General Services Administration: Improvements Needed in Managing Delegated Authority of Real Property Activities
Released: 2007-10-05T00:00:00

Letter

Background

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.

GSA Delegated Most Types of Real Property Authority but Did Not Have Consistent or Complete Data for Certain Delegated Activities

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.

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

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.

GSA Policies and Procedures for Managing Certain Delegations Were Not Always Current

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.

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

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.

Agencies Primarily Request Delegated Authority to Receive Faster Service, and Most Said They Plan to Seek Delegations in the Future

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.

Agency Officials Said They Sought Delegations to Improve Timeliness of Real Property Activities

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.

Agencies Plan to Seek Delegations in the Future

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments

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.

Appendix I: Objectives, Scope, and Methodology

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.

Appendix II: Comments from the General Services Administration