The federal government’s civilian real property holdings include hundreds of thousands of buildings and permanent structures across the country that cost billions of dollars annually to rent, operate, and maintain. Within this portfolio of government owned and leased assets, GSA plays the role of broker and property manager to many civilian agencies of the U.S. government. The Administrator of GSA is authorized by law to enter into lease agreements, not to exceed 20 years, on behalf of federal agencies. The administrator delegates leasing authority to GSA regional commissioners, who further delegate authority by issuing leasing warrants to lease contracting officers. GSA manages its inventory via 11 regional offices and its central office, located in Washington, D.C. While GSA’s Office of Portfolio Management is responsible for establishing the strategies and policies for GSA’s real property portfolio, its regional offices are generally responsible for conducting day-to-day real property management activities, including leasing, in their region. Federal management regulations specify that when seeking to acquire space for an agency, GSA is to first seek space in government-owned buildings and vacant space already under lease to the government. If suitable government-controlled space is unavailable, GSA is to acquire space in an efficient and cost-effective manner. As shown in figure 1, the square footage of property leased by GSA has steadily increased in recent years while the amount of federally owned space held by GSA has remained steady. The process for acquiring leased space, as outlined in GSA’s Public Building Service Leasing Desk Guide, begins when GSA receives a request for space from a federal agency. Using this guide—which provides guidance on implementing federal property regulations—GSA officials then work with an agency to fulfill the specific requirements for the space, including the square footage and any geographic limitations. According to GSA guidance, developing and finalizing these details should take anywhere from 2 to 8 months, depending on the complexity of a tenant agency’s space needs. After this initial stage, the Leasing Desk Guide estimates that approximately 18 to 24 months are needed to procure new leased space. During this time, GSA takes a number of steps to complete a lease acquisition (see fig. 2). During the lease acquisition process (‘leasing process’), GSA compiles and shares iterative estimates of the leasing costs with tenant agencies pursuing space. Prior to the advertisement step, GSA and each tenant agency involved sign a draft occupancy agreement detailing the estimated costs associated with a lease. At the conclusion of the process—when the actual costs of leasing a specific space are known, following the “build-out and acceptance” step—GSA and the agencies execute a final occupancy agreement associated with a specific lease, which allows agencies to budget for future payments. GSA is required to take additional action for prospectus leases—in 2014, those new leases with a net annual rent above $2.85 million. For these leases—also known as ‘high-value’ leases—GSA must submit a prospectus, or proposal, to the House and Senate authorizing committees for their review and approval. Given this additional requirement, GSA’s Leasing Desk Guide suggests the lease acquisition process for high- value leases begin 3 to 5 years prior to lease expiration. The prospectus should include the purpose and location of the lease, as well as basic information about the space to be leased including the location, an estimate of the maximum cost to the government of the space, and a statement of rent currently being paid by the government for federal agencies to be housed in the space. This information assists Congress in overseeing GSA’s management of its real property portfolio. Typically, these prospectuses are drafted in the GSA regional offices and reviewed and approved by GSA’s Office of Portfolio Management. The prospectuses are then reviewed and approved by the Office of Management and Budget prior to being provided to congressional authorizing committees—the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure. In 2013, we reported that there were 218 active GSA high- value leases, which accounted for about one-third of GSA’s net annual rent costs; GSA’s overall lease inventory included more than 8,300 leases as of August 2015, 4 percent of which had current annual rents above the $2.85 million threshold. Once GSA executes a lease on behalf of a tenant agency and an occupancy agreement with the agency, that agency is required to pay rent to GSA for the space they occupy. Rent payments are deposited into the Federal Buildings Fund (FBF), which is a fund established by the Public Buildings Act Amendments of 1972. Congress provides annual limits on the amount GSA may obligate to provide a range of real property services. As of February 2015, the FBF had an unobligated balance of $3.6 billion. Included in federal agencies’ monthly rent is a monthly fee to GSA for its services related to leased space; as of 2015, tenants paid 5 or 7 percent of their lease value in a fee to GSA based on the level of flexibility the agency had in canceling the agreement. Depending on the extent to which leased space must be altered for an agency to fulfill its mission, the costs of the improvements necessary (“tenant improvements”) are paid by the tenant to the lessor through GSA. Tenant improvement costs include changes to walls, electrical outlets, telephone lines, and secure rooms that need to be made by the lessor between the time that GSA executes the lease and the point when the tenant agency takes occupancy. GSA officials said that it is standard practice for tenant agencies to amortize these costs over the lease term and noted that this approach is similarly utilized in the private sector. GSA assigns each tenant to one of 6 tiers, which equate to the standard improvements that tend to be required to prepare a space to support the mission and activities of a particular agency. In late 2009, GSA began to reform its leasing by simplifying the lease acquisition process, among other changes. For example, for leases below $150,000 in annual rent, GSA introduced a ‘simplified lease’ model to allow a more efficient way to process documents customized for lower- value leases. GSA included this and other reforms in its Leasing Desk Guide of policies and procedures, which was introduced in April 2011. While GSA’s fiscal year 2015 budget request stated that one of the agency’s strategic objectives is to procure leased space on behalf of federal tenants at or below market rates, our analysis of recent GSA office leases across all regions performed for this report found that about half of the rates negotiated in recent years exceeded market rates at the time the leases were executed. Although GSA analyzes its lease rates against market rates over the full term of the lease, we chose to limit our assessment to the point in time the leases were executed, as this is the moment at which actual market rates were known. In doing so, the review of 714 new GSA leases finalized between 2008 and 2014 found that about half exceeded their local market’s average rate for similar space by 10 percent or more. This phenomenon varied across the 11 GSA regions, with some regions performing better than others. In general, three GSA regions were in line with market values for rents, five GSA regions executed leases that were on average at or below market, and three GSA regions had rates that exceeded local market rates on average. Specifically, figure 3 shows how the rates negotiated by GSA regional offices compared to relevant market rates in the years the leases were executed. GSA officials across all regions stated that they utilize a number of tools to establish a range of market rental rates for each lease, including a report specifically tailored for each transaction with market information, analysis, and insight regarding the relevant location. GSA could more consistently achieve market rates or better if there were more competition for its leases. The Federal Management Regulation requires that federal agencies acquire leased space at rates consistent with prevailing market rates through full and open competition. As we reported in 1995, this is designed to ensure that all responsible sources are allowed to compete and serves as the government’s primary price control mechanism. At a June 2015 hearing, a top GSA manager stated that GSA’s ongoing lease reform effort includes plans to reduce costs by increasing competition. However, according to our interviews with officials across all GSA regions as well as private sector stakeholders, competition among private lessors is currently limited by the following factors: Restricted geographic area: GSA regional officials said that tenant requirements for the location of a leased space reduced the number of buildings that qualify, thereby limiting competition for GSA leases. In some cases, an agency’s requested geographic area may be so restricted that it does not include a single building that meets all the tenant’s requirements. For example, for one lease we reviewed, a tenant agency was forced to twice widen the geographic areas it initially requested in order to find the space ultimately leased. GSA officials from this region said that these starts and stops necessitated by the narrow geographic area requested by the tenant resulted in repeating steps of the leasing process, increasing related costs and the overall schedule. Although officials from GSA’s central office told us that GSA has not typically questioned the appropriateness of an agency’s location limitations, GSA regional officials said that broadening the area deemed suitable for potential properties—while still ensuring that the agency can pursue its mission—is one of the best ways to increase competition for a lease. In September 2015, an internal GSA memo to all regions detailed a renewed policy through which GSA is taking the initiative to suggest geographic areas to tenant agencies. This memo states that GSA will consult with regional officials on several factors in order to designate geographic areas and, when agencies submit future space requests to GSA, this policy will help to enhance competition.