GSA reasserts lead role as leasing authority

The General Services Administration plans to tell agencies they can no longer negotiate their own leases for large offices after recent audits showed some have abused their leasing authority.

Recent investigations by the General Services Administration’s inspector general and the Government Accountability Office showed the Defense and Homeland Security departments and others paid higher rents than they should have and circumvented required approvals for large deals.

In 1996, GSA empowered agencies to lease their own office space. But GSA will publish a rule in the Federal Register that will bar agencies from negotiating their own leases for offices of 20,000 square feet or larger. Agencies still can lease for smaller-sized offices, but GSA promises to scrutinize those more closely. GSA could not say when the rule will be published.

An official from the National Archives and Records Administration (NARA), which has negotiated its own office leases without problem, complained that GSA is punishing all agencies for the bad actions of a few.

Certainly the problems they found are significant problems. But we don’t understand why we get punished because somebody else made mistakes,” said Richard Judson, NARA’s director of the space and security management division.
The GSA inspector general reviewed and found no problems with all three leases NARA entered into. NARA is working on two other property lease deals, and Judson said GSA’s decision to revoke agencies’ leasing authority puts those efforts in jeopardy.

“This is a problem for us,” Judson said.
NARA sent a letter to GSA in September, after the IG audit was completed, asking GSA to weigh each agency’s track record when deciding who can and can’t lease offices.

GSA officials say the change will make sure federal office leases are handled consistently.

“Leasing is one of GSA’s core business functions. We have the expertise and the tools to get the best deals for agencies who lease space from GSA,” said David Winstead, commissioner of GSA’s Public Buildings Service, in an Oct. 29 statement.
A GSA spokeswoman said the intent of the change isn’t to punish agencies but to fix problems identified by GAO and the IG.

“In the end, we think we can do better,” the spokeswoman said, adding that rents for office space secured by GSA this year are 11 percent below industry averages.
But NARA’s Judson said having to go through GSA to lease property means agencies will pay higher rents. GSA charges an administrative fee that totals between 6 percent and 8 percent of the lease amount.

Agencies have been increasingly entering into their own leases. In fiscal 1997, the first year agencies could strike their own lease arrangements, agencies arranged six leases — and GSA’s Public Building Service awarded 668 leases, the IG found. In 2007, agencies arranged 156 leases, GSA said.

Still, agency-awarded leases are a small percentage of the nearly 8,600 leases in GSA’s portfolio. Of the 156 leases issued by agencies this year, only 17 exceeded 20,000 square feet, GSA said.

Judson said allowing delegated authority for properties under 20,000 square feet is useless for NARA, which typically leases large warehouses for storing records. The three NARA properties reviewed by the IG averaged 231,000 square feet each.
In an August audit report, GSA’s IG reviewed select leases for property exceeding 25,000 square feet issued between 2001 and 2006 at Defense, Homeland Security, Interior, Justice, Treasury, Agriculture and Veterans Affairs departments and NARA.
Of the 25 leases it reviewed, 18 were not awarded properly. The IG said the problems occurred because agencies lacked experience executing leases and didn’t report lease details to GSA officials or obtain GSA’s assistance when they should have.

Some agencies appeared to willfully circumvent congressional approval for high-dollar leases by splitting up the leases, the IG said.

For example, the Defense Department signed a lease in 2003 for 115,000 square feet of office space at Fort Sam Houston Army post in Texas, which is managed by a private company. Defense agreed to a rental rate of $2.2 million a year, just over the statutory dollar cap at the time. Defense should have obtained congressional approval before signing the lease, but didn’t. Additionally, the department issued supplemental leases for the same property in 2003 and 2004 for a combined $10.9 million, which exceeded a price threshold requiring it to seek Congress’ approval.
The GSA IG said it appeared the Pentagon “attempted to engineer the rental rate to avoid obtaining congressional approval.”

In addition, the department paid more than it should have for the leases and for renovation work authorized in supplemental leases. Rental rates for the leases awarded at Fort Sam Houston exceed appraised market values by between 28 percent and 32 percent. The property improvements cost the department $105 per square foot, well above the $35 per square foot standard, the IG said.

In another case, the Homeland Security Department signed a lease in April 2001 for 10 acres of land in Glynco, Ga., to build a 300-room dormitory for the Federal Law Enforcement Training Center. The lease was to cost the department nearly $1.8 million, which is below the $2 million threshold at which the department would have to seek Congress’ approval. However, in October 2001 and again in September 2002, the department signed additional leases for two additional dormitories on the same site. Combined, the three buildings totaled $5.5 million, well above the congressional notification limit.

Homeland Security officials contend each building was a standalone project, but the IG said each building appears to be part of a larger project that should have required congressional approval.

http://federaltimes.com/index.php?S=3160794

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GSA reasserts lead role as leasing authority