementing the terms and conditions of the General Services  Administration delegation program and delegation agreements for real  property management authorities in federally owned and operated space.”
Chapter 8 of GSA’s “Customer Guide to Real Property,” which, according  to GSA officials, serves as formal guidance to explain the general  procedures for issuing the different types of delegations, and   GSA’s “Standard Operating Procedures for Operation and Maintenance of  Delegated Real Property,” which describes the agency’s responsibilities  under a delegation of operations and maintenance authority.
Table 3 identifies the delegation types and the applicable documents that  outline the policies and procedures for the delegation.
Our review of the policies and procedures found that the desk guide has  not been updated to include current guidance for delegations of real estate  leasing, lease management, repair and alteration, and utility services  authority. For example, the section on delegations of real estate leasing  authority did not include the procedures associated with the use of the  real estate leasing delegations; procedures for requesting lease  management authority were not explained; and delegations for repair and  alteration project authority and utility services authority were not  discussed. In addition, the customer guide did not distinguish between  blanket repair and alteration authority, which can be used for projects up  to $100,000 and authority for individual repair and alteration projects  above $100,000. As discussed earlier, the approval process for each  differs. GSA officials acknowledged the need to update the delegations  desk guide and the customer guide and said the updates are in process.  According to GAO’s Standards for Internal Controls, written policies and  procedures are control activities that help ensure management’s directives  are carried out and action are taken to control risks. The lack of updated  guidance could limit GSA’s ability to manage its delegations effectively.
section_title: GSA Did Not Always Use Mandated Criteria When Deciding to Delegate Certain Real Property Activities, and the Procedures Used Were Not Always Included in Written Guidance
paragraphs: GSA did not always use mandated cost-effectiveness criteria when  delegating activities, as shown in table 4.
The Federal Management Regulation states that delegations are to be in  the government’s best interest and specifies that GSA must evaluate such  factors as whether a delegation would be cost effective for the government  in the delivery of space. GSA used these mandated criteria when  delegating utility services and for the most recent delegations of individual  repair and alteration authority above $100,000 and operations and  maintenance authority. But all of the procedures used for assessing cost- effectiveness of delegations of individual repair and alteration authority  above $100,000 and operations and maintenance authority were not  included in any of GSA’s written guidance. Since GSA is either required by  law or has issued a blanket repair and alteration delegation for projects  that do not exceed $100,000; it does not apply cost-effectiveness criteria to  these delegations. Further, GSA officials told us these delegations have  limited financial risk and, based on anecdotal evidence, they had not seen  a pattern of problems with these delegations. GSA did not use the criteria  when delegating real estate leasing authority and administrative  contracting officer authority, and it could not determine if mandated  criteria were used when delegating lease management authority. GSA  officials told us they are updating their guidance for delegations of general  purpose real estate leasing authority to include procedures for cost- effectiveness. The officials also said they are limiting the use of  delegations of administrative contracting officer authority and that  delegations of lease management authority have limited financial risk, and  thus it may not be the best use of resources to develop procedures to  determine whether these delegations are cost effective.
To determine whether a delegation of utility services authority would be  cost effective, GSA identifies the federal presence—that is, the number of  federal agencies in a given area—within the utility service area where the  requesting facility resides. According to the Director of the Energy Center,  most delegation requests are for buildings in areas where there is no other  federal need for utility services. Because it takes substantial resources for  the center to negotiate public utility contracts with a serving utility, the  center generally does not negotiate contracts for individual agency needs.  Therefore, the center determined it was cost effective to grant the  delegations when there were no additional federal needs requiring an area- wide utility contract in the areas of the requested delegations.
PBS officials said they assessed cost-effectiveness prior to granting the  individual repair and alteration delegation to EPA. PBS required EPA to  submit a justification that demonstrated the delegation was in the  government’s best interest and was cost effective. The justification  included a cost analysis as part of its management plan, which GSA used  to compare against its costs for similar work and other data. Although PBS  officials said they used these procedures, they acknowledged that they  have not been formalized in any written guidance.
GSA recently began assessing the cost-effectiveness of operations and  maintenance delegations. Although GSA reviewed the operating costs of  agencies with operations and maintenance delegations in the early years  of the delegations, it did not assess cost-effectiveness of the delegations.  Agencies paid GSA rent for delegated buildings and, until 1997, GSA  transferred back to the agencies an amount that GSA estimated it would  have spent in the absence of the delegation to provide standard-level  building service. To oversee how agencies used this funding, GSA  required agencies to submit an annual building operations cost report.  However, at GSA’s direction, agencies did not include funding it spent to  provide night and weekend building services because GSA considered  these costs above standard level. In 1990, we reported that GSA could not  determine whether the delegations were cost-effective because it lacked  all cost and performance data to oversee the operations and maintenance  delegations, and the data it required were frequently inaccurate or  sometimes never received.
Since our previous review, GSA has issued additional guidance for  delegations of operations and maintenance. The customer guide and desk  guide state that overall operating costs must be reasonable and not exceed  those that GSA would incur. Both guides add that facility operating costs  should be included in the delegation. Further, the desk guide states that  the operating costs should be derived from and supported by the facility  management plan. But the section on the facility management plan in the  standard operating procedures does not address submission of building or  facility operating costs. According to GSA officials, the financial  information provided by the agencies will be compared with industry  benchmarks to determine cost-effectiveness.
However, GSA has not formalized the benchmark comparison procedure  in any of its guidance. GSA officials told us they have issued only one new  delegation of operations and maintenance authority since 2000, and they  performed an economic evaluation of the request.
In contrast, GSA did not consider cost-effectiveness prior to issuing  delegations for real estate leasing authority. GSA officials told us that  staffing and financial constraints limited their ability to assess cost- effectiveness of real estate leasing authority and that initially (at the  beginning of the general purpose delegations in 1996) they had no reason  to believe the delegations were not cost effective. GSA does require  agencies that use the general purpose lease delegation to provide  documentation to the relevant GSA regional office that the negotiated  rental rate is within the prevailing market rental rate for the class of  building leased. If the negotiated rental rate exceeds the market range, the  agency is to provide information as to why the market rate was exceeded.  However, these procedures do not apply to special purpose delegations  over 2,500 square feet, where GSA has the discretion to issue these  delegations. In addition, GSA officials acknowledged that they did not  use the information or know the degree to which agencies were in  compliance with this requirement and did not validate the market ranges  used by agencies. Under GSA’s draft leasing guidance, which is scheduled  to be issued in September 2007, agencies using the general purpose leasing  delegation will be required to provide a narrative explaining why the  granting of the request is in the best interests of the government and a plan  for meeting or exceeding GSA’s performance measures (lease cost). GSA  will use this and other information to determine whether the requesting  agency’s exercise of the delegation is in the government’s best interest.
Additionally, GSA will analyze each general purpose lease awarded against  the same GSA lease cost performance measure used for GSA leases.
GSA also did not consider cost-effectiveness for delegations of  administrative contracting officer authority. According to GSA officials,  cost-effectiveness was not considered because the intent of the delegation  was not to reduce costs, but to improve service delivery. GSA allows  agencies with delegations of administrative contracting authority to pay  rent directly to the landlords instead of GSA paying the rent to the  landlords. In 2004, GSA reviewed these delegations and found that the  program was not revenue neutral, but rather had a negative financial  impact. This delegation type increased their administrative costs because  of the staff time needed to reconcile the funds paid to the agencies with  the amount the agencies paid to the landlord. In addition, GSA officials  said that in certain cases, agencies were changing the terms of lease  agreements to make revisions to the space without GSA’s knowledge,  which resulted in increased costs and financial liability to the government.  For example, as a part of the 2004 review, GSA found instances of space  alterations that were added to the lease agreements by the agency. The  space alterations required the government to restore the space to its  original condition; however, there was no explanation of the costs or any  indication of how the costs would be paid at lease expiration. The review  recommended discontinuation of the program by June 2005. GSA decided  to offer lease management authority delegations in place of new  administrative contracting officer authority delegations if desired by the  tenant agencies.
Finally, PBS central office officials could not determine if they used  mandated criteria when delegating lease management authority because  these delegations are managed at the regional level, and GSA does not  require the regional offices to report on these delegations to the central  office. Further, the central office does not routinely request information  on these activities. GSA officials told us there is limited risk associated  with delegations of lease management authority as these delegations are  structured to prevent the agencies from exceeding the terms of the  delegation. Therefore, it may not be the best use of resources to develop  and implement procedures to determine whether these delegations are  cost effective.
According to GAO’s Standards for Internal Controls, written policies and  procedures are control activities that help ensure management’s directives  are carried out and actions are taken to control risks. The absence of  written guidance for all procedures used to assess cost-effectiveness for  (1) delegations of individual repair and alteration authority above  $100,000, (2) operations and maintenance authority, (3) general purpose  leasing delegations and (4) special purpose leasing delegations that exceed  2,500 square feet could limit GSA’s ability to determine if delegations are  in the best interests of the government.
section_title: Agencies Primarily Request Delegated Authority to Receive Faster Service, and Most Said They Plan to Seek Delegations in the Future
paragraphs: Of the six tenant agencies we contacted with delegated real property  authority, five agencies cited timeliness and control as the main reasons  they sought delegations. Officials from all of the agencies we contacted  told us their decisions were not based on a lack of satisfaction with GSA’s  performance. All of the agencies said they will continue to seek  delegations of real property authority in the future. We also contacted the  Judiciary, which was terminating its delegations, and agency officials told  us it was doing so because the delegations were no longer cost effective.
subsections: section_title: Agency Officials Said They Sought Delegations to Improve Timeliness of Real Property Activities
paragraphs: Officials at five of the tenant agencies we contacted cited improved  timeliness as the main reason they sought their delegations. In particular,  these officials told us their respective delegations provided them with the  ability to complete their delegated real property activities in a more timely  fashion. For example, officials from the Department of Commerce told us  they are able to procure leased space faster than GSA because they believe  GSA’s competing demands prevent GSA officials from urgently locating  space for the agency. Similarly, Department of Interior officials stated that  timeliness was a major benefit of their delegations of real estate authority  because GSA officials cannot always make its needs a priority because of  GSA’s large workload. Both the Departments of Commerce and Defense  officials said their administrative contracting officer authority delegations  provided them with increased control and direct access to the landlord,  which resulted in faster service. Officials from the Department of Defense  and the Social Security Administration said their delegations of operations  and maintenance activities provided them with the flexibility to work  closely with their own personnel to plan and prioritize service requests in  order to fulfill agency needs in a timelier manner. Finally, the EPA said  they requested repair and alterations delegations because they needed to  expedite the installation of blast mitigation material on windows in GSA- controlled space to be compliant with increased security requirements. An  EPA official said these delegations allowed them to complete their  projects in a more timely fashion because they had direct access to their  contractors. In contrast, officials at the Departments of Interior and  Justice said they sought delegations of utility service to obtain stabilized  pricing for utilities to protect them from market fluctuations.
All of the agencies we interviewed that received real property delegations  said their decisions to seek delegations were not based on a lack of  satisfaction with GSA’s performance in the given service but rather were  useful in certain circumstances where GSA’s knowledge and expertise  were less critical. For example, the Departments of Commerce and  Interior said they primarily use lease delegations in remote areas where  GSA has a minimal presence. In these instances, both agencies said it  made sense for them to conduct the lease transactions because they  generally had more knowledge of these isolated real estate markets. Both  agencies added that their decisions to seek lease delegations were not  related to any dissatisfaction with GSA’s leasing program. Further, they  said that it was sensible for them to use GSA to acquire leased space in  urban areas because of GSA’s expertise with these real estate markets.  Officials from the Departments of Commerce and Defense said their use of  delegations of administrative contracting officer authority was driven by  their desire to leverage direct payments to the landlord to help ensure  better service. An official from EPA told us that the agency’s decision to  seek a repair and alteration delegation was not a result of any problems  with GSA’s services. Finally, the Departments of Interior and Justice told  us they request delegations of utility authority when they have a need to  contract for utility services, and GSA determines that it is more  appropriate for the agency to obtain the contract.
GSA’s view of the various types of delegations is that it allows for greater  efficiency in use of federal contracting officer authority. Additionally, if  utility connection and service is required in an expedited fashion for  operations and maintenance purposes, a delegation of utility acquisition  authority can allow for timelier services. GSA officials acknowledged that  the delegations of utility services allowed for stabilized pricing and  delegations of administrative contracting officer authority and operations  and maintenance allowed for timelier services. However, GSA officials  questioned whether the individual repair and alteration delegation above  $100,000 allowed for faster service. GSA told us that EPA used a  contractor from GSA’s approved list of contractors to perform these  delegations and did not think the work would be performed faster because  of the delegation. Similarly, GSA officials questioned whether agencies  with lease delegations had more market knowledge in remote areas or  were able to complete lease transactions in a more timely fashion. GSA  added that agencies do not always provide their space needs in a timely  fashion which affects GSA’s ability to provide timely leasing services.
section_title: Agencies Plan to Seek Delegations in the Future
paragraphs: Officials from all six agencies that we interviewed said they planned to  seek delegations in the future. Officials from the Department of Commerce  told us they do not necessarily want to increase their delegations of real  estate leasing authority, but they will continue to seek lease delegations  when the conditions are conducive. However, department officials said  they would like to increase the number of administrative contracting  officer authority delegations, but GSA has been reluctant to issue  additional delegations. Department of Interior officials said they will  continue to seek delegations for space acquisition in remote areas and  utility services when needed. Officials from the Department of Defense  said they do not plan to aggressively pursue additional operations and  maintenance delegations because many of the delegated lease facilities are  subject to base realignment and closure and will continue to request  delegations of administrative contracting officer authority as needed.  Social Security Administration officials said they plan to maintain their  current level of operations and maintenance delegations. EPA said it plans  to continue to seek delegations of repair and alteration project authority  as needed. Finally, the Department of Justice told us it will continue to  seek delegations of utility services as needed.
While these six agencies told us they would likely continue to seek  delegations, one agency is terminating its delegations with GSA. According  to PBS officials, the Judiciary terminated authority for one delegation of  operations and maintenance and is currently terminating three more.  Judiciary officials from the Administrative Office of the U.S. Courts stated  that prior to terminating the delegations of operations and maintenance  authority, the tenant satisfaction level in their delegated buildings was  higher than in nondelegated buildings because the court was aware of  their tenants’ operating needs and could respond to repairs and service  requirements faster than GSA. However, their decision to terminate the  delegation authority was driven by two primary considerations. First,  according to the officials, in 2004, GSA shifted responsibility for all  repairs, regardless of cost, to delegated agencies with no adjustment to the  rent GSA charges. According to the officials, the office was required to  repair and maintain systems that were aging and significantly beyond their  useful life. The officials stated the shift of more responsibility to perform  costly repairs reduced the Judiciary’s funds for preventive maintenance on  those aging systems. Second, for buildings without an operations and  maintenance delegation, GSA charges an appraised rate for operating  expenses based on local comparable buildings. However, according to the  officials from the Administrative Office of the U.S. Courts, the actual cost  for managing the delegated buildings was higher than what GSA was  charging for nondelegated buildings under its appraisal system for some  locations. Therefore, the Judiciary did not consider it cost effective to  continue the delegations because the operating costs were higher than  what GSA charges. GSA acknowledged that Judiciary’s delegated buildings  were aging and that the rising expenses of operations and maintenance  delegations prompted the Judiciary’s decision to terminate the  delegations. However, GSA told us it did not shift responsibility for all  repairs to the Judiciary. GSA officials explained that repair activity for  delegated buildings is divided between the tenant agency and GSA.  According to GSA, the Judiciary was responsible for routine repairs,  defined by GSA as items typically expensed to tenants by private sector  landlords. GSA was responsible for making necessary replacements to the  structure and building systems, which it considered capital replacements.
section_title: Conclusions
paragraphs: In managing its delegations, GSA lacked basic management controls such  as complete and consistent data and current written policies and  procedures. In particular, GSA had inconsistent data on delegations of real  estate leasing authority. GSA is currently implementing several changes to  improve its data collection for lease delegations and will issue separate  oversight procedures that include a requirement to reconcile the two  sources of lease delegation data. However, it is unclear when the oversight  procedures will be issued. GSA has written policies and procedures for  managing its delegations, but some of this guidance is out of date. While  GSA officials said updates to some of the guidance are in process, it is  unclear when these updates will be finalized. Further, GSA also did not  use mandated cost-effectiveness criteria when deciding to delegate certain  real property authority. These basic management controls are the first line  of defense in safeguarding assets and providing effective stewardship of  public resources. In the absence of (1) accurate program data on the  numbers and types of key authorities delegated, (2) current policies and  procedures to help guide decisions to delegate, and (3) complete cost- effectiveness analyses, GSA cannot ensure that delegations are an efficient  use of federal dollars or in the best interests of the government.
section_title: Recommendations for Executive Action
paragraphs: To improve GSA’s ability to oversee the various delegated authorities, we  recommend that the Administrator of GSA take the following two actions:    develop written procedures for reviewing the different sources of its lease  delegation data to identify and determine an accurate count of the leases  awarded using all three types of leasing delegations and   update the guidance for managing delegations, including procedures for  assessing the cost-effectiveness of individual repair and alteration  delegations above $100,000, operations and maintenance delegations,  general purpose leasing delegations, and special purpose leasing  delegations that exceed 2,500 square feet.
section_title: Agency Comments
paragraphs: We provided GSA a draft of this report for its review and comment. GSA  agreed with the report’s findings and recommendations and stated it will  use them to improve its delegation programs. More specifically, with  respect to our first recommendation, GSA stated it is in the process of  implementing several changes to improve its data collection for lease  delegations. GSA noted that it has requested the Federal Real Property  Council to provide PBS the data on delegated leases listed in the Federal  Real Property Profile database. GSA agreed to compare annually the  agencies’ data sent to GSA with the Federal Real Property Profile  database, as agencies will now be required to identify the authority under  which they acquired their leased assets. GSA further agreed to develop  written guidance for these new procedures. Regarding our second  recommendation, GSA said it would review and update, as necessary, the  guidance for managing its real property delegations. GSA further noted  that it has various types of delegations of authority with unique policies  and procedures to administer the specific requirements of the delegation  programs. GSA also provided written technical comments, which we have  incorporated in this report as appropriate. GSA’s letter is contained in  appendix II without the enclosure that contained the technical comments.
As agreed with your office, unless you publicly release its contents earlier,  we plan no further distribution of this report until 30 days after the date of  this letter. At that time, we will provide copies to interested congressional  committees and the GSA Administrator. We will make copies available to  others upon request. The report is available at no charge on GAO’s Web  site at http://www.gao.gov. Contact points for our offices of Congressional  Relations and Public Affairs may be found on the last page of this report.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-7215 or brownke@gao.gov. Key contributors to  this report were Sally Moino, Assistant Director; Derrick Collins; Susan  Michal-Smith; Michael Mgebroff; Courtney Reid; Janay Sam; and Sandra  Sokol.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Given your interest in the General Services Administration’s (GSA) use of  real property delegations of authority, we determined (1) what real  property authority GSA has delegated to its tenant agencies, (2) what  policies and procedures GSA uses to manage delegated real property  authority, and (3) reasons the tenant agencies requested delegated  authority.
To determine what real property authority GSA delegated to its tenant  agencies and the criteria GSA used when deciding to delegate those  activities, we reviewed, among other materials, the law, the Federal  Management Regulation, and the Federal Acquisition Regulation related to  GSA’s authority to delegate real property functions; existing policies and  procedures for managing the delegations, including internal Public  Buildings Service (PBS) guidance on delegations of real estate leasing  authority and PBS’s “Standard Operating Procedures for Operation and  Maintenance of Delegated Real Property;” previous Office of  Governmentwide Policy reviews of delegations of real estate leasing  authority; PBS summaries of the lease delegation program; and data on the  number of delegations by type and agency from fiscal years 1996 to 2006.  We limited our review to delegations for the following agencies:  Departments of Commerce, Defense, Health and Human Services,  Homeland Security, Interior, Justice, the Treasury, Environmental  Protection Agency, the Judiciary, and the Social Security Administration.  These agencies were GSA’s top 10 customers in annual rent for fiscal year  2005 as reported in GSA’s State of the Portfolio. For the purposes of our  review, we did not include real property disposal authority or delegations  of security authority in our analysis. To assess the reliability of the  delegations data we (1) reviewed related documentation, (2) conducted  manual testing of certain source databases, and (3) interviewed  knowledgeable agency officials about the quality of the data. As a result,  we determined that the data were sufficiently reliable for the purposes of  this report.
Finally, to obtain information on the views and experiences of agencies  with delegations we interviewed officials from six agencies. To select the  agencies, we reviewed GSA’s data on delegations to its tenant agencies  from fiscal years 1996 to 2006 and selected the two agencies with the most  delegations in each category for which we had data: real estate leasing  authority, administrative contracting officer authority, operations and  maintenance authority, repair and alteration project authority, and utility  service authority. Because we used a sample selection method, our results  are not generalizable to all agencies that received delegations of real  property authority. Table 5 provides a listing of the agencies we selected  and interviewed.
We also interviewed Judiciary officials from the Administrative Office of  the U.S. Courts to discuss its decision to return delegations of operations  and maintenance authority.
We performed our review from August 2006 through June 2007 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Comments from the General Services Administration