Facilities Location: Agencies Should Pay More Attention to Costs and Rural Development Act
Released: 2001-08-09T00:00:00

Letter

Background

GSA is the central management agency for acquiring real estate for federal agencies. According to a GSA policy official, GSA is responsible for managing the acquisition of about 40 percent of the federal government’s office space and 10 percent of all government space. Other agencies, such as DOD, have their own authority to acquire space. To acquire real estate, an agency must either go through GSA using GSA’s statutory authority, use its own statutory authority, or obtain delegated authority from GSA. If it is using GSA, the agency must provide GSA with a "delineated area," the geographic area where the agency wants to be located. GSA’s policy requires its staff to review each delineated area to confirm its compliance with all applicable laws and regulations. Once an agency has selected a delineated area, GSA, under CICA, is to acquire the site within the selected area through the use of full and open competitive procedures. If an agency acquires property independently of GSA using its own statutory authority, it is responsible for compliance with all relevant laws and regulations but is not subject to GSA regulations.

In 1990, we were asked by Senator Kent Conrad to look at policies that guide civilian agencies in selecting facility locations and determine whether any changes in federal location policies were warranted. We reported that GSA needed to develop a more consistent and cost-conscious governmentwide location policy that required agencies, in meeting their needs, to maximize competition and select sites that offer the best overall value, considering such factors as real estate and labor costs. Since 1990, at least two matters raised in that report have remained unchanged. First, GSA has not developed for congressional consideration the cost-conscious and consistent governmentwide location policy that we recommended. The second item that remains unchanged is that rents in the CBAs of federal regional cities and Washington, D.C., are generally higher than the rents in non-CBA sections of those same cities—an average of $4.03 per square foot higher within calendar year 1999, as shown in table 1.

According to an April 2001 GSA congressional testimony, high rents for class A commercial space in San Francisco, CA, caused three federal agencies to move from leased space in San Francisco to leased space in Oakland, CA, where rates were 25 percent to 30 percent lower.

One change that occurred since our 1990 report that affected the workplace is the surge in telecommunications services, including widespread access to the Internet. One result of telecommunications services is the practice of “telecommuting,” whereby employees can work from home or remote offices for all or part of their work week. Telecommuting increased significantly, rising from a level of 4 million U.S. workers in 1992, according to the Department of Transportation, to 16.5 million in 2000, according to the International Telework Association and Council.

Despite the continuing relative higher cost of urban commercial rents, federal employment generally remains focused in Metropolitan Statistical Areas (MSA), as shown in table 2.

Recently Selected Federal Sites Were Mostly in Urban Areas

During fiscal years 1998 through 2000, agencies chose urban areas for about 72 percent of the 115 acquired federal sites in our survey and selected rural areas (those with a population of 25,000 or less) for about 28 percent of the sites. Agencies reported that mission was the primary factor used to determine the location for over one-half of the sites and that the mission dictated the need to be in close proximity to clients, other agency facilities, and related organizations. GSA conducted the acquisitions for 79 of the sites using GSA authority, and agencies using their own statutory authority conducted the acquisitions for the other 36 sites.

Agencies selecting urban sites reported that close proximity to other agency facilities and organizations contributed to cost savings resulting from less travel, more prompt on-site support, and ease in technology sharing. Other benefits reported for urban sites included the availability of a skilled labor pool and accessibility to public transportation for both employees and agency clients. Agencies that chose rural sites reported some similar benefits, stating that close proximity to related or support agency facilities and proximity to industries with which the agency is connected resulted in more efficient use of agency resources and less travel. Other benefits reported for rural sites included better building and data security and improved access to major transportation arteries.

Officials reporting for about 66 percent of the sites either said no problems existed at the sites (45 percent), or they did not respond to the survey question (21 percent). For the remaining sites, agencies selecting urban areas reported problems such as lack of secure buildings, lack of expandable space, and high rental rates. Agencies selecting rural areas reported problems such as lack of infrastructure for high-speed telecommunications and a lack of access to public transportation.

Functions performed at the sites varied, and some functions were performed in both urban and rural areas.

Most of the Sites Were Located in Urban Areas

Eighty-three (or 72 percent) of the sites in our survey were located in urban communities (areas with a population above 25,000), and 32 (or 28 percent) were located in rural areas (areas with a population of 25,000 or below). Most of the 115 site selections involved relocations within existing communities (56) or expansions of existing sites (14). As table 3 shows, the number of newly established locations (locations for agency functions for which the agency neither relocated nor expanded an existing site) was almost evenly distributed between rural and urban areas. Functions at the six rural sites selected for newly established locations included storage/inventory (mainly Census Bureau material for the 2000 Census), air traffic control, and law enforcement. The seven urban areas selected for the newly established locations included functions such as document archiving, passport production, law enforcement, and inspection of diseased plants near plant quarantine areas.

As table 3 shows, of the 32 sites that were relocated from one community to another community, 18 were in urban areas and 14 were in rural areas. Among these relocated sites, law enforcement and administrative program management were the most prevalent functions; and the two functions were about evenly divided between urban and rural sites. However, the finance and accounting and research and development functions were found only at rural sites. Functions at the urban relocated sites included inspecting/auditing, tax administration, and aviation operations.

An agency can use GSA to acquire property on its behalf or acquire the property independently, using either statutory authority or authority delegated by GSA. No major difference existed in the percentage of urban sites selected, regardless of whether the site decisions were made by agencies working with GSA or made independently of GSA. About 71 percent of the sites that GSA procured on behalf of agencies were in urban areas, and about 75 percent of the sites agencies selected independently of GSA were in urban areas.

Agencies Reported That Agency Mission Requirements Determined Site Location

From a list of 12 factors (and an overall “others” category) in our survey, agencies reported that they considered numerous factors to determine the delineated area for the sites in our survey. As shown in table 4, agencies considered mission in making location decisions for 82 of the sites in our survey. The next most-cited factors were transportation efficiencies, which was considered for 46 sites; and particular space needs, such as specialized floor layouts, which was considered for 45 sites.

In their discussion as to why agency mission was the primary factor for site selections, agencies most often cited the need for the site to be in close proximity either to the mission service area, other agency facilities, other government agencies, or related private sector organizations. For example: The U.S. Customs Service (Customs) reported that it chose the delineated area for its international mail inspection function in Carson, CA, because the U.S. Postal Service (USPS) had relocated its international mail operations to Carson, CA, and Customs needed its inspection function to be near the international mail site. Customs also reported that its cybersmuggling center needed to be located within the concentration of private computer-based industries in Fairfax, VA. U.S. Attorney offices reported that their policy is to be within four blocks of federal courthouses because, as the principal litigators for the U.S. government, U.S. Attorneys need to be available for courtroom activities on a regular basis. U.S. Marshals Service (USMS) offices also reported that USMS offices need to be colocated with the courts because the agency’s primary concern is the safety and security of the judiciary, the judicial process, and its participants.

The Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) reported that the delineated areas of its sites in our survey were selected because they needed to be in close proximity to diseased plant quarantine areas. The Federal Emergency Management Agency also reported that its Pasadena, CA, site in our survey needed to be in close proximity to a disaster area.

The Immigration and Naturalization Service reported that its national records center had to be located as close as possible to a National Archives and Records Administration (NARA) center in Lees Summit, MO, to reduce the costs associated with a high-volume records transfer to NARA.

Agencies providing services to the public, such as the Social Security Administration (SSA), IRS, and the Department of Veterans Affairs, reported that the delineated areas for their offices/clinics were selected because the agencies needed to be as close as possible to the client/patient population that the agencies service.

Agencies did not select rural areas for 83 of the 115 sites in our survey. For about 75 percent of the 83 sites, agencies cited mission requirements as the reason for not selecting rural areas. They again cited proximity considerations and said that locating the sites in rural areas would have placed them too far from their clients, other supporting agency facilities, related research facilities, or the function they had to monitor. For example, GSA’s Federal Technology Service reported that it did not consider a rural area for its site because the function needed to remain in the Washington, D.C., area to have access to its major customers and telecommunications providers.

Other reasons for not selecting rural areas included the need to be near public transportation and rural areas’ lack of the necessary labor pool and sufficient space. Some respondents also said that rural areas can have high costs, such as for transportation to airports. The Bureau of Reclamation stated that a water resources management operation was not located in a rural area because of the unavailability of a building to meet space needs.

The IRS said it did not place a telephone−based customer service site in a rural area because of the need for a large number of recruitment candidates who were available only in a more heavily populated area. Similarly, the SSA said that when one of its teleservicing centers needed additional space, it did not move the center to a rural area because of the difficulty of locating sufficient space and personnel in rural areas.

In addition to agency mission, lower real estate cost was one of three main factors that contributed to the selection of the 32 rural sites. Respondents representing almost one-half of the rural sites identified (1) lower real estate costs; (2) particular space needs (e.g., specialized space for security reasons); and (3) transportation efficiencies, such as access to major arteries, as factors considered in the site selection decisions.

Agencies Reported Benefits and Problems With Selected Sites

In response to our survey’s request to list three chief benefits and problems, if any, associated with the selected location for sites in our survey, agencies reported numerous benefits and few problems for both urban and rural locations. The benefits of urban areas included close proximity to other agency resources, such as support facilities and related government agencies, and related private sector organizations. Agencies said proximity was a benefit because it contributed to more prompt on-site support and cost savings resulting from less travel and transportation of material over distances and eased technology sharing and daily interaction among related organizations. For example, both the Forest Service and APHIS reported that their sites’ close accessibility to universities allowed for sharing of advanced technologies and improved collaboration between the agency and university researchers. Also, the Department of Veterans Affairs reported that the urban location of one of its clinics was a benefit because it was in close proximity to the city’s medical center complex. Other benefits cited for sites in urban areas included the availability of a skilled labor force, the ability to use existing infrastructure, and the accessibility of public transportation for both employees and clients.

Agencies that located sites in rural areas reported some similar benefits, such as close proximity to related or support facilities, other program employees, and the industry to which the agency was connected. They said proximity resulted in more efficient use of agency resources and less travel. Other benefits reported for rural sites included improved building and data security and accessibility to major transportation arteries.

Agencies reported they had no problems with about 45 percent of the sites, either urban or rural. They provided no response to this survey question for another 21 percent of the sites. For the remaining sites, agencies selecting urban areas reported problems such as lack of secure buildings and expandable space, traffic problems, high rental rates, and specific problems with buildings needing repairs. Agencies selecting rural areas reported problems such as a lack of proximity to other agency facilities and public transportation, great distance from major airports, and a lack of necessary infrastructure for telecommunications and city waste management services.

Functions Located at Established Sites Varied Widely

As table 5 shows, agencies reported that the three most common functions located in rural areas included law enforcement, research and development, and supply storage and inventory control. Three functions, automated data processing, finance and accounting, and social services, were located only in rural areas.

The three most common functions located in urban areas were law enforcement, administration of loans/grants/benefits and processing of applications and claims, and administration/program management. Law enforcement was the most prevalent function in both urban and rural areas, although it was more prevalent in urban areas. Also, although research and development and supply storage and inventory functions were more prevalent in rural areas, sometimes they were also located in urban areas.

The Rural Development Act and Other Federal Policies on Location

Several laws and executive orders affect the location of federal facilities. The laws, which take priority over the executive orders, include RDA, the primary law on rural siting; and CICA, a law governing federal acquisition generally. When considering areas in which to locate, RDA "directs the heads of all executive departments and agencies of the Government to establish and maintain departmental policies and procedures giving first priority to the location of new offices and other facilities in rural areas.” Any move by an agency to new office space in another location would be considered a new office or facility covered by RDA. Once agencies have selected their respective areas for possible locations, CICA generally requires that agencies obtain full and open competition for facilities acquisitions within the areas selected.

The two primary executive orders on federal facility location decisions are Executive Order 12072 of August 16, 1978; and Executive Order 13006 of May 21, 1996. Executive Order 12072 specifies that when the agency mission and program requirements call for facilities to be located in urban areas, federal agencies must give first consideration to locating in a CBA and adjacent areas of similar character. Executive Order 13006 requires the federal government to utilize and maintain, wherever operationally appropriate and economically prudent, historic properties and districts, especially those located in the CBA.

Agencies acquiring real estate are responsible for complying with federal laws and executive orders. If GSA is acquiring the real estate for an agency, then GSA regulations state that GSA is responsible for ensuring compliance with “all applicable laws, regulations, and Executive orders." However, if the agency is making the acquisition under its independent statutory authority, or through a delegation from GSA, the agency is responsible for compliance with relevant laws and regulations. Some agencies also have been provided statutory authority to acquire real estate for different purposes. Some agencies such as the Tennessee Valley Authority (TVA) have been provided broad authority. TVA is authorized to purchase or lease real property that it deems necessary or convenient in transacting its business. Other agencies’ statutory authority is for more limited purposes. For example, the Secretary of the Interior is authorized to lease buildings and associated property for use as part of the National Park System and the Secretary of the Treasury is authorized to lease space for the storage of unclaimed or other imported merchandise that the government is required to store.

Limited Consideration of RDA

RDA states that executive departments and agencies must establish policies and procedures to give first priority to the location of new offices and other facilities in rural areas. However, among the 13 cabinet departments, only the departments of Agriculture (USDA), Commerce, Labor, Transportation, and the Treasury had written policies specifically addressing RDA. The other departments (Justice, Health and Human Services, the Interior, Housing and Urban Development, State, and Education) said they did not have policies on RDA; and two (Energy and Veterans Affairs) said they expect all employees to abide by all policies on facility acquisitions, but they also had no written policies regarding RDA.

In addition, many agency real estate specialists in field offices also said either their agencies did not have RDA policies or they did not know if their agencies had such policies. Among the 113 sites for which we received responses, 61 sites involved agencies that did not have RDA policies, and 24 involved agencies that had policies. Respondents for 28 sites also said that they did not know if their agencies had RDA policies.

Our survey also requested respondents to report which of the four applicable laws and executive orders were considered in the acquisition of the surveyed sites. Agencies reported that CICA was considered for 73 percent of the 113 sites for which a Executive Order 12072 (on locating in CBAs) was considered for 50 percent of the 113 sites for which a response was received, Executive Order 13006 (on historic districts) was considered for 43 percent of the 112 sites for which a response was received, and RDA was considered for about 27 percent of the 113 sites for which a response was received.

Agencies reported that they considered RDA for 8 of the 36 sites that were acquired independently of GSA. Agencies also reported that RDA was considered for 21 of the 79 sites acquired by GSA. Conversely, for about 73 percent of 113 sites for which a response was received, respondents said they either did not use RDA in site acquisitions or did not know whether it was used.

To determine if GSA was requiring agencies to apply RDA, we looked at GSA regulations and examined 33 GSA lease files. GSA regulations state that federal agencies using GSA are responsible for identifying their delineated areas, consistent with their missions and program requirements in accordance with applicable regulations and statutes, including RDA. The agencies must also submit to GSA a written statement explaining the basis for their delineated areas, and GSA is responsible for reviewing these delineated areas to confirm their compliance with laws and regulations. We looked at 33 files involving GSA leases made from 1989 through 2000 in 3 GSA regions, including the Rocky Mountain Region, based in Denver; the Greater Southwest Region, based in Ft. Worth, TX; and the Mid-Atlantic Region, based in Philadelphia. We found no mention of RDA in any of the 33 acquisition files. In the files we examined, we did find cases where GSA requested modification of the delineated area in response to other criteria, such as CICA. Additionally, a GSA official in the National Capital Region (NCR) provided us with a checklist of documents that are expected to be in each NCR lease file. Neither the 1999 checklist nor the 2000 update of that list mentioned RDA, although both mentioned Executive Orders 12072 and 13006.

What Constitutes Rural or Rural Area Is Unclear

In addition to agencies’ limited consideration of RDA, the act’s definition of "rural" is unclear. RDA provides that rural areas, for the purpose of federal facilities location decisions, are defined in the private business enterprise exception in section 1926(a)(7) of title 7 of the U.S. Code. Prior to 1996, this exception in 7 U.S.C. § 1926(a)(7) defined rural as “all territory of a State that is not within the outer boundary of any city having a population of fifty thousand or more and its immediately adjacent urbanized and urbanizing areas with a population density of more than one hundred persons per square mile, as determined by the Secretary of Agriculture according to the latest decennial census of the United States: Provided, that special consideration for such loans and grants shall be given to areas other than cities having a population of more than twenty five thousand.”

Different Agencies Use Different Rural Definitions

Government agencies have different definitions of what constitutes a rural area. For example, GSA uses two different population thresholds to define rural area for purposes of RDA. According to GSA Interim Rule D-1, a rural area is any area "that (i) is within a city or town if the city or town has a population of less than 10,000 or (ii) is not within the outer boundaries of a city or town if the city or town has a population of 50,000 or more and if the adjacent urbanized and urbanizing areas have a population density of more than 100 per square mile." Meanwhile, as table 6 shows, other federal agencies use other definitions of rural to implement various federal programs; and private organizations use other definitions as well.

Lessons From Private Sector Relocations That Relate to the Federal Government

According to our study and our consultant’s review, location factors considered important by the private sector for minimizing costs might benefit the public sector. These factors are (1) incentives offered by localities to attract new employers, such as free land; and (2) the lower real estate, labor, and operational costs available in some areas. The private sector cited these two factors as having influenced their location decisions more frequently than did the federal agencies in our survey. We recognize that federal agencies’ missions may sometimes preclude them from taking advantage of the savings represented by these factors. However, in instances where an agency has flexibility in locating a function, the agency may be able to take advantage of one or both of these factors, so long as they are not offset by other higher operational costs.

Location Factors Important to the Private Sector

According to our consultant, there are two broad steps involved in office location decisions made by the private sector. The first step is to determine whether a given location is functionally suited to achieve the purposes of the office that is to be located. The second step is to test the location for its ability to meet a range of factors that have been shown to be important in meeting required goals. Our consultant found that corporations strongly preferred urban locations over rural ones. The determining location factor for most companies, he said, derives from a specific location’s characteristics. The private sector considers numerous factors in making location decisions, and the relative importance of the factors appears to be company specific. However, our consultant’s literature search and survey of 52 private sector companies identified several factors as the main areas of consideration in the private sector location decisionmaking process. They were (1) transportation and logistics, (2) labor availability and cost, (3) real estate costs, and (4) business climate and business incentives. Of these factors, some were location factors considered by the federal sites we surveyed and some were not.

Transportation: Access to Highways, Trains, and Airports

Access to highways and major thoroughfares is important for employees who commute and essential to maintaining connections to companies’ suppliers and customers. When asked to rate the importance of transportation and logistics, 17 of the 52 respondents in our consultant’s survey gave it the highest rating for headquarters offices, and over one-half gave it the highest rating for satellite (field) offices. With the increasing globalization of markets, easy access to airports is also very important in corporate location decisions. Professional services, such as those of accountants and lawyers, also increasingly require access to airports, our consultant said.

Transportation factors were also important to the public sector. In our survey of federal agency sites, officials for 40 percent of the sites said access to transportation, such as airports, trains, and highways, was an important factor in their location decisions. Examples cited by the agencies included easy access to airports for trainees from around the nation and access to highways for service centers.

Availability and Cost of Labor

According to our consultant, the availability and cost of labor are among the most important location factors for the private sector. Most of the corporations responding to our consultant’s survey rated these among the top location factors considered when locating either their headquarters or field offices. Asked to rate the importance of "availability and cost of labor supply,” of the 52 survey respondents 30 gave it the highest rating for headquarters offices and 32 gave it the highest rating for satellite (field) offices. Our consultant emphasized that the availability of sufficient and qualified labor is crucial to any business location decision because, even in a low-wage area, the need to train a qualified workforce can wipe out savings from lower labor costs. Our consultant also stated that while many small towns on the fringes of metropolitan areas have experienced rapid growth, their small populations suggest that they will remain small, which can be a liability to attracting companies.

Labor costs include not only wage rates but also benefits, unemployment insurance, and workmen’s compensation requirements. Labor costs also include costs associated with recruitment and training and the competition for labor within the same area. Some companies try to avoid areas where they have to compete with major competitors for the same labor pool because of the possibility that skilled labor would be unavailable or that competitors would drive up the wage rate. According to our consultant, these factors are particularly important when considering rural areas where educational qualifications, in some cases, are not so readily available.

Availability and cost of labor were not location factors considered by federal agencies for most of the sites in our survey. Respondents reported that they considered personnel costs, including lower labor costs and recruitment and retention costs, in location decisions for no more than 23 of the 115 sites in our survey. Whether the federal government can adopt the private sector’s practice in this area is open to question because, as previously mentioned, the primary location factor cited by federal agencies for the sites in our survey was agency mission. If agency mission dictates where most of the federal facilities have to be located, specifically in close proximity to clients, then the agency may have little flexibility to realize costs savings from low-wage areas.

Lower Real Estate and Operating Costs

Since at least 1990, real estate costs have consistently ranked among the top 10 factors influencing private sector location decisions. Real estate costs include direct costs (i.e., land, building, and occupancy costs such as rent and utilities), and indirect costs (costs such as shipping, transportation, and storage). When direct costs are higher in one community than another, the addition of lower indirect costs may result in a lower overall real estate cost in the community with higher direct costs. When asked to rate the importance of real estate costs, 31 percent of the corporate survey respondents gave this factor the highest rating for corporate headquarters offices, and 63 percent did the same for corporate field offices.

Real estate cost was cited less frequently by federal agencies in our survey than by the private sector in making site location decisions. Agencies reported that for about 22 percent of the sites in our survey, lower real estate cost was a factor in the decision. If the public sector adopted this private sector practice, specifically for functions where agencies have flexibility as to where they may be located, potential savings could be offered by lower real estate costs, so long as the savings are not offset by other higher operating costs.

Business Climate and Business Incentives

The business climate of an area, including its business incentives, is a cost factor highly important to the private sector. When asked to rate the importance of an area’s business climate, 54 percent of respondents in our consultant’s survey gave it the highest rating. Business climate factors include the general business potential and receptivity of a community to the corporate purpose. This includes the community’s economic health, its organization and preparedness for growth, and the capacity of the community to support future growth of the locating company. For example, zoning issues are critical. Similarly, business incentives, such as tax abatements, free land, or infrastructure improvements offered by a community, are indicative of the business climate and are highly important location decision factors. According to our consultant, while incentives do not replace the need for a company’s location to make good business sense, incentives become a means of distinguishing among otherwise acceptable alternatives.

Business incentives were mentioned by only 2 agencies in our survey of 115 sites. USDA said it chose a site at a local university for wildlife research because Colorado State University made land available at no cost. In return, USDA agreed to work in cooperation with university students on wildlife research. The Environmental Protection Agency (EPA) said when the lease expired for its regional office in Kansas City, KS, it relocated to another location within the city because the city provided free land. EPA reported that this was a “win-win” situation for both the agency and the city because the agency saved on its real estate costs, and the office benefited the economically depressed area where it is located.

The limited use of local incentives by agencies in our survey contrasts with the emphasis the private sector places on incentives to save costs. For example, functions that need not be in proximity to the public or other facilities—such as training, data processing, document distribution, or telephone-based servicing—have the potential to take advantage of local incentives. While federal agencies cannot take advantage of all local incentives, such as tax relief, they might make use of other local incentives. For example, our 1990 report, referred to earlier, noted that the Bureau of Engraving and Printing chose a site in Ft. Worth, TX, in the late 1980s in part because of incentives offered by the locality. The incentives included the donation of 100 acres of land and construction of a building, a total package valued at between $12.5 million and $15 million.

Public policy may have an impact on the extent to which federal agencies may seek incentives provided by local communities. The public sector sometimes seeks to provide economic assistance to certain areas, rather than the reverse—consider how the government may benefit from an area.

RDA and executive orders, such as Executive Order 12072, promote locating federal agencies in rural areas or in the central business districts of urban areas to foster their economic development. In contrast, according to our consultant, the private sector seeks the reverse—consider how the corporation may benefit from the community.

Government Lacks Cohesive Location Policy

The government lacks a cohesive overall location policy that requires agencies to consider costs when initially deciding whether to locate a site in a rural or an urban area. In 1990, we reported that the government was not as cognizant of cost considerations as was the private sector and that government policy was aimed at improving the economic development of either rural areas through RDA or urban areas through the executive orders. We recommended that GSA develop for congressional consideration a more consistent and cost-conscious govermentwide location policy that considers such factors as maximizing competition and taking advantage of lower real estate and labor costs in order for the government to lower its acquisition and operating costs. In 1991, GSA issued a temporary regulation requiring agencies to consider the availability of local labor pools, pay differentials for employees, local incentives offered, and real estate costs for prospectus-level projects whose missions did not dictate a geographic area. However, the requirement was eliminated in 1997 when GSA revised its location regulations. GSA officials could not explain why the requirement was deleted when we asked them in May 2001.

On the basis of our latest survey of 115 sites, we found that little consideration in the site acquisition process was given to the differing costs of alternative areas. Besides finding little interest in lower real estate costs or in the use of certain local incentives, our survey also found that only 15 sites were acquired using cost analyses of alternative geographic areas, which compared costs of different areas in which a site could ultimately be selected. However, no regulation presently calls for such an analysis.

In 1990, we reported that GSA, as a central management agency, had not provided leadership to assist agencies in implementing and complying with RDA. We noted that GSA had not assisted agencies in developing procedures and guidelines to implement the various location policies. Therefore, we recommended in our 1990 report that GSA develop for congressional consideration a more consistent governmentwide location policy. In our recent survey of agency sites, we found most agencies, whether they obtained the sites independently or through GSA, did not use RDA or did not know whether it was used in choosing their sites.

Some Functions Can Potentially Locate in Rural Areas

On the basis of our survey of 115 federal facilities, the report of our consultant, and our interviews with high-ranking officials in human resources and information technology at 13 cabinet agencies, we were able to identify several federal functions that could be performed in rural areas. These included printing, archiving, accounting and finance, training, passport application processing, automatic data processing, research and development, storage, and law enforcement.

Private Sector Functions That Might Locate in Rural Areas

Our consultant identified 21 functions that the private sector might locate in rural areas, as shown in table 7.

According to our consultant, these functions lend themselves to being performed in rural areas because (1) some of them do not demand the large and technical, sophisticated labor pool often found in urban areas; (2) some functions may be performed in a location remote from the principal office’s day-to-day operations; and (3) some support functions can be performed by telephone. He also emphasized that rural areas are sometimes suitable for functions where security is important, such as research and development and law enforcement activities.

We reviewed the 21 functions to see if they were represented in the federal sector and whether any of the federal agencies we contacted identified them as being found in rural areas or potential for rural areas. Nine of the 21 functions met these criteria. They were (1) accounting, (2) distribution and warehousing, (3) education and training, (4) enforcement and quality control, (5) printing and publishing, (6) records archiving, (7) data processing, (8) scientific studies and research and development, and (9) telemarketing/teleservicing.

Table 8 shows the potential benefits and challenges that would result from situating the function in a rural area for the nine selected functions.

Functions Performed by Federal Agencies in Rural Areas

Some of the federal functions in our survey were more often located at rural sites than at urban ones. These were automated data processing, finance and accounting, social services, research and development, and storage and inventory.

Special space needs and low real estate cost were key factors for research and development and storage sites. The survey also asked respondents to pick 1 or more of 12 named reasons why they had chosen their locations. Survey responses regarding research and development and storage/inventory facilities that were in rural areas pointed to two factors: low real estate costs and unique space needs. For instance, officials representing four of the eight research and development sites cited their unique space needs as a reason for their sites’ selection. Of these sites, three were in rural areas. Officials representing five of the eight storage/inventory facilities also gave this reason, and four were in rural areas. Similarly, all three of the research and development sites for which officials cited low real estate costs as a reason for their site choices were located in rural areas. All five of the storage and inventory sites for which respondents cited low real estate costs as a factor were in rural areas.

Information from cabinet agency officials showed that functions that had been decentralized within the agency were more likely to be found in rural areas than were centralized functions. We asked these officials, who worked in information technology or human resources, about five functions—printing, training, personnel benefits administration, procurement, and finance/payroll—and whether these or other functions could be relocated to rural areas. Officials from 11 of the 13 cabinet agencies said they had decentralized 1 or more of the 5 functions by placing it in regional or even local operating units, including those in rural areas. For instance, USDA said its training and procurement functions were decentralized to local offices, which are "in a majority of rural counties.” The Interior Department said that, except for finance and payroll, the other functions were decentralized “to the installation level,” and it has hundreds of rural installations. Four agencies reported that they had placed training in rural areas, and one, the Department of Energy, said it also had decentralized the procurement and personnel functions to local offices, half of which are in nonurban areas.

However, if an administrative function was centralized it was more likely to be in an urban area. For instance, of the seven agencies that said they had centralized payroll, five said they located that function in cities, including New Orleans. The remaining two agencies placed the function in suburbs. The five agencies that centralized printing said they were doing it at an urban location—Washington, D.C. One agency that centralized its training and benefits administration said it had achieved economies of scale that it feared would be lost if any part of that centralized operation was relocated to a rural area.

At least six agencies represented in these interviews identified one or more problems with rural areas. One official cited difficulty in recruiting minority employees because some rural areas tend to lack minorities. Such areas, this official said, also may pose sufficient cultural adjustments for minorities and minority employees may not wish to relocate to these areas. Other officials cited cost concerns. Officials for five agencies, for instance, said rural areas can involve personnel-related costs, such as the cost of relocating employees or of recruiting and training replacement workers. Officials from three agencies also expressed concern over the relatively higher cost of travel to rural areas, with one asserting that this made such areas poor choices for training sites. Three agencies also raised concerns about facility costs, stating that the lack of available office space in rural areas would force them to build new facilities and lose agency infrastructure investments at current locations. Three agency officials also told us that their urban operations were in those areas because of factors intrinsic to urban areas, such as the availability of public transportation and proximity to the operations of other agencies or private sector organizations.

The full impact of telecommunications advancements in office location decisions is still uncertain. A widespread notion is that telecommunications advances have made the use of rural areas more viable. However, of the 11 cabinet agencies that discussed the benefits and drawbacks of rural telecommunications, only 2 agencies said telecommunications advances had made rural locations more viable. The other nine agencies expressed concern about telecommunications service in rural areas, with five saying that sophisticated telecommunications services are not always available or can be costly when they are available. Three agencies also said telecommunications is of less importance to siting decisions than other factors, and one of these expressed concern that rural telecommunications networks are inherently less secure than urban ones. On a positive note, five agencies saw telecommunications benefiting employees by, for instance, allowing benefits data and training to be offered on-line or by allowing employees to work from home or from the sites where they are conducting inspections.

The private sector offered similar views. According to our consultant, although telecommunications is an increasingly important factor in location decisionmaking, its full impact has not become clear. Advanced telecommunications services are touted as leveling the playing field between small towns and metropolitan areas; however, broadband (high- speed) telecommunications facilities are not available in all areas, as noted by our consultant. He also emphasized that many small towns and rural areas lack the capital and infrastructure to facilitate these broadband services.

Conclusions

Since our 1990 report on this issue, federal agencies continue to locate for the most part in higher cost, urban areas. Eight of the 13 cabinet agencies surveyed had no formal RDA siting policy, and there was little evidence that agencies considered RDA’s requirements when siting new federal facilities. Further, GSA has not developed for congressional consideration a cost-conscious, governmentwide location policy, as we recommended in 1990.

In our survey, the sites that involved relocated operations still largely remained in urban areas, while the sites that involved newly established operations were more evenly spread over rural and urban areas. Federal agencies’ mission requirements, such as the need to be near clients or other organizations, apparently have led them to select urban areas. Other factors that led them to select urban areas are the availability of public transportation and particular space needs. A major factor that influences private sector site selection for urban areas was the availability and cost of skilled labor. Other private sector factors included real estate cost, access to transportation, and business incentives. In choosing the geographic area for a facility, the private sector more often cites cost considerations and incentives offered by states and local areas than did the federal agencies in our survey.

Several government functions, such as research and development, data processing, accounting and finance, and teleservice centers, can be located in rural areas. Although it is not clear from the information we collected whether any of the federal agencies that located sites in urban areas could have located them in rural areas, one matter that is clear is that RDA has not had the influence on federal siting practices that the Congress appears to have intended when RDA was enacted. Many agencies had no RDA policy, as required by the act, and many agency personnel in our survey either did not consider RDA or did not know whether the act was used in making their site selection decisions. If agencies had RDA policies and agency personnel were aware of and considered them, certain constraints would still exist that impede efforts to locate in rural areas, such as inadequate infrastructure for high-speed telecommunications, limited public transportation, and a limited labor force.

In the future, some of these constraints may be mitigated for a number of rural areas, but for the federal government to cost effectively consider rural as well as urban areas, we believe the following must occur: The government needs to have a cohesive, governmentwide site location policy that considers costs to the government as well as the goal of enhancing the socioeconomic status of urban areas and rural areas. We do not believe that the public policy objectives of assisting either urban or rural areas in a way that will allow agencies to fully and effectively achieve their missions preclude agencies from considering other factors such as the availability and cost of labor, real estate costs, operational costs, and certain local incentives. In fact, a more cost-conscious federal siting policy may even increase agencies’ consideration of rural areas, since rural areas may have lower overall costs. However, we also recognize that in making siting decisions, the agency’s ability to achieve its mission can be a more important consideration than costs.

Federal agencies need to have clearly stated and documented policies on site location that conform to governmentwide policy, including RDA; and GSA and other agencies need to document their consideration of RDA to ensure consistent policy application. As a central management agency, GSA could require any agency subject to its authority to do this.

Federal agencies need one, clear definition of “rural area” for the purposes of implementing facility siting under RDA.

Matters for Congressional Consideration

We suggest that Congress consider (1) enacting legislation to require agencies to consider, along with their missions and program requirements, real estate, labor, and other operational costs and applicable local incentives when deciding whether to relocate or establish a new a site in a rural area or urban area, and (2) amending RDA to clarify the definition of “rural area” for facility siting purposes to facilitate its implementation.

Recommendations for Executive Action

We recommend that the Administrator of GSA, in GSA’s role as the federal government’s central property management agency, revise its guidance on federal facility siting to (1) advise customer agencies that they should consider, along with their missions and program requirements, real estate, labor, and other operational costs and applicable local incentives when deciding whether to relocate or establish a new site in a rural or urban area; (2) require that each federal agency subject to GSA’s authority provide a written statement to GSA demonstrating that, in selecting a new facility location, the agency, as required by RDA, had given first priority to locating in a rural area, and if a rural area was not selected, the agency’s justification for the decision; and (3) define the term “rural area” to provide its customer agencies with a single definition for purposes of federal siting under RDA, until the Congress amends RDA to define the term.

Agency Comments and Our Evaluation

We provided copies of a draft of this report for comment to the heads of 21 federal agencies. The agencies included both the agencies in our survey and departmental agencies from which we obtained additional site location information. We received written comments from 14 of the agencies and oral comments from 7 of the agencies.

Seventeen of the agencies responded that they either had no comments on the draft report, agreed with the information in the report, or suggested technical changes, which we considered and incorporated within this report where appropriate. The remaining four agencies provided more extensive comments, which are discussed below.

The GSA Administrator provided written comments dated July 16, 2001, which are reprinted in appendix VII. The Administrator stated that references in our report to GSA as the government’s central real property management agency were somewhat misleading, since GSA administers only about 10 percent of the total federal real property inventory and, therefore, GSA has no authority to establish governmentwide policy. However, we note that GSA’s mission statement identifies it as one of three central management agencies in the federal government. According to GSA, its inventory includes 40 percent of all federal office space, which is occupied by 1 million civilian federal employees, approximately half of the total federal civilian workforce. Thus, GSA’s policies would affect almost half of the federal government’s civilian office space, the type of space that was included in our survey.

We agreed with the Administrator’s statement in his comments that agencies acquiring property independently of GSA are not subject to GSA regulations, and we have revised this report accordingly.

The Administrator also said that our 1990 report, which we referred to in our draft report, called for GSA to develop a governmentwide location policy, and he added that GSA could not have done so since it lacked the authority. Our 1990 report did not call on GSA to develop this policy under its authority, but instead recommended that GSA propose a policy to Congress as a matter for consideration. The Administrator also said GSA had no mechanism for implementing a governmentwide leadership role in 1990, while that might be possible now through its Office of Governmentwide Policy. As previously mentioned, we recommended in 1990 that GSA develop such a policy for congressional consideration.

The Administrator also said our draft report implied that GSA selected the geographic area for agencies’ site acquisitions. We did not intend that implication, and we have revised this report to clarify that issue.

In addition, the Administrator pointed to GSA’s efforts to make its customer agencies aware of RDA requirements. In our report, we noted GSA’s regulations require RDA compliance by customer agencies. Nonetheless, RDA was not often used in the site acquisitions we surveyed, and some agencies said they were not aware of RDA requirements.

The Administrator also responded to our recommendation that GSA require written statements from each customer agency demonstrating that the agency had given first priority to locating in a rural area and, if a rural area was not selected, the agency also include a justification for the decision to GSA. He agreed to require a written statement from customer agencies regarding use of RDA in site acquisitions. However, he did not agree to asking for a justification because he said this would put GSA into the position of second-guessing the agencies because he believes that the agencies have authority to decide where to locate their facilities. While we agree with GSA on the latter point, we remain convinced that a justification is needed to help document that agencies gave first priority to rural areas when they did not choose a rural area. We are not recommending that GSA be required to evaluate these justifications.

The Administrator also responded to our recommendation that GSA define “rural area” to provide agencies with a single definition for the purpose of federal siting under RDA until the Congress amends RDA to define the term. He said GSA will develop a definition for use by its customer agencies, but it has no authority to establish a definition for all federal agencies. We clarified our report to reflect GSA’s authority to develop a definition only for its customers. GSA did agree, however, to issue a bulletin to make other agencies aware of this definition. We believe that GSA’s definition should be useful to other agencies until Congress amends RDA to set forth a statutory definition.

We also received written comments from the Department of the Interior’s Acting Assistant Secretary of Policy, Management and Budget dated July 3, 2001, which are reprinted in appendix VIII. The Acting Assistant Secretary responded that the agency generally agreed with the findings and agreed in part with the matters for congressional consideration and the recommendations for executive action. Our report suggested that Congress consider enacting legislation to require agencies to consider certain costs along with agency mission when deciding whether to locate a site in a rural or urban area. He responded that our suggestion should be limited to the establishment of new offices because agencies have different considerations, for example, relocation costs, when expanding operations at an existing location, as compared to establishing a new office. We did not intend our recommendation to apply to situations in which an agency expands an operation at an existing site that does not involve a relocation or establishment of a new site. We clarified our recommendation in this regard.

The Acting Assistant Secretary also commented that our recommendation that GSA require customer agencies to provide a written statement to GSA demonstrating that the agency had given first priority to a rural area should (1) be required only if the agency does not select a rural area, (2) be limited to a minimum dollar threshold that would exempt certain locations from the documentation requirement, and (3) exempt operations that are being expanded in the same local area. Our recommendation, as noted in the draft report, states that all site decisions should include a written statement to GSA and a justification only should be provided if a rural area was not selected. Although we agree that the establishment of a minimum dollar threshold may be reasonable conceptually, we note that RDA does not include a dollar threshold for application of the act’s requirements. We also believe that expansions of existing operations should be subject to this requirement if they might involve a relocation.

The two Department of the Treasury components in our survey also provided written comments. We received comments from IRS’ Director of the Office of Real Estate and Facilities Management dated June 26, 2001. IRS’s comments on this report covered four areas: (1) the use of RDA, (2) compliance with RDA requirements, (3) agencies’ ability to consider costs when selecting new sites, and (4) technical considerations.

With respect to the first point—use of RDA, IRS said that the RDA’s encouragement of locating in rural areas needs to be balanced against other legal requirements that sometimes contradict RDA requirements, such as those of CICA, and OMB and congressional budget requirements and limitations, and short-term and long-term cost considerations; a “rural area” should be defined in a way that achieves the intent of the RDA and be based on terms other than population alone; and if Congress supports a location policy that is economically rather than socially based, then Congress should repeal RDA and replace it with legislation that would require agencies to meet specific threshold terms specified in the legislation.

We agree that agencies need to consider a variety of legal requirements when selecting a new site for their facilities as well as costs. However, the statutory requirement imposed by RDA must be given priority. We also believe that if Congress defines “rural area” for purposes of RDA, it may want to consider factors in addition to population. By stating in our report that cost factors should be considered in the location process, we are not suggesting that Congress enact a location policy based solely on economics. Rather we are saying that cost should be one of the factors considered in the decisionmaking process.

With respect to its second point, on compliance, IRS said that agencies selecting their own sites without GSA assistance are to be held directly accountable for compliance with RDA and, therefore, GSA should not be required to evaluate or enforce compliance with the RDA. Additionally, IRS said that if an agency is using GSA to acquire a site, a simple statement that the agency considered the RDA should be sufficient. We recommended that GSA require a written statement only for federal agencies subject to its authority. We are not recommending that GSA enforce compliance with RDA for agencies that have and use their own authority to acquire space. In those cases where GSA acquires space for other agencies, we believe that providing GSA with a justification for a site selection that includes the reasons for not choosing a rural area under the RDA will help document that the agency gave consideration to RDA.

Regarding IRS’s third point, IRS said that, in considering costs, most agencies have no means to assess project costs, such as real estate or labor costs, across geographic areas. The agency added that market data on rural areas are not readily available or readily accessible to compare them with alternative geographic areas. We believe that GSA and OPM can provide much of the information needed to do cost analyses. Furthermore, private sector companies are able to make such analyses and gain access to them. Finally, several agencies in our survey said their site selection process included cost analyses of alternative geographic areas as well as cost analysis of sites within a geographic area.

Regarding IRS’s fourth point, its technical comments, IRS thought we should make distinctions between leased occupancies and new federal construction because of the greater time commitment for continued occupancy in new construction. We do not agree with IRS on this point. RDA does not distinguish between leased and owned space, and in our view, it is as important to consider costs and other factors regardless of whether space is leased or owned, particularly considering that many leases are for long time periods.

On July 3, 2001, we received written comments from the U.S. Customs’ Director, Office of Planning, which are reprinted in appendix IX. The Director responded that Customs concurred with the report’s recommendation to GSA to revise its guidance on federal facilities and stated that information in the report about Customs’ facility acquisition process and factors used by Customs to select the sites in our survey was correct. He also stated that when Customs acquires property under its existing statutory authority, it utilizes the same process as GSA; and, although not mentioned in our draft report, Customs applies GSA’s basic policy to house agencies in existing federally owned and leased space before acquiring additional space. The Director of Planning also stated that many of Customs’ facilities are unique because the operation requires proximity to the border, an airport, or a seaport, and difficulties sometimes arise in complying with RDA and the pertinent executive orders because many of the land border crossings, airports, and seaports are not located in the central business area of either a rural area or an urban area. We agree and acknowledged in this report that agency mission requirements primarily dictated the location of the sites in our survey.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 21 days after its issue date. At that time, we will send copies of this report to the Chairman and Ranking Minority Member, Senate Committee on Governmental Affairs; the Chairman and Ranking Minority Member, House Committee on Government Reform; the Chairman and Ranking Minority Member, Senate Committee on Environment and Public Works; the Chairman and Ranking Minority Member, House Committee on Transportation and Infrastructure; the Chairman and Ranking Minority Member, Senate Committee on Agriculture, Nutrition and Forestry; the Chairman and Ranking Minority Member, House Committee on Agriculture; the House and Senate Appropriations Committees; Representative Ernest J. Istook; the Director of the Office of Management and Budget; and the Administrator of GSA. We will also make copies available to others upon request.

If you have any questions about this report, please call me on (202) 512- 8387. Key contributors to this report are acknowledged in appendix X.

Objectives, Scope, and Methodology

Objectives

Our objectives were to determine (1) what executive branch civilian non- Department of Defense (DOD) functions have recently selected urban locations other than Washington, D.C., and the federal cities, compared to rural locations; and what factors, benefits, and problems were associated with such site selections; (2) what federal laws and policies govern facility location and to what extent have agencies implemented this guidance; (3) what lessons can be learned from private sector site selections; and (4) what functions lend themselves to being located in rural areas.

Scope and Methodology

To address the first objective, we looked at (1) sites selected by the General Services Administration (GSA), the government agency that has authority to acquire space on behalf of executive branch agencies and (2) sites selected by executive branch agencies using their independent statutory authority. We chose to look at sites acquired independently of GSA to determine whether agencies, when acting independently, engaged in practices that were different from those of agencies that used GSA for their acquisitions. We looked at those sites that were acquired from fiscal years 1998 to 2000. In establishing an appropriate site size to study, we wanted to choose sites that were large enough to have some economic impact on the community in which they were located, that were sufficient in number to provide useful information, and for which sufficient information was available.

Accordingly, we decided to consider only those sites with space of 25,000 square feet or more. Regarding manageability, GSA advised us that spaces of this size were small enough that they would be found on GSA’s inventory in all of its 11 regions. Concerning economic impact, GSA advised us that spaces of 25,000 square feet or more would tend to be associated with a relatively larger number of employees than spaces of less than 25,000 square feet and would consequently have a greater economic impact. Finally, in considering the availability of information, we discovered that if a space has 25,000 or more square feet, the agency requesting that site can officially appeal any GSA revision of the delineated area in which that agency wishes to search for a site. As a result, we thought the appeals process would make information on such sites more readily available.

We selected fiscal years 1998 through 2000 to obtain the most recent complete data available. As agreed with your office, we excluded Washington, D.C., and the 10 agency regional cities because of your request to see site acquisitions made outside of those cities.

We focused exclusively on new sites, rather than locations where leases had been renewed. In addition, we excluded spaces acquired by the judicial and legislative branches of the federal government because these branches are not subject to the Rural Development Act (RDA), which is applicable to executive departments and agencies. We also excluded sites acquired by DOD because DOD informed us that it has so much vacant space available at its bases nationally that it has no choice but to consider its existing vacant space when locating new or existing operations. We excluded the sites acquired by the United States Postal Service (USPS) because USPS advised us that it had little or no discretion in deciding where to locate most of its facilities, in that they needed to be in specific locations to serve customers or near airports. In addition, the Postal Reorganization Act of 1970 exempts USPS from federal laws relating to contracts and property. Further, USPS has authority to acquire space independently of GSA.

Identifying Sites Recently Acquired Through GSA and Independently of GSA

GSA provided us with a list of 166 sites it had recently acquired for agencies. After excluding sites on the basis of the previously discussed criteria, the total number of GSA-acquired qualifying sites was reduced to 81, representing 29 agencies. We did not independently verify the completeness or accuracy of the site data provided by GSA.

GSA also provided us with a list of 52 agencies, including cabinet departments and their components, that have some level of statutory authority to acquire space independently of GSA. After excluding agencies from the list on the basis of the previously discussed criteria, we reduced the total number of agencies to 33. We subsequently contacted the 33 agencies, asking each whether it had, independently of GSA, used its statutory authority to acquire, during fiscal years 1998 through 2000, sites that met our criteria. All 33 agencies responded, and 12 agencies identified 37 sites meeting these criteria. Of the 12 agencies, 5 were not among the 29 agencies represented by the 81 sites GSA helped agencies to acquire. Therefore, our total universe was 118 sites (81+37) represented by 34 agencies (29+5). Using a 28-question, mail-out survey form, we surveyed agency officials at the 118 sites. As of May 3, 2001, we had received responses for 115 of the 118 sites, for a response rate of 97.5 percent.

The practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted by the survey respondents could introduce unwanted variability in the survey's results. We took steps in the development of the questionnaire, the data collection, and the data editing and analysis to minimize nonsampling errors. These steps included pretesting the questionnaire with officials of the Department of Veterans Affairs and the National Institutes of Health, prompting potential respondents in order to increase our survey's response rate, and editing the questionnaires for completeness and accuracy.

Identifying Sites in Rural Areas—Defining “Rural”

To determine whether any of the sites were in rural areas, we reviewed RDA to obtain a definition for rural. However, RDA’s definition for rural was unclear, and we found application of it would be impractical. For the purpose of locating federal facilities, RDA states that rural areas shall be defined as those areas identified by the private business enterprise exception in 7 U.S.C. § 1926(a)(7). Prior to 1996, the private business enterprise exception in 7 U.S.C. § 1926(a)(7) defined rural areas as including all territory of a state that is not within the outer boundary of any city having a population of 50,000 or more and its immediately adjacent urbanized and urbanizing areas with a population density of more than 100 persons per square mile, as determined by the Secretary of Agriculture, according to the latest decennial census of the United States. In 1996, 7 U.S.C. § 1926(a)(7) was amended and no longer includes the private business enterprise exception. Therefore, the appropriate definition of rural area under RDA is unclear. Furthermore, we identified two problems with the pre-1996 definition. First, determining the population density for communities adjacent to these federal sites was not feasible within the scope of this job. Second, the term “outer boundary” in this definition lacks specificity.

The current definition of rural in 7 U.S.C. § 1926(a)(7) is for purposes of water and waste disposal grants and loans and defines rural as a city, town, or unincorporated area that has a population of no more than 10,000 inhabitants. We are not certain that this is the appropriate definition since it refers to water and sewer grants and not the private business enterprise exception. The prior threshold, which was eliminated in 1996, used a population threshold of 50,000 and included a population density requirement. Population density data were not readily available; therefore, it was not feasible for us to use this definition.

For this survey, we chose a threshold of 25,000 or less because it was used to define rural areas by several other federal agencies and private sector organizations that we identified. When we applied this population threshold of 25,000 to the sites on the list of 81 GSA-acquired federal sites, we determined that 23 were located in rural communities; and of the 37 sites that agencies acquired independently of GSA, 9 were located in rural communities. Thus, our survey included a total of 32 rural sites. We note that 26 of the “rural” sites in our survey that fall within the 25,000 population threshold were actually located in metropolitan statistical areas in which large cities are located.

Determining Laws, Regulations, and Policy That Affect Site Selections

To address the second objective, which concerned federal laws and policies that affect the selection of sites, we reviewed federal laws, executive orders, and policies that relate to the location of federal facilities. We also conducted interviews with officials of GSA’s Office of Governmentwide Policy, the chief realty officers of 13 of the 14 cabinet agencies, and an Office of Personnel Management official on federal employee compensation and relocation benefits. Furthermore, we asked survey respondents to identify whether they had applied the relevant laws and policies when making a site acquisition. We also examined GSA lease files created between 1989 and 2000 in three GSA regions—the Rocky Mountain Region in Denver, CO; the Greater Southwest Region in Ft. Worth, TX; and the Mid-Atlantic Region in Philadelphia, PA—where we were already conducting an examination of GSA files for another assignment. We examined the files for documentation regarding application of RDA. However, we did not attempt to verify whether GSA or other agencies were in compliance with RDA.

Private Sector Lessons for the Public Sector

To address our third objective, we contracted with a private sector consultant to (1) perform a literature search, interview experts in corporate real estate consulting, and survey corporations that had made recent site selection decisions; (2) determine the factors and criteria the private sector uses to select urban, suburban, or rural office locations; (3) identify types of office functions (such as claims processing) that lend themselves to being performed in more rural areas; (4) identify, to the extent possible, similar federal functions; and (5) identify and explain how technological advances in the last decade have reduced the disadvantages previously associated with rural areas and what impact U.S. economic changes have had on facility location decisions.

Our consultant reviewed relevant professional literature, surveyed a judgmental sample of private sector firms, and analyzed selected economic data for indicators of private sector location practices. Our consultant's results are not statistically representative of private sector locations practices because of the following factors: (1) a judgmental sample rather than a random sample was used, (2) 17 percent of those surveyed responded, and (3) no evidence was provided that those who responded were distributed proportionately across industry-type and geographic region to the proportions corresponding to these factors in the population of the 1,000 largest U.S. companies. Our consultant also did not empirically determine whether the same factors that influence private sector location decisions are applicable to location decisions of federal facilities.

Information obtained from our consultant was still very useful for our review because the information included data from both survey respondents and an extensive literature search on factors involved in corporate location decisions. Also, although our consultant's study included various types of companies, the study's focus was on the location of offices of those companies. Offices in the consultant's survey performed such functions as professional services, management, computing, secretarial, clerical, and administrative, functions that are similar to government functions.

Identifying Functions That May Relocate

To accomplish the fourth objective, which concerned the potential of certain federal functions to relocate to rural areas, we used the agency survey described above and interviewed officials at 13 of the 14 cabinet agencies about the location of functions—such as printing, personnel benefits administration, and procurement—that are often conducted on an agencywide basis. Experts in government management and personnel management had identified such functions as those that could be conducted in nonurban areas. At these agencies, we contacted the chief technology and human resources officials to inquire whether each of these agencywide functions was being conducted in an urban or a nonurban area and why. These officials were also asked to report the impact of telecommunications technology on the location of these agency functions and whether technology had made rural areas more viable as site locations. We also reviewed several of our reports, which provided background information on all four of our objectives.

We did our review between August 2000 and May 2001 in Washington, D.C., and in the cities of Philadelphia, PA; Denver, CO; and Fort Worth, TX, cities where we were already conducting an examination of GSA files for another assignment. Our review was conducted in accordance with generally accepted government auditing standards.

List of Surveyed Federal Agencies That Recently Selected Site Locations

The Smithsonian Institution is an independent trust instrumentality of the United States.

Location of the 32 Rural Sites (Areas With Populations of 25,000 or Less) in Our Survey

(Not in MSA)

Washington, D.C. (Not in MSA) (Not in MSA)

Washington, D.C.

Washington, D.C.

Washington, D.C. (Not in MSA)

Washington, D.C.

Washington, D.C. (Not in MSA)

Washington, D.C.

Washington, D.C. (Not in MSA)

Location Factors Considered by Private Sector Organizations

As table 9 shows, some agencies have been provided independent statutory authority to acquire real estate, and some agencies have broad authority. For example, the Tennessee Valley Authority is authorized to purchase or lease real estate property that it deems necessary or convenient in transacting its business; and the Securities and Exchange Commission is authorized to enter into real property leases for office, meeting, storage, and other space as is necessary to carry out its functions. Other agencies' statutory authority to acquire space is for more limited purposes. For example, the Secretary of the Interior is authorized to lease buildings and associated property for use as part of the National Park System, while the Secretary of the Treasury is authorized to lease space for the storage of unclaimed or other imported merchandise that the government is required to store.

Survey of Federal Facilities’ Locations

Comments From the General Services Administration

Comments From the Department of the Interior

Comments From the U.S. Customs Service

GAO Contacts and Staff Acknowledgments

GAO Contacts

Acknowledgments

In addition to those named above Alan Belkin, Lucy Hall, Brandon Haller, Stuart Kaufman, Thomas Keightley, Gary Lawson, Susan Michal-Smith, Edward Warner, and Greg Wilmoth all made key contributions to this report.