GSA Leasing: Improving Stakeholder Outreach and Lease Model Evaluation Could Enhance Competition
Fast Facts
The General Services Administration (GSA) leases space for federal agencies. GSA leases are stable, but they come with requirements and processes that are uncommon in private-sector leases. These can lead to extra costs, which lessors pass through to GSA.
We spoke to some lessors and real estate brokers who work with GSA about their concerns with these leases. For example, lengthy negotiations can increase costs and make federal leases less attractive to lessors. GSA has simplified some of its less-expensive leases to start addressing these concerns.
We recommended that GSA study whether the simplified lease has reduced costs or saved time.
General Services Administration
Highlights
What GAO Found
Stakeholders, including 20 lessors (e.g., building owners) and the six real-estate brokers that negotiate federal government leases, identified several aspects of the General Services Administration's (GSA) leases that can affect cost and competition. For example, specific lease requirements such as early termination (see table) can lead lessors to increase their rent rates or decide not to bid on a lease—thereby increasing federal leasing costs or decreasing competition. According to GSA officials, many of these lease aspects reflect contracting policy rather than being required by law, regulation, or executive order. GSA has made some changes, such as lengthening the term of some leases, to address stakeholder concerns. Stakeholders also identified the time it takes to complete a lease and GSA's propensity for staying in a space beyond the term of a lease as increasing costs and making GSA leases less attractive to potential bidders.
Examples of Requirements That Stakeholders Cited as Affecting Cost and Competition for the General Services Administration's (GSA) Leases
|
Requirement |
Description |
|
Early termination |
Gives GSA the option to terminate the lease after a set period of time; this option increases a lessor's risk of a vacancy. |
|
Tenant substitution |
Allows GSA to substitute the originally intended tenant agency in a building for another agency with a potentially very different mission. |
|
Janitorial and maintenance |
Stipulates stringent intervals and requirements for cleaning and maintenance services—more so than typical non-government leases. |
Source: GAO analysis of stakeholder information. | GAO-20-181
Note: This table represents selected stakeholders' views on a sample of leases.
GSA has undertaken initiatives to identify stakeholders' concerns to inform its reform efforts, but it lacks complete information to address concerns or evaluate its efforts. Specifically, GSA has not gathered information from a representative group of lessors because its recent outreach has involved two industry groups that focus primarily on organizations such as real estate brokers and investment trusts that are experts in GSA leasing. These organizations may not have the same concerns as smaller, less experienced, organizations. By obtaining information from a broad spectrum of stakeholders, GSA would be better positioned to know whether its leasing reforms are addressing stakeholders' concerns. Additionally, to expedite processing of lower-value leases, GSA developed a simplified lease model that excludes some requirements that stakeholders identified as challenging but may protect GSA, such as tenant substitution. GAO found that for fiscal years 2016 to 2018, GSA used the model for only about one-third of potentially eligible leases. GSA has proposed increasing use of the model, but it does not know whether the model as currently used is achieving the anticipated benefits, including reduced lease processing times, or the impact of financial or other risks from this model because GSA has not evaluated its use. Without such an assessment, GSA does not have the information needed to determine whether the simplified lease model is achieving its intended results, whether to make improvements, or how to mitigate any risks.
Why GAO Did This Study
As the federal government's landlord, GSA works with lessors and real estate brokers to identify space for other federal agencies to use. As part of this process, GSA uses leases that include requirements not commonly used in the private sector. These requirements and GSA's lengthy and complex leasing process can affect federal leasing costs and competition for leases.
GAO was asked to review issues related to cost and competition for GSA leases with private sector lessors. This report examines: (1) lease requirements selected stakeholders identified as affecting cost and competition and steps GSA has taken to address stakeholders' concerns, and (2) how GSA has identified stakeholders' concerns and evaluated its simplified lease model. GAO reviewed pertinent federal statutes and regulations and GSA's contracting policy and leasing data from fiscal years 2016–2018. GAO conducted interviews with 20 GSA lessors selected from GSA's data to represent a range of location, and cost of the leases and the six real estate brokers that work with GSA.
Recommendations
GAO is making three recommendations, including that GSA: (1) expand its outreach as appropriate to obtain feedback from lessors that are representative of its entire lease portfolio, and (2) evaluate whether the simplified lease model is achieving its intended results. GSA agreed with the recommendations and said it believes there are additional opportunities to expand its outreach efforts and evaluate the simplified lease model.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| GSA Office of the Administrator | The Administrator of the General Services Administration should expand its outreach as appropriate to obtain feedback from lessors that are representative of its entire lease portfolio. (Recommendation 1) |
Closed – Implemented
The General Services Administration (GSA) serves as the federal government's landlord and leases properties from private sector building owners for use by other federal agencies. These leases come with requirements not commonly used in the private sector. These requirements and GSA's lengthy and complex leasing process can affect federal leasing costs and competition for leases. To identify areas where its lease requirements may be increasing costs or affecting lessors' willingness to compete for leases, GSA has sought input from stakeholders including lessors, real estate brokers, and industry organizations by making presentations at industry conferences, meetings and hosting feedback sessions. In December 2019, GAO reported that GSA's outreach efforts had not gathered information from a representative group of lessors. Specifically, GSA had focused its outreach efforts primarily on large organizations such as real estate brokers and investment trusts that were already experts in GSA's leasing process. These organizations were not representative of GSA's total population of leases, which includes many smaller lessors that have less experience with the GSA leasing process. By focusing its efforts on these larger groups, GSA was missing the perspective of smaller lessors, whose representatives may not attend industry meetings. Therefore, GAO recommended that GSA expand its outreach as appropriate to obtain feedback from lessors that are representative of its entire lease portfolio. In 2022, GAO confirmed that GSA has adapted its approach to stakeholder outreach to make it easier for more types of stakeholders to provide input on the leasing process. Specifically, GSA has held more events virtually as opposed to in-person, and has recorded presentations to make them viewable later on. In addition, GSA has advertised upcoming events more widely by posting notices online and expanding its outreach mailing list from around 30,000 addressees in 2018 to more than 60,000 in February 2022. GSA has also formalized the need for appropriate feedback in its outreach and engagement strategies. For example, GSA's October 2020 Lease Offer Platform Outreach Plan includes achieving continuous improvement by soliciting feedback from the leasing market as one of its four primary goals, and defines specific activities to meet the goal including quarterly virtual industry meetings, monthly calls about lease platforms, and presentations to regions about feedback strategies. GSA's expanded outreach has resulted in greater numbers of stakeholders participating in the events where GSA receives feedback. For example, in 2018, GSA's emails were opened by 19 percent of recipients and only 1 percent clicked the links to GSA's notices. By February 2022, those figures had improved to 28 percent of recipients opening the emails and 19 percent clicking the links. GSA officials also told GAO that a broader range of leasing stakeholders are attending events and providing feedback about the GSA leasing process. This expanded outreach to a wider group of leasing stakeholders has given GSA more information about how the market views GSA leases, and it better positions GSA to develop products that will maximize competition for leases.
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| GSA Office of the Administrator | The Administrator of the General Services Administration should, for future outreach efforts, document and assess lessors' feedback about the leasing process. (Recommendation 2) |
Closed – Implemented
The General Services Administration (GSA) serves as the federal government's landlord and leases properties from private sector building owners for use by other federal agencies. These leases come with requirements not commonly used in the private sector. To inform its lease reform efforts, GSA has sought input from stakeholders. In December 2019, GAO reported that GSA began reform efforts in 2011 by conducting outreach, introducing new lease models, and adjusting some leasing provisions in response to stakeholder concerns. While GSA had continued its industry outreach, its more recent outreach efforts had not gathered information from a representative group of lessors. Further, GSA had not documented and analyzed the information it did collect and therefore did not know if its reform efforts were adequately addressing stakeholder concerns. Consequently, GAO recommended that GSA document and assess feedback about the leasing process for its future outreach efforts. In 2022, GAO confirmed that GSA is using two separate formal systems to document, assess, and prioritize stakeholder feedback related to leasing policy and the information technology tools GSA uses to execute leases. For feedback related to leasing policy, GSA uses a central database to document proposed changes, including those received from industry stakeholders and GSA staff, along with changes derived from GSA initiatives, and regulatory and statutory changes. To assess these proposed changes, GSA then prioritizes them based on the number of times they were suggested, implementation feasibility, and how they relate to GSA's policy goals, among other factors. GSA then uses this database to track its progress toward implementing these ideas. For feedback related to information technology, GSA uses dedicated software to document and assess suggested changes by tracking and prioritizing suggestions, and managing implementation of changes using three to four week project cycles. This process is included in GSA's Online Tools Engagement Project Management Plan dated July 2021 that lays out initiatives to improve GSA's leasing information technology tools. These initiatives include collecting feedback from stakeholders, prioritizing proposed changes based on feedback and utilization data, and regularly monitoring stakeholder feedback to gauge progress. By implementing these two formal systems for documenting and assessing feedback about the leasing process, GSA is better positioned to know whether its leasing reforms are addressing stakeholder concerns.
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| GSA Office of the Administrator | The Administrator of the General Services Administration should evaluate whether the simplified lease model is achieving its intended results. (Recommendation 3) |
Closed – Implemented
The General Services Administration (GSA) serves as the federal government's landlord and leases properties from private sector building owners for use by other federal agencies. These leases come with requirements not commonly used in the private sector and can involve lengthy negotiations to finalize the lease which can affect competition. In response to these issues, GSA developed a simplified lease model that was intended to be a faster and more efficient way to process lower value leases because the model had fewer requirements and a streamlined process for negotiating construction costs. In December 2019, GAO reported that, while GSA was proposing to expand the use of this model to higher value leases, GSA had not evaluated whether the model was performing as intended. Without such an evaluation, GSA did not have the information needed to determine whether the model was achieving its intended results. Therefore, GAO recommended that GSA evaluate whether the simplified lease model was achieving its intended results. In 2021, GAO confirmed that GSA performed an evaluation of the simplified lease model and found that the model had failed to achieve its intended purposes, such as shortening the leasing process, because it suffered from serious flaws that greatly limited its use. First, GSA found that one of the key features of the model-the process for negotiating construction costs by requiring the federal agency that would occupy the space to provide detailed space requirements to GSA in advance of GSA advertising the leasing opportunity-was difficult to accommodate because most federal agencies do not have requirements developed to the level of detail needed until later in the leasing process. Second, GSA found that GSA personnel were less willing to use the model because it used a different process and had different documentation requirements than GSA's other lease models. As a result of this evaluation, GSA determined that the simplified lease model would require significant rework in order to address its drawbacks. In 2020, GSA decided to retire the simplified lease model in favor of a newly-developed model for smaller lease acquisitions designed to better follow the process and documentation requirements of GSA's more common lease models while still reducing the workload burden on both GSA personnel and the private sector entities who bid on GSA leases. GSA began using this new model in October 2020 and fully retired the simplified lease model as of the same date. Completing an evaluation of the simplified lease model allowed GSA to determine that the simplified lease model was not achieving its intended results and needed to be replaced. With the information from this evaluation, GSA is better positioned to develop an improved lease model that could enhance competition for leases.
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