Federal Real Property: Measuring Actual Office Space Costs Would Provide More Accurate Information

The government's RTF policy has intensified federal efforts to reduce office space and save money since 2015. GSA and OMB report key cost performance measures but questions exist about how well these measures reflect agencies' efforts.

GAO was asked to review how federal real property costs have changed since 2015. This report examines (1) the extent to which performance measures reflect changes in civilian CFO Act agencies' office space costs and (2) how selected agencies considered cost in their office space decisions.

To conduct this work, GAO analyzed federal data on office space square footage and cost changes for the 23 civilian CFO Act agencies from fiscal years 2015 through 2018, and reviewed GSA's and OMB's calculations for cost performance measures. GAO selected five agencies and 13 of their office space projects as non-generalizable case studies based on several factors, including those with larger space and cost changes. GAO reviewed the selected agencies' policies and project documentation, and interviewed agency officials.

The Office of Management and Budget (OMB) issued the Reduce the Footprint (RTF) policy in 2015 to promote the more efficent use of federal space. The General Services Administration (GSA) and OMB track and report two RTF cost performance measures: estimated costs avoided and average cost per square foot. GAO found that the method for estimating costs avoided was reasonable. However, the average cost per square foot was not accurate for the federally-owned and leased office space GSA manages for agencies. Specifically, GAO found that from fiscal years 2015 through 2018 the actual average cost per square foot for this space was, on average, $1.31 per square foot higher than the costs GSA and OMB reported for the 23 civilian agencies subject to the Chief Financial Officers (CFO) Act. The actual cost per square foot was higher for 18 out of 23 of these agencies (see figure). Because GSA and OMB did not use readily available actual cost data, their method, which is based on 1 month's data, excluded an average of $271 million per year in costs over this period. Consequently, stakeholders and agencies do not have accurate information to assess agencies' performance or help manage their space decisions.

Note: This information covers the 23 Civilian Chief Financial Officers Act agencies.

While selected agencies considered costs when making office space decisions, they balanced other factors as well. As the federal government's principal landlord, GSA obtains space for many agencies. In so doing, it emphasizes federal cost savings, which may not lead to agency savings. For example, GSA prioritized filling unoccupied federally-managed space even if it was more costly to an agency than another option. The selected agencies also reported that factors such as mission, workforce needs, and external factors are important to consider and balance as well. For example, a senior official from the Department of Education said that effects on employees' commutes are an important factor in its space decisions, and that it weighs the impact of potential office locations on the Department's workforce against the cost of the space.

GAO recommends that GSA coordinate with OMB to use actual cost information to calculate the average cost per square foot performance measure for GSA-managed space. GSA agreed with the recommendation.

Federal agencies spend billions of dollars each year to rent, operate, and  maintain their real property assets, including office space. The federal  government has faced long-standing challenges managing these assets  in an efficient way. Recognizing this, in March 2015 the Office of  Management and Budget (OMB) directed agencies to reduce and more  efficiently manage their space as part of the Reduce the Footprint (RTF)  policy. According to OMB and the General Services Administration  (GSA), the 24 agencies subject to the Chief Financial Officers Act (CFO  Act agencies) have reduced their domestic office and warehouse space  by more than 16 million total square feet and avoided an estimated $166  million in costs since fiscal year 2015. However, OMB and GSA also  reported that average costs per square foot have increased for some  space, raising questions about the effects agencies’ efforts have had on  their actual real property costs. Moreover, as the RTF policy ends in fiscal  year 2020, it is unclear if agencies have reduced their space to the best  possible size or how they will strive to optimize their office space size and  costs going forward.

You asked us to review how federal real property costs have changed  since 2015. This report discusses: (1) the extent to which Reduce the  Footprint performance measures reflect changes in civilian CFO Act  agencies’ office space costs, and (2) how selected agencies considered  costs in their office space decisions.

To assess the accuracy of the RTF cost performance measures used to  monitor changes in agencies’ office space costs, we analyzed data  submitted by the 23 civilian CFO Act agencies to the Federal Real  Property Profile (FRPP) and data maintained by GSA in its Occupancy  Agreement database from fiscal year 2015, the year RTF began, through  fiscal year 2018, the most recent year for which data were available. We  assessed the reliability of these data by conducting electronic testing and  interviewing GSA officials, among other steps, and determined that both  datasets were reliable for the purposes of our reporting objectives. While  GSA measures RTF performance for all 24 CFO Act agencies, we  excluded the Department of Defense (DOD) from our scope because of  GSA concerns about the reliability of their data. We refer to the  remaining 23 civilian CFO Act agencies as “agencies” in this report. We  also reviewed the methodologies GSA developed with OMB for the cost  performance measures, interviewed GSA and OMB officials regarding the  measures, and replicated one of the methods. We compared our analysis  of one method to Standards for Internal Control in the Federal  Government, which state that agencies should use and communicate  quality information—information that is complete and accurate—to inform  decisions.

To understand how agencies considered cost in office space decisions,  we selected five agencies—the Department of Education (Education),  GSA, the Internal Revenue Service (IRS) within the Department of the  Treasury, the Department of Labor (Labor), and the National Institutes of  Health (NIH) within the Department of Health and Human Services—to  review in depth. To select agencies, we used FRPP and Occupancy  Agreement data on agencies’ costs and square footage, and considered  a range of factors, such as changes in portfolio cost and square footage.  We selected agencies for variety but weighted our selection toward  agencies with larger absolute changes in cost and square footage. We  also selected 13 office space projects these agencies undertook from  fiscal years 2015 through 2018 based on factors such as cost, location,  changes in square footage, and project type to further understand how  agencies considered cost in their decisions. We selected projects with a  range of locations and types, but selected only those with a cost of $1  million or more because these projects have more effect on overall costs.  Our selections are not representative or generalizable to all agencies or  projects. To gain insights into how selected agencies considered costs in  their office space decisions, we reviewed their real property management  policies and project documentation and interviewed agency officials. We  analyzed this information to identify common themes across the  agencies. Because GSA’s Public Buildings Service (PBS) acquires,  manages, and disposes of office space on behalf of agencies, we  reviewed PBS’s policies and its analyses for most of our selected  projects. We also interviewed PBS headquarters officials to understand  how PBS considers costs when helping agencies obtain space. Appendix  I describes our objectives, scope, and methodology in greater detail.

We conducted this performance audit from November 2018 to December  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Roles and Responsibilities for Managing Federal Real Property

Within the executive branch, both OMB and GSA provide leadership in  managing federal real property. OMB, among other things, issues policies  and memorandums, including the RTF policy discussed below. GSA has  dual roles with regard to the management of federal real property. First,  GSA’s Office of Government-wide Policy supports the implementation of  OMB’s real property policies, including RTF, by collecting and analyzing  federal real property data and providing agencies with guidance on  leading practices. According to GSA officials, GSA and OMB coordinated  to develop data analysis methods to monitor agencies’ performance in  meeting OMB’s real property policies, and OMB approved the methods  that are used.

Second, as the federal government’s principal landlord, GSA’s PBS  acquires, manages, and disposes of federally-owned real property for  which it has custody and control on behalf of agencies that occupy it, and  leases commercial space on behalf of agencies. In these cases, GSA  manages the lease agreements. We refer to both of these types of  properties as GSA-managed space. All of the agencies obtain at least  some of their office space through GSA’s PBS; in fact, two-thirds of the  23 agencies’ office space is GSA-managed space. When agencies obtain  space through GSA, they enter into occupancy agreements with PBS and  pay rent, operations, and maintenance costs to PBS. When GSA obtains  space for its own employees, it also enters into occupancy agreements  with PBS. PBS maintains a record of agencies’ GSA-managed space,  including information on square footage and costs, in its Occupancy  Agreement database. We discuss PBS’s role in agencies’ office space  decisions later in this report.

Some agencies also have independent statutory authority to lease, or  acquire and manage their own property, which GSA refers to as directly- leased or directly federally-owned (“directly-owned”) space. Additionally,  some agencies may be authorized to directly lease or acquire property  when GSA delegates authority to them because doing so is in the  government’s best interest. Fourteen of the 23 agencies directly lease or  own some of their office space, and about one-third of these agencies’  total office space is made up of directly-leased or owned property.  Agencies pay rent to private landlords when directly leasing space and  are responsible for operating and maintaining directly-owned property.  Agencies must report, among other things, the square footage and costs  to rent, operate, or maintain such properties to the FRPP database, which  GSA maintains.

Reduce the Footprint Policy and Performance

As previously mentioned, in March 2015, OMB issued the RTF policy to  promote the more efficient use of real property assets through improved  space utilization and reduction. According to OMB, the policy is intended  to provide value to the taxpayer. The RTF policy requires agencies to  submit annual Real Property Efficiency Plans (Efficiency Plans) to OMB  that: (1) identify annual reduction targets for domestic office and  warehouse space for a 5-year period; (2) include a policy that specifies  the maximum usable square feet per person, also known as a utilization  rate, and (3) refrain from increasing the square footage of domestic office  and warehouse space over fiscal year 2015 levels. As part of the  Efficiency Plans, agencies must also identify specific projects they will  implement to reduce or improve efficient use of their space. Agencies  may undertake different types of projects such as renovation, relocation,  or consolidation projects to achieve their space reduction or efficiency  goals.

While OMB oversees the implementation of the RTF policy, GSA tracks  and reports key cost performance measures on agencies’ square footage  and cost changes, in accordance with analysis methods it developed in  coordination with OMB. GSA reports these performance measures on  performance.gov and to Congress in annual reports, and provides  measures for agencies to use in their Efficiency Plans. According to  these data, the 23 civilian agencies reduced more than 6 million square  feet of office space from fiscal year 2015 through fiscal year 2018. As  shown in figure 1, space changes varied across agencies; 16 of the 23  agencies reduced office space, while 7 increased space.

According to publicly available RTF data, some agencies’ space  reductions have slowed as the RTF policy approaches its end date in  fiscal year 2020 and as according to OMB officials, many of the lower- cost, high financial return projects have been executed. GSA has  reported varied results with regard to changes in agencies’ costs since  the start of RTF. GSA reported that the federal government has avoided  spending millions of dollars as a result of reduced office and warehouse  space but also has reported that the average cost per square foot for  office space has increased. We discuss the RTF cost performance  measures in detail later in this report.

The RTF policy is effective through the end of fiscal year 2020. OMB and  GSA officials told us that discussions about a real property policy to  succeed RTF were underway as of early 2019. However, no policy to  succeed RTF has been issued as of September 2019, according to a  senior GSA official.

Reduce the Footprint Cost Performance Measures Give Insight into Agencies’ Efforts, but Using Actual Cost Data Would Provide More Accurate Information

GSA tracks and reports two RTF cost performance measures—estimated  cost avoidance and average cost per square foot. These measures  provide useful information on agencies’ results, but the average cost per  square foot performance measure does not use the most accurate  information.

Regarding estimated cost avoidance, GSA reported that the 24 CFO Act  agencies—including DOD—avoided an estimated $166 million in office  and warehouse costs as a result of their space reductions since fiscal  year 2015. We used GSA’s data and the cost avoidance approach GSA  developed with OMB to identify that $114 million of the estimated cost  avoidance can be attributed to civilian agencies’ office space reductions  since fiscal year 2015.

The estimated cost avoidance measure reflects overall federal cost  avoidance because it accounts for space that agencies have returned to  GSA but that remains unoccupied. Under certain conditions, agencies  may vacate GSA-managed space prior to the end of their occupancy  agreement and report that as a reduction in their space. However, until  this space is reoccupied or GSA disposes of it, the federal government  continues to incur costs to operate and maintain the space. Because of  these continued costs, GSA accounts for vacant space when it estimates  cost avoidance. For example, from fiscal year 2016 to fiscal year 2017 the  amount of vacant GSA-managed office space increased more than the  amount of space agencies reduced. Since this increase meant that the  federal government had not reduced office space overall when the  calculation was made, GSA estimated that rather than avoiding costs,  costs for civilian office space increased by roughly three-quarters of a  million dollars during this period. GSA officials noted that this estimate  represents estimated cost avoidance at a single point in time and does  not capture fluctuations in agencies’ space or vacant federal space  throughout the year.

Average fiscal year 2015 cost per square foot  for (1) space agencies lease directly,   (2) space agencies acquire and manage  directly, (3) space GSA leases on behalf of  agencies, and (4) federally-owned space  GSA manages.

In 2018, GAO reported that GSA’s and OMB’s method for estimating the  cost avoidance associated with agencies’ real property changes is a  reasonable approach given current limitations. OMB officials explained  that the estimated cost avoidance is not intended to depict actual cost  savings or the net effect of space changes on costs (i.e., investment cost  minus savings) because the estimate does not include agencies’  investment costs to renovate, relocate, or dispose of space. Rather,  GSA’s and OMB’s method estimates the costs for rent, operations, and  maintenance that the federal government did not incur because it no  longer occupies space. Further, OMB officials pointed out that because  agencies use a variety of methods and systems to track and categorize  their renovation, relocation, and disposal costs, agencies’ data on actual  investment costs are not consistent across agencies and using these data  would limit the accuracy of any estimate purporting to be an actual cost  savings measure.

Another annual cost measure GSA uses to track agencies’ RTF  performance is the average cost per square foot, which is intended to  reflect actual changes in agencies’ real property costs. GSA calculates  the annual average cost per square foot for different categories based on  how the space is managed—directly-owned, directly-leased, and GSA- managed office space. GSA uses the same approach to calculate the  measure for all agencies, and for each agency to use in their annual  Efficiency Plans. GSA’s performance measure shows an increase in all  types of office space costs since fiscal year 2015, and our analysis of  FRPP and Occupancy Agreement data similarly found that overall office  space costs have increased for the majority of agencies, some by as  much as 10 to 15 percent. We found the approach GSA developed with  OMB to calculate average cost per square foot for directly-owned and  directly-leased office space to be reasonable because GSA used the best  available data.

However, we found that GSA’s and OMB’s approach for GSA-managed  space understated the average cost per square foot. Specifically, we  found that GSA understated the overall average cost per square foot for  all agencies’ GSA-managed office space by $1.31 (4.7 percent) on  average from fiscal years 2015 through 2018. Furthermore, we found that  GSA’s and OMB’s method understated the average cost per square foot  for 18 of the 23 agencies between 3 percent and 41 percent on average  from fiscal years 2015 through 2018. Figure 2 illustrates the range of  differences we found between GSA’s and OMB’s method and actual  costs.

GSA understated the average cost per square foot for GSA-managed  space because it did not use readily available data on the actual costs  agencies paid to GSA for office space each year. Instead, GSA used the  “rental rate”, which reflects the cost per square foot that agencies paid in  the month GSA accessed the data—usually September. This rate does  not include all agency costs, such as costs for GSA’s fee. Using the  monthly rental rate to calculate average cost per square foot can  significantly affect the resulting measure because the rental rate can differ  from month to month. According to GSA officials, this variation can occur  for many reasons including rental incentives, credits, or one-time costs  that are reflected in that particular month but do not apply in all months.  To identify how GSA’s use of the rental rate affected the cost information  GSA used to calculate the measure, we calculated costs using the rental  rate (GSA’s method) and compared them to the actual annual costs in  GSA’s data. We found that costs calculated using the rental rate were  almost always lower than actual annual costs for agencies, sometimes by  millions of dollars for a single space. This approach led GSA to exclude  an average of $271 million in office space costs per year from its  calculations during this time period. Moreover, by using this approach  GSA did not include the costs for spaces that did not have a rental rate,  even when agencies paid for those spaces during the fiscal year. In  fiscal year 2018, GSA’s and OMB’s method excluded 405 GSA-managed  office spaces that did not have a rental rate but that had a combined  annual rental cost of $24.2 million.

Example of the Effect of General Services  Administration’s (GSA) and Office of  Management and Budget’s (OMB) Method  on Cost per Square Foot: National  Aeronautics and Space Administration  (NASA)

GSA used the rental rate even though it tracks and can easily access  actual annual costs in its Occupancy Agreement database because, in  GSA’s view, the rental rate better reflects the real average cost of an  office space. Officials said that the actual annual cost can represent  partial year costs and that GSA did not want to skew the averages toward  zero- or low-cost spaces. However, as demonstrated by our analysis,  GSA’s use of the rental rate, rather than preventing GSA from skewing  the average costs toward lower cost office spaces, actually resulted in an  understatement of these costs.

GSA and OMB’s method excluded about $31  million from the cost per square foot  calculation. This difference was largely  attributable to one office space, which had a  rental rate of $44.67, much lower than the  actual annual cost per square foot for that  space, which was $97.98.

Standards for Internal Control in the Federal Government state that  agencies should use and externally communicate quality information— information that is accurate and complete—to achieve their goals.  Understating the average cost per square foot for GSA-managed office  space, which comprises two-thirds of agencies’ office space, has  implications for federal efforts to efficiently manage space. First, using an  inaccurate cost performance measure affects stakeholders’ and  policymakers’ ability to accurately judge and oversee agencies’ progress  toward reducing space costs. Second, because agencies use these data  to judge their own performance and make decisions about how to  efficiently manage their space, agencies are at risk of taking ineffective  steps to manage their costs and achieve their goals.

While Costs Are a Central Consideration When Making Office Space Decisions, Selected Agencies Balance Additional Factors GSA Prioritizes Federal Cost Savings When Obtaining Office Space for Agencies

As the government’s principal landlord, GSA’s PBS emphasizes cost  savings from a government-wide perspective when working with  agencies. To facilitate this approach, PBS has established policies and  tools that focus on early planning and cost analysis. For example,  according to PBS officials, PBS generally begins planning and cost  analysis 5 years ahead of expiring occupancy agreements and leases. As  part of this planning, PBS analyzes project costs and cost savings, and  considers opportunities to fill vacant federal space and improve a space’s  efficiency by, for example, improving the utilization rate. PBS  recommends projects—including consolidation, relocation, and renovation  projects—to agencies based on its analysis. Though PBS officials said  that PBS has the final decision-making authority regarding agencies’  space, they said PBS works closely with agencies to make collaborative  decisions about office space changes. Officials also told us that early  planning helps ensure that PBS and agencies have time to identify and  select the most cost-effective project option.

According to PBS officials, PBS developed a tool in 2018 to compare  potential space projects based on, among other factors, market and move  costs. Officials told us that this tool is a way to ensure that PBS analyzes  all projects consistently to identify the most cost-effective option for the  federal government. They also told us that they use this tool iteratively  throughout the planning process and that the cost analysis becomes  more refined as PBS coordinates with agencies and identifies specific  spaces as options. For high-cost projects, PBS also performs cost  analysis of alternative options, including comparing each alternative’s net  present value.

However, PBS officials said that there are instances when they do not  perform GSA’s standard cost analysis because it is not necessary.  Specifically, PBS does not conduct this analysis when there is a space  option that clearly aligns with its priorities. For example, PBS did not  conduct its standard cost analysis for two of our 13 selected projects  because both agencies moved into vacant federally-owned or leased  space, moves that presented clear benefits to the federal government,  according to PBS officials.

However, GSA’s government-wide emphasis may not always result in  cost savings for individual agencies, and in some cases, what is most  cost-effective for the federal government does not always align with what  is most cost-effective for individual agencies. For example, when  Education relocated its San Francisco office to vacant federal space in  fiscal year 2016, GSA’s analysis of the relocation showed that it cost  Education slightly more than one other option, but was the lowest cost  option for the federal government because it allowed GSA to fill space the  federal government was already paying for.

Selected Agencies Conduct Cost Analysis When Making Office Space Decisions

PBS officials told us that they expect their analysis to heavily influence  agencies’ office space decisions and do not expect agencies to perform  their own cost analysis for these decisions, but said some agencies do  conduct such analysis. We found that all five of our selected agencies— Education, GSA in the space that it occupies, IRS, Labor, and NIH— conducted some type of cost analysis to inform office space changes. We  found that some agencies include such analysis as part of their routine  policies and procedures, while others conducted analysis for specific  projects as needed.

Percentage Change in Selected Agencies’  Square Footage and Cost, Fiscal Year  2015 through 2018  Cost plays an important role in agencies’  office space decision-making processes,  which can influence office space changes  over time. From fiscal year 2015 through  2018, our selected agencies’ office space  costs and square footage changes varied,  and square footage and cost changes did not  always have the same trend.

Education: A senior Education official said that the Department carries  out various cost analyses when making office space decisions. For  example, the official told us that Education conducts various cost  analyses to identify the most cost-effective options for the Department. To  manage agency office space costs, the Education official told us that  Education focuses its planning process on expiring leases, high-cost  leases, and low-cost projects with a large and rapid return on investment.  We found that Education conducted such analysis when carrying out its  Washington, D.C., consolidation project in fiscal year 2016. The official  told us that Education had to quickly reduce agency costs and decided to  do so by reducing space as opposed to furloughing employees. After  reviewing their space and conducting rent savings analysis, Education  decided to consolidate its staff from three different office buildings in  Washington, D.C., into excess space it had in two other buildings.  According to Education’s analysis, this consolidation reduced the annual  rent for its Washington, D.C., offices by about 19 percent.

GSA: GSA considers cost when it identifies and evaluates potential  projects for the space it occupies. Specifically, GSA requires its offices to  use a project template to routinely collect rent savings and payback  period information on almost all potential projects. In fiscal year 2015,  GSA also conducted a portfolio-wide review of GSA-occupied space  during which it identified potential projects based, in part, on rent savings  and payback period analysis. Through this review, GSA identified and  recommended 15 projects that would reduce 964,000 rentable square  feet, use space more efficiently, and save up to more than $17 million in  rent over 5 years. GSA officials told us GSA prioritized its implementation  of the recommendations by starting with the projects that had the largest  space reduction and rent savings. For example, in fiscal year 2015, GSA  decided to consolidate two of its Atlanta offices into one smaller, more  efficient space. GSA determined that this consolidation could reduce its  rentable square feet by 150,000 square feet (52 percent) and save $4.1  million in annual rent.

IRS: IRS has developed multiple tools to analyze the cost of project  options based on market data and upfront costs, among other  information. For example, IRS developed its Return on Investment  Calculator to help determine whether it is most cost-effective to stay in  place, downsize, or relocate when a lease or occupancy agreement  expires. The tool compares the return on investment for moving versus  staying by using cost information, such as market data, travel, furniture,  and rent costs. The IRS also uses a project estimating and tracking tool  called the Space, Time & Resources Tool to create general cost  estimates for a variety of project types, evaluate alternatives, and  according to IRS officials, contribute to the development of plans for  expiring leases. This tool uses preliminary space and cost estimates for  needs such as facilities, security, and information technology to determine  each project’s return on investment and potential annual rent savings.  IRS officials told us that they may use the analyses from some of the  tools to make a case to GSA in support of IRS’s preferred alternative or  lowest-cost option, if necessary.

Labor: Labor considers cost in its space policies and procedures, and we  found that Labor sometimes conducted its own cost analysis to identify  opportunities to achieve savings. A senior Labor official told us that Labor  conducts an informal, broad review of its space that allows the  Department to identify opportunities for cost savings. The official told us  Labor looks for opportunities to co-locate staff from multiple agencies,  and according to its space management policy, co-location allows Labor  agencies to share support spaces which can reduce overall square  footage and administrative costs. The official said that through review and  analysis, Labor identified an opportunity to consolidate staff from multiple  offices in Washington, D.C., into a single space in fiscal year 2016.  Labor’s analysis indicated that the consolidation could save the  Department an estimated $789,000 in annual rent in fiscal year 2014, the  year the project began. The Labor official told us that Labor is focused on  early planning to identify opportunities for cost savings and space  reductions, and is beginning a new initiative to review and plan for  projects up to 6 years in advance of lease or occupancy agreement  expirations.

NIH: We found that NIH routinely considers costs when it evaluates  potential projects. Specifically, when NIH considers potential projects, it  collects information on costs, such as long-term budget effects. A senior  NIH official also told us that NIH works closely with GSA to conduct cost  analysis, including analysis for high-cost projects that NIH submits as part  of its funding requests to Congress, such as analysis of rent costs over  the full lease term. Through this analysis, NIH has been able to identify  lower-cost space options to meet its needs. For example, NIH determined  that it could save $3.6 million annually and $53 million over 15 years by  locating to office space that was closer to its other offices because it  would decrease the time employees spent traveling between spaces.  Additionally, the NIH official said one of NIH’s goals includes co-locating  agency offices and staff to improve efficiency and reduce costs, and NIH  routinely identifies opportunities to co-locate as part of its project selection  process. For example, when NIH consolidated staff in Maryland into two  buildings on one campus, the official said that NIH chose consolidation  because it offered NIH an opportunity to operate more efficiently.

All Selected Agencies Consider Factors beyond Cost When Making Office Space Decisions

We found that while all selected agencies consider cost when making  office space decisions, they generally do not make decisions based on  cost alone. We have previously reported that cost, mission, and external  considerations influence agencies’ efforts to manage, reduce, or change  their space. We found that all five of our selected agencies balance  these factors, as well as workforce considerations, with cost, and with  each other, when making office space decisions. These factors may not  always align with each other and the extent to which these factors  influence space decisions and their cost implications can vary for each  specific office project need.

Mission and Goals: We found that all selected agencies considered and  balanced their mission or goals with other factors, such as cost, when  making office space decisions.

Mission: Agencies’ missions are an important factor and can work in  tandem, or be in tension, with agencies’ efforts to achieve cost  savings. For example, we found that when GSA decided in fiscal year  2014 to renovate and reduce space in its Chicago, IL, office, it  considered, among other factors, how this project supported GSA’s  government-wide mission to make federal space available to  agencies. By reducing space in the existing location by fiscal year  2017, GSA determined it could reduce its annual rent in Chicago by  40 percent and provide more than 50,000 square feet of federal space  to other agencies. On the other hand, a senior IRS official told us that  because enforcement needs—a central part of IRS’s mission—are  constantly shifting to different parts of the country, IRS may not  always be able to enter into long-term lease agreements, which are  generally more cost-effective.

Goals: We found that agencies’ goals could be complementary to or in  conflict with their efforts to reduce cost. A senior NIH official told us  that NIH’s offices are currently widely dispersed and that NIH has a  goal of “making the crumbs into a loaf” by co-locating different offices  as leases expire. The NIH official told us that co-locating can facilitate  cost savings because it allows NIH to operate more efficiently by, for  instance, reducing shuttle services and sharing common areas and  services. For example, one NIH project in Bethesda, Maryland will  consolidate 11 expiring leases in five locations into three leases in a  two-building campus that, according to GSA analysis, will reduce rent  by 42.5 percent per year for 15 years. Conversely, some of our  selected agencies noted that agency goals do not always align with  cost savings. For example, both Labor and IRS officials told us that  they may not pursue their space utilization goals if it costs too much to  renovate space to meet their desired space per person. Additionally,  the senior NIH official told us that NIH has previously moved to office  space that did not meet its utilization rate goals because it was able to  achieve larger cost savings by moving to a space in an area with  lower rent than the area it previously considered.

Workforce Impact: We found that all five of the selected agencies  considered how office space decisions could impact their workforce, and  a couple of agencies told us that they balance this consideration with  costs, along with agency mission and goals.

Commuting time: Officials from three selected agencies noted that  changes in employees’ commuting time can influence what office  space to select. For example, Education is scheduled to relocate its  Dallas regional office in fiscal year 2020. A senior Education official  told us that Education chose a space that has close proximity to the  current space, in part, because the relocation will have minimal impact  on employees’ commute. The official also said that even if federally- owned office space further away became available, Education may  not move there if it would be difficult for staff to get to. Similarly, IRS’s  business case to consolidate several offices in the Cincinnati, OH,  area into one office starting in fiscal year 2015, analyzed how the  project would affect IRS employees, including the impact on  employees’ commute, ability to park, and the effect on employees’  income taxes.

Employee Morale and Productivity: Several selected agencies noted  that reducing the amount of space per person can affect employee  morale and productivity. According to GSA’s strategic goals,  improving space utilization by, for example, reducing the amount of  space per person can help the federal government achieve cost  savings. A senior Education official told us that when redesigning  Education’s Washington, D.C., offices, which reduced the amount of  space per person, leadership engaged in a substantial employee  outreach effort to understand how these changes affected employees  and to build employee support for the changes. The official also said  Education took into account upfront costs for tools to improve  employees’ experience. For example, the official said that the  Department invested in noise cancelling headphones to improve the  employee experience, which was a small cost compared to the cost  for office space. To ensure that reductions are not having a negative  impact on its employees, GSA developed a survey that it sometimes  distributes both before and after making space changes.

External Factors: Officials from four of the five selected agencies said  external factors, such as federal priorities, statutes, regulations, and  policies can influence their office space decisions. In some cases, these  factors did not complement efforts to reduce costs.

Federal Priorities: Federal goals and priorities can influence agencies’  space decisions, and these requirements may not align with efforts to  reduce costs. For example, in fiscal year 2016, GSA relocated its  regional office in New York City from federally-owned to federally- leased space in the World Trade Center. Though GSA considered  cost, the federal government’s commitment to move into the World  Trade Center after the terrorist attacks on September 11, 2001,  influenced this decision, which resulted in increased costs for GSA.

Statutes, Executive Orders, and Regulations: Some agencies told us  that statutory requirements, directives, and regulations can influence  their space decisions, and may or may not align with efforts to reduce  costs. For example, a senior IRS official told us that a 1978 Executive  Order, which requires that agencies with a mission need to locate in  an urban area first consider moving to a central business district,  might result in IRS moving to higher-cost neighborhoods. A senior  official from the Department of Health and Human Services also told  us that locating office space in the central business district of urban  areas can be more expensive, but that the Department often does so  because of the Executive Order.

GSA policies: GSA policies on space management can also affect  agencies’ office space decisions. A senior Labor official told us that  the Department is currently reducing space in its Chicago, IL, regional  office but the ability to do so is dependent on whether Labor can  return the space to GSA. GSA policy states that agencies occupying  space acquired from PBS can return space within a certain time frame  if, among other requirements, the space is categorized as cancelable  and is in marketable blocks based on the location, usage, and size of  the space. If the space does not meet these criteria, an agency can  return the space to PBS but is still responsible for paying rent and  other costs associated with the space until the occupancy agreement  or lease expires.

Even as agencies have intensified their focus on better space  management in an effort to save taxpayer dollars, overall, the cost for  office space continues to rise. Using the best data available to assess  space options and trade-offs is critical. GSA’s and OMB’s cost per square  foot performance measure could provide agencies a good way to assess  their costs and track cost trends, particularly as agencies’ efforts continue  to evolve beyond reducing their footprints toward optimizing their space.  However, the measure is only as good as the approach and data used in  the calculation. Because GSA’s and OMB’s cost per square foot  performance measure is not using actual cost information for GSA- managed space, GSA and OMB are understating the average cost per  square foot for a significant portion of square footage. This inaccurate  information could adversely affect agencies’ and stakeholders’  understanding of RTF results. As the RTF policy ends in fiscal year 2020  and agencies look toward the next initiative, having the most transparent  and accurate information on the results of agencies’ efforts to date can  inform new strategies and tools to help agencies continue and expand  upon their efforts to manage their property more efficiently and ultimately  save money. Moreover, having accurate information on agencies’ real  property costs will continue to be important in future initiatives to  efficiently manage federal real property.

The Administrator of the General Services Administration (GSA), in  coordination with the Director of the Office of Management and Budget,  should ensure that the average cost per square foot performance  measure for GSA-managed space is calculated using actual cost  information. (Recommendation 1)

We provided a draft of this report to GSA, OMB, and the Secretaries of  the Departments of Labor, Education, the Treasury, and Health and  Human Services for review and comment. In GSA’s written comments,  which are reproduced in appendix II, GSA agreed with our  recommendation. OMB did not provide comments, but GSA stated in its  comments that it is working with OMB to develop a plan to address our  recommendation. The Departments of Labor, Education, the Treasury,  and Health and Human Services told us that they had no comments on  the draft report.

We are sending copies of this report to the appropriate congressional  committee; the Administrator of GSA; the Director of the OMB, and; the  Secretaries of the Departments of Education, Health and Human  Services, Labor, and the Treasury. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions concerning the report, please  contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made significant  contributions to this report are listed in Appendix III.

This report discusses: (1) the extent to which Reduce the Footprint  performance measures reflect changes in civilian Chief Financial Officers  Act agencies’ (CFO Act agencies) office space costs, and (2) how  selected agencies considered costs in office space decisions.

To obtain background information on both of our objectives, we reviewed  literature including the Office of Management and Budget’s (OMB) and  General Services Administration’s (GSA) memos and guidance governing  the Reduce the Footprint (RTF) policy, the Real Property Efficiency  Plans (Efficiency Plans) agencies submit to OMB and GSA annually as  part of RTF, and relevant regulations and statutes. We also examined  information GSA uses to track RTF progress, including public data on  agencies’ square footage changes. We assessed the reliability of these  data by conducting electronic testing, reviewing prior GAO assessments  of reliability, and interviewing agency officials. Based on this assessment,  we determined these data to be reliable for the purposes of describing  changes in agencies’ square footage. Additionally, we reviewed previous  GAO and GSA Inspector General reports describing the federal  government’s efforts to use its property more efficiently and reduce  costs.

To address our first objective, we analyzed federal data on office space  square footage and costs, and reviewed the two RTF cost measures GSA  developed with OMB to track and report agency performance: (1)  estimated cost avoidance and (2) changes in average cost per square  foot. To identify changes in agencies’ office space costs, we analyzed  square footage, and rent, operations, and maintenance costs from  Federal Real Property Profile (FRPP) data submitted by agencies and  GSA’s Occupancy Agreement data. Office space costs in both datasets  may contain costs for additional items beyond rent, operations and  maintenance, such as tenant improvements, but we determined that the  inclusion of these costs did not preclude us from using these data to  describe agencies’ costs as the data reflect the total annual costs to  agencies. Though agencies may report different types of square footage  in FRPP, as specified by GSA’s FRPP reporting guidance, we analyzed  rentable square footage where available because it represents the total  space an agency pays for. We limited our analysis to the CFO Act  agencies because these agencies are subject to RTF requirements, but  we excluded the Department of Defense (DOD) from our analysis  because of GSA concerns about the reliability of DOD’s data. We  analyzed data from fiscal year 2015, the year RTF began, through fiscal  year 2018, the most recent year for which data were available. To assess  the reliability of these data, we conducted electronic testing, reviewed  GSA documentation and prior GAO data reliability assessments, and  interviewed GSA officials. Based on our assessment, we determined that  both the FRPP and Occupancy Agreement data were reliable for the  purposes of describing changes in agencies’ office space costs and  square footage.

To analyze the extent to which the cost performance measures reflected  agencies’ cost changes, we reviewed the methodologies GSA developed  with OMB for the cost performance measures and GSA’s calculations,  interviewed OMB and GSA officials regarding the measures, and  replicated one of the methods. We also reviewed previous GAO  assessments of the estimated cost avoidance methodology. To determine  how GSA’s and OMB’s approach to calculating the average cost per  square foot affected the results for GSA-managed space, we used GSA  Occupancy Agreement data to compare the average cost per square foot  based on GSA’s and OMB’s method to the average cost per square foot  using actual costs. We compared our analysis of the average cost per  square foot method to Standards for Internal Control in the Federal  Government, which state that agencies should use and communicate  quality information—information that is complete and accurate—to inform  decisions.

To address our second objective, we selected five agencies—the  Department of Education (Education), GSA, the Department of the  Treasury, the Department of Labor (Labor), and the Department of Health  and Human Services—to review in depth. Within the Departments of the  Treasury and Health and Human Services, we further selected the  Internal Revenue Service (IRS) and National Institutes of Health (NIH)  respectively because we determined that real property within these  Departments is managed at the agency level. Using FRPP and  Occupancy Agreement data on agencies’ costs and square footage, we  selected agencies based on factors such as office space portfolio size,  whether the agencies obtain office space themselves or through GSA,  and changes in portfolio cost and square footage. We selected agencies  for variety but weighted our selection toward agencies with larger  absolute changes in cost and square footage. Our selection is not  representative, and these agencies’ experience is not generalizable to all  agencies. To gain insights into how these agencies consider costs when  making office space decisions, we reviewed selected agencies’ real  property management policies, and interviewed agency officials. We then  analyzed this information to identify common themes across selected  agencies.

To further understand how agencies implemented their policies and the  factors agencies considered when making specific office space decisions,  we also selected 13 office space projects these agencies undertook from  fiscal year 2015 through fiscal year 2018. We identified potential projects  based on selected agencies’ annual Efficiency Plans, agency project  data, and interviews with agency officials. We selected specific projects  based on factors such as cost, location, changes in square footage, and  project type. We chose projects with a range of types and locations to  better understand agencies’ decision-making process for different kinds of  projects. However, we selected only projects with a cost of $1 million or  more and with larger changes in square footage because these projects  have more effect on overall federal and agency costs and portfolios.  Because our intent was to understand the factors selected agencies  considered when deciding on projects, our selection includes both  completed projects and projects that were ongoing as of spring 2019,  when we collected our data. The projects we selected are not  representative of all projects or agencies, and are not generalizable. We  analyzed project documentation and interviewed agency officials about  each project. We also reviewed federal data for some projects to identify  the changes in agencies’ square footage and costs before and after  projects.

To further address our second objective, we reviewed GSA Public  Buildings Service (PBS) policies and guidance, and interviewed PBS  headquarters officials to understand PBS’s role in agencies’ office space  decisions, including how PBS considers costs when helping agencies  obtain space. We also reviewed PBS cost analyses, such as net present  value alternatives analysis and move-stay analysis, for most of our  selected projects.

Appendix II: Comments from the General Services Administration

In addition to the contact named above, Maria Edelstein (Assistant  Director), Katherine Raymond (Analyst-In-Charge), Eli Albagli, Ricki  Gaber, and Minette Richardson made significant contributions to the  report. Also contributing to this report were Melissa Bodeau, Josh  Ormond, Kelly Rubin, Terence Lam, and Crystal Wesco.

The Office of Management and Budget's "Reduce the Footprint" policy promotes reducing federal office space and managing it more efficiently to help keep costs down.

OMB and the General Services Administration (the government's main landlord) try to measure the policy's effects by tracking changes in the average cost per square foot of federal space.

We found GSA and OMB didn't use readily available actual cost data to calculate the costs of certain spaces. As a result, their calculations excluded an average of $271 million a year in costs from fiscal years 2015-2018.

We recommended that GSA and OMB use actual cost data for this calculation.


Federal Property: GSA Guidance Needed to Help Agencies Identify Unneeded Property in Warehouses

Federal civilian agencies hold and manage billions of dollars in property that is not considered to be real property, such as vehicles, furniture, computers, and scientific instruments. Some of these items are stored in nearly 18,000 warehouses covering more than 90-million square feet. Agencies are required by law to regularly identify and dispose of unneeded items. However, GAO reported in 2018 that agencies often did not do so. The Federal Personal Property Management Act of 2018 requires agencies to use GSA guidance to assess the utilization and ongoing need for property.

GAO was asked to review property stored in warehouses. This report examines: (1) what is known about property in selected agencies' warehouses and how much agencies spend to store it, and (2) the extent to which selected agencies assess the ongoing need for property stored in warehouses. GAO reviewed federal statutes, regulations, and GSA's guidance; analyzed policies from three agencies—FAA, Office of Science, and BOP—which were selected based on total warehouse square footage, among other factors; conducted site visits to agencies' warehouses; and interviewed stakeholders such as agency officials and industry groups.

GAO found that three selected agencies stored a wide variety of property in their warehouses. For example:

Federal Aviation Administration (FAA) warehouses at four main sites contained items used to build and repair aviation support systems, such as wind shear alert systems. Other sites contained tools and equipment to maintain aviation support systems or housed the systems themselves.

The Department of Energy's Office of Science warehouses, located primarily at national laboratories, contained items, such as large magnets, for use in scientific experiments.

Bureau of Prisons (BOP) warehouses, located mainly at federal correctional institutions, contained items, such as food, uniforms, and soap, for inmates.

The above agencies reported spending approximately $50.1 million in fiscal year 2018 on warehouse rent, operations, and maintenance costs.

The three selected agencies generally did not systematically assess the ongoing need for property in their warehouses and had limited guidance for doing so. For example, although two of the agencies had policies about when such an assessment should occur, none of the agencies specified how it should occur for most types of property. Instead, agencies primarily relied on agency officials' professional judgment to assess ongoing need. GAO identified instances where agencies retained unneeded property absent relevant guidance. For example, one agency site had stored obsolete computers dating back to the 1990s. While the General Services Administration (GSA) drafted guidance in response to recent legislation, this guidance does not describe approaches or practices stakeholders identified as potentially useful for assessing ongoing need for property, such as periodic retention justifications, use of data analytics, and utilization reviews. Further, while GSA officials intend to put the final guidance on GSA's website and provide it to agencies that participate in a GSA-chaired committee on property management by December 2019, GSA has not provided a documented plan or a timeline for broader dissemination. Guidance that incorporates such approaches could help agencies avoid retaining property that is no longer needed and, as a result, allow them to better manage their property and use of their warehouse space.

GAO recommends that GSA incorporate approaches agencies could use to assess the ongoing need for property in GSA's guidance—such as periodic justifications, use of data, and utilization reviews—and develop a plan for communicating the guidance government-wide. GSA concurred with GAO's recommendation.

Federal civilian agencies hold and manage billions of dollars of property  that is not considered real property, such as vehicles, furniture,  computers, and scientific instruments. Some of this property is in the  nearly 18,000 warehouses that take up over 90-million square feet that  these agencies reported holding and leasing in fiscal year 2018. Over the  last 4 years, the Office of Management and Budget (OMB) has called for  agencies to reduce their physical footprint, including warehouse space.  This effort presents an opportunity for agencies to review their property  inventory stored within warehouses and dispose of unneeded items.  However, we have found that federal agencies do not routinely identify  and dispose of unneeded items, which could affect their ability to reduce  warehouse space and storage costs. Recently enacted legislation, the  Federal Personal Property Management Act of 2018 (FPPMA), requires  agencies to regularly assess certain types of property under their control  in accordance with guidance from the General Services Administration  (GSA). Such assessments are to include evaluating utilization and the  extent to which agencies’ missions are dependent on the property being  assessed.

You asked us to review property stored in warehouses. This report  addresses: (1) what is known about property stored in selected federal agencies’ warehouses and how much they spend to store it; and (2) the  extent to which selected agencies assess the ongoing need for property  stored in warehouses.

There are no government-wide data on the types of government property  stored in warehouses. As a result, for both of our objectives we focused  on selected departments and agencies. At the department level, to obtain  variation among the top 10 agencies by warehouse square footage, we  used the following criteria: (1) total warehouse square footage, (2) recent  changes in warehouse square footage, and (3) proportion of leased to  owned warehouse space as reported in Federal Real Property Profile  (FRPP) and Reduce the Footprint data. Within each selected  department, we then selected components with the most warehouse  square footage, with one exception. These agencies were: (1) the  Federal Aviation Administration (FAA) within the Department of  Transportation; (2) the Office of Science within the Department of Energy  (DOE); and (3) the Bureau of Prisons (BOP) within the Department of  Justice.

To determine what is known about property in selected agencies’  warehouses, we conducted site visits to at least one site for each agency  that was among the largest in terms of warehouse square footage and at  least one other site that was near one of the large sites, as described  below.

FAA: Mike Monroney Aeronautical Center in Oklahoma City,  Oklahoma; the Staging Area and Mobile Asset Deployment Center in  Independence, Missouri; and Charles B. Wheeler Downtown airport in  Kansas City, Missouri.

Office of Science: Argonne National Laboratory and Fermi National  Accelerator Laboratory in the Chicago area.

BOP: U.S. Penitentiary Leavenworth in Leavenworth, Kansas, and  Federal Correctional Institution El Reno in El Reno, Oklahoma.

For each agency, we viewed property stored in warehouses at each of  the sites and also interviewed officials at the headquarters and regional  level. Information obtained from these sites and regional officials is not  generalizable to the selected agencies, and information from the selected  agencies is not generalizable to other agencies.

To determine how much selected agencies spend to store property in  warehouses, including the numbers and square footage of these  warehouses, we reviewed fiscal year 2018 FRPP data for information on  FAA and BOP because that was the most recent data available when we  conducted our analysis. For the Office of Science, we reviewed DOE data  because DOE reports most information to FRPP at the department level  rather than for specific offices, such as the Office of Science, and we  used fiscal year 2018 data to cover the same period covered by the  FRPP data. Both FRPP and DOE data included information about direct  costs for warehouses such as rent, operations, and maintenance costs.  We reviewed documentation related to these data sources, interviewed  knowledgeable officials, and determined that these data were sufficiently  reliable for providing information about warehouse numbers, square  footage, and costs.

To determine the extent to which selected agencies assess the ongoing  need for property stored in warehouses, we analyzed their policies and  procedures related to property management, including policies for  identifying and disposing of unneeded property. We interviewed officials  at the sites we visited about their processes for identifying and disposing  of unneeded property and challenges in identifying unneeded property.  To obtain a government-wide perspective on these issues, we reviewed  GSA guidance and relevant industry standards related to property storage  and warehousing practices. We also interviewed a standards-setting  organization and two industry stakeholders selected based on their  knowledge about property management practices to discuss property  storage and warehousing processes, practices, and standards that  agencies could use to assess the ongoing need for property. In addition,  we invited participants from the Interagency Committee on Property  Management (ICPM)—a committee chaired by GSA that consists of  executive agency representatives interested in federal property—to speak  with us regarding their practices for identifying unneeded property and  interviewed the four agencies that volunteered to participate. Finally, we  reviewed FPPMA’s requirements and interviewed GSA’s Office of  Government-wide Policy officials about GSA’s role in assisting agencies  in identifying unneeded federal property, how FPPMA could affect GSA’s  roles and responsibilities going forward, and GSA’s progress in  implementing FPPMA. For further details on our methodology, see  appendix I.

We conducted this performance audit from October 2018 to December  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Federal law requires executive agencies to: maintain adequate inventory controls and accountability systems for  property under their control;  continuously survey property under their control to identify excess;  and promptly report excess property to GSA and generally dispose of it in  accordance with GSA regulations so that it can be made available to  other federal agencies and stakeholders for reuse.

In addition, the FPPMA requires agencies to assess accountable property  within their control in accordance with guidance from GSA. Property can  be accountable or non-accountable. Accountable property is property  with a useful life of at least 2 years that an agency determines should be  tracked in its property records. Each agency determines what  constitutes accountable property for that agency, and for our selected  agencies, consideration is given to an item’s acquisition cost and other  factors, such as ease of theft and sensitivity. For our three selected  agencies, these acquisition cost thresholds ranged from $5,000 to  $10,000 in fiscal year 2018. Non-accountable property is property that  does not meet the agency’s definition of accountable property and may  include items such as office furniture and printers. Agencies typically do  not track non-accountable property unless they need to for specific  purposes, such as managing inventory levels.

Some agency property is located in warehouses. For the purpose of this  report, we used the definition of “warehouse” in FRPP guidance:  “buildings used for storage, such as ammunition storage, covered sheds,  and buildings primarily used for storage of vehicles or materials.” This  term encompasses a broad array of property that agencies may classify  differently for internal purposes but classify as warehouses for FRPP  reporting in the absence of more precise categories. For example, some  buildings that DOE reports as warehouses in FRPP are specialized  facilities for storing nuclear and nuclear-contaminated material. In the  absence of an FRPP category for nuclear storage, these buildings are  classified in FRPP as warehouses. In a similar manner, FAA classified as  warehouses in FRPP buildings used to house air traffic support systems,  such as approach lighting systems, because no other category in FRPP  was a better fit.

GSA’s role in agencies’ management of property they have acquired,  whether in warehouses or elsewhere, is limited until an agency declares  that property as excess. Once property is declared excess, it can be  transferred to another agency or certain non-federal recipients, donated,  sold, abandoned, or destroyed. GSA has issued regulations that govern  agencies’ actions in the property disposal process, and it administers a  web-based system that facilitates property disposal. However, prior to an  agencies’ identifying property as excess, GSA’s authority to issue  regulations or formal guidance regarding agencies’ management of  property is limited to topics that have been specifically assigned to the  GSA Administrator, according to GSA officials.

GSA distinguishes between formal guidance and informal guidance, and  GSA officials explained this distinction as follows. Formal guidance, such  as a Federal Management Regulation bulletin, must be reviewed by GSA  management and general counsel officials. For example, in 2017 GSA  issued a Federal Management Regulation bulletin on warehousing that  summarized industry perspectives from two voluntary consensus  standards, which were published by ASTM International’s asset  management committee and which GSA had participated in developing.  One standard addressed storage of property and the other addressed  strategic warehousing. GSA officials stated they were authorized to  include content on property management in the bulletin under the  authority of GSA’s real-property policy program because the content  supported the real property goal of reducing the federal government’s real  property footprint. In contrast, informal guidance does not require review  by GSA management or general counsel officials but may be published  on GSA’s website or disseminated at GSA trainings. Whether formal or  informal, agencies are not required to adhere to such guidance.

Typically, within agencies, responsibility for managing property is  generally shared between property officials and property custodians.  Property officials’ primary responsibilities relate to property management.  For example, they may be responsible for updating property data  systems, providing property lists and instructions for property inventories,  resolving issues that arise with property management, and managing the  disposal process after a property custodian has determined that an item  is no longer needed. Property custodians are generally program  managers who are assigned responsibility for specific property items  associated with the program they manage as an ancillary duty. For  example, property custodians may be required to conduct physical  inventories of property assigned to their program and work with a property  official to resolve any issues arising during the inventory. Depending on  how an agency uses its warehouses and property, property custodians  may be responsible for property in a single warehouse, in multiple  warehouses, or in a variety of locations. Moreover, multiple property  custodians may be responsible for property in a single warehouse, as  depicted in figure 1.

Selected Agencies Stored Various Types of Property in Warehouses but Had Limited Information about Storage Costs

Selected Agencies Stored a Variety of Property in Warehouses

The three selected agencies had a total of 1,221 warehouses, with over  6.4-million square feet, that contained a broad array of property.  Although comprehensive data on property in these agencies’ warehouses  were unavailable, interviews, site visits, and agencies’ data on  warehouses themselves provided some information on the types of  property in them. We found that the agencies had some commonalities in  the contents of their warehouses. For example, all three had warehouses  that contained material-handling equipment, such as fork lifts, as well as  excess property being processed for disposal. However, much of the  property in agencies’ warehouses was specific to their missions,  according to agency officials and our observations. Table 1 includes  information about the agencies’ warehouses and examples of the types of  agency-specific property in them.

We also visited warehouses at each of the selected agencies to obtain  additional information about and view the types of property stored within  them, as described below.

FAA. FAA had warehouses at four main sites that contained property  specific to the sites’ missions, and most of the remaining warehouses  were buildings that contained equipment, tools, or materials to maintain  aviation support systems or housed support systems, such as approach  lighting systems, according to our analysis of FAA warehouse data, FAA  officials, and sites we visited. For example, we visited FAA’s warehouses  at the Mike Monroney Aeronautical Center, including the Logistics  Support Facility, FAA’s largest warehouse and central location for  maintaining and repairing aviation support systems deployed throughout  the national airspace system. Most items in the warehouse were spare  parts, materials, and systems or system components that had been sent  to the facility for repair. We also visited FAA’s Staging Area, which  supports FAA’s manufacture and assembly of new systems to be  deployed throughout the country. Accordingly, much of the property at the  two warehouses that comprise this facility was equipment, parts, and  material, along with the machines and tools to manufacture and assemble  the material. For example, we viewed components of a wind shear alert  system that were being prepared to be shipped. FAA’s Mobile Asset  Deployment Center stored and maintained FAA’s mobile assets, such as  air traffic control towers and housing units that FAA deploys to maintain  service during disruptions such as natural disasters. Finally, we visited a  96-square-foot shack—identified in FRPP as a warehouse and pictured  below—that housed an approach lighting system. (See fig. 2 for examples  of FAA warehouses and property.)

Office of Science. Most Office of Science warehouses were located at  Office of Science national laboratories. Warehouses at the two national  laboratories we visited—Argonne National Laboratory and Fermi National  Accelerator Laboratory—contained a broad variety of equipment,  including equipment being staged for near-term use and equipment in  longer-term storage specifically designated for future projects. For  example, one warehouse at Fermi National Accelerator Laboratory  contained a cryogenic system acquired by CERN, the European  Organization for Nuclear Research, as its contribution to a planned  experiment. This cryogenic system will be used for cooling purposes. A  warehouse at the same site also contained some decades-old items kept  as replacements for items still in use. According to officials, many of these  older items would be difficult to obtain in a reasonable time frame for a  reasonable price if a replacement were needed. In addition, at Fermi  National Accelerator Laboratory, we saw a large, out-of-use calorimeter— a device commonly used in physics experiments—that was being stored  for eventual use in an educational display. Warehouses also contained  parts, materials, and supplies for laboratory use. (See fig. 3 for examples  of Office of Science warehouses and property.)

BOP. Most of the BOP warehouses were located at correctional  institutions throughout the country, served similar functions, and  contained similar types of property for inmate use, according to BOP  headquarters officials and our review of BOP real property data. The two  correctional institutions we visited each had a warehouse that served as a  distribution center, where items arriving at the institution were received,  processed, and sent to the appropriate personnel within the institution,  and a food service warehouse, where food items used to feed the inmate  population were stored. At one institution, non-perishable items for inmate  use, such as uniforms, mattresses, soap, and toilet paper were stored at  the distribution center, while the other institution we visited stored less  property at the distribution center and expedited delivery to the relevant  division. Additionally, one institution used a warehouse to store dairy  equipment in support of an inmate-run dairy. (See fig. 4 for examples of  BOP warehouses and property.)

Selected Agencies Tracked Warehouse Costs but Lacked Information on Property Storage Costs

All three selected agencies tracked certain direct costs for owned and  leased warehouses, including operations and maintenance costs for  owned warehouses and some leased warehouses, and the rental cost for  leased warehouses (see table 2).

Although the agencies had this cost information, they did not use it to  systematically determine how much it costs to store their property in  warehouses, whether at an aggregate or per-item level. Two features of  how these agencies track property and warehouse costs would make it  difficult to do so. First, as mentioned above, selected agencies did not  have comprehensive information on items in warehouses, information that  would be needed to determine per-item storage costs. Second, selected  agencies generally incurred direct costs—rent, operations costs, and  maintenance costs—at a warehouse level. However, because a  warehouse may have had some of its square footage dedicated to other  uses, such as office or laboratory space, it would be difficult to ascertain  what percentage of costs would be allocated to storage versus these  other uses. Moreover, in some cases, operations costs, such as utilities,  were incurred at a multi-building level, making it difficult to determine what  portion of the bill is attributable to a single warehouse. Finally, selected  agencies generally did not track indirect costs, such as personnel costs  for conducting regular inventories and other administrative costs  associated with storing property in their warehouses, according to agency  officials.

While none of the selected agencies systematically tracked property  storage costs, we did identify one Office of Science site, one Department  of Transportation site, and one Department of Justice site that analyzed  the use of specific portions of warehouses for cost allocation purposes.  Officials at these agencies said that this approach may create incentives  for property custodians to identify excess property in a timelier manner.

Argonne National Laboratory, within the DOE’s Office of Science,  annually analyzes direct costs for each building, including  warehouses, and charges each division within the laboratory for the  space it occupies. A report assessing contractor performance at  DOE’s Fermi National Accelerator Laboratory noted that  implementation of such a system could be an effective way to hold  divisions accountable for the number of items they have in storage.

The Department of Transportation and the Department of Justice  each manage a warehouse near their respective headquarters that  they use to store property for various divisions within each  department. The departments charge users for the portions of the  warehouses they occupy.

While these approaches may create incentives to identify unneeded  property in a timely manner, they may not be applicable for all  circumstances. For example, staff at Fermi National Accelerator  Laboratory stated that they explored the cost and benefits of analyzing  space use to allocate costs by user but had not found it to be cost- effective or feasible. In addition, allocating costs based on warehouse  usage would be challenging if users’ space usage changes regularly.

Without Guidance, Selected Agencies Did Not Systematically Assess the Ongoing Need for Property in Their Warehouses Two of the Three Agencies Specified When to Identify Some Types of Unneeded Property, but None Speciied How to Assess Most Items for Ongoing Need

Two of the three agencies we reviewed had policies in place explaining  the frequency in which property custodians should assess property for  ongoing need. Specifically, the Office of Science and BOP had policies  that called for identifying unneeded property beyond the statutory  requirement to continually survey property to identify excess. For  example, DOE regulations, which cover the Office of Science, require  managers to perform walkthroughs at least every 2 years to identify  unneeded property. According to officials, these walkthroughs are  conducted by contractors that manage national laboratories. Similarly,  BOP policy requires that property custodians conduct an annual site  inspection to identify unneeded property prior to the annual inventory,  and, according to officials, this process is overseen by the institution’s  associate warden. In contrast, FAA policy does not set any timeframe  for property custodians to identify unneeded property. However,  according to one FAA headquarters official, assessing property for  ongoing need is inherent to the inventory process, which, according to  FAA policy, should occur at least every 3 years for accountable  property.

In addition, only DOE had specific requirements to determine if property is  needed. Specifically, DOE regulation requires written justification for  retention of property classified as equipment held for future projects. If  equipment is retained for longer than a year, the justification is to be  reviewed by a higher level of authority, and retention of such equipment  for longer than 3 years requires approval by the head of the DOE field  organization. The Office of Science Organizational Property  Management Officer—who is responsible for reviewing contractors that  manage Office of Science sites—reviewed  sites’ adherence to this  requirement using metrics, such as acquisition date and time in storage,  according to officials.

Beyond this particular requirement for DOE, none of the agencies had a  systematic way to identify property that may be unneeded. Instead, they  primarily relied on professional judgment to determine the ongoing need  for property in warehouses in the absence of guidance on how to  determine whether property is still needed. For example, FAA officials  confirmed that they do not have guidance or metrics on how to identify  unneeded property and typically rely on property custodians’ professional  judgment. According to officials at one FAA site we visited, property  custodians do not use specific criteria for identifying unneeded property  because it is obvious when items are no longer needed. Similarly, at the  BOP institutions we visited, officials confirmed that they rely on property  custodians’ professional judgment, along with the judgment of associate  wardens, to identify unneeded property during the annual site inspections,  but acknowledged that this has led to different outcomes. For example, at  one site we visited, site officials stated that some associate wardens are  more inclined than others to require property custodians to identify  property as unneeded.

While officials at all of the selected agencies said they believed property  custodians were able to identify unneeded property in a timely manner  using their professional judgement, we identified instances, through our  interviews and agency assessments, where agencies had retained  unneeded property in storage. While the agencies identified and in most cases addressed these instances, these situations demonstrate the  challenges associated with agencies’ existing approaches. Specifically:

A 2016 report from DOT’s inspector general found that FAA property  custodians allowed obsolete computers to remain on the property  records, including computer systems manufactured in 2006 or earlier  that were likely no longer in use because of their 3- to 4-year  lifecycles.

In 2018, a review found that Fermi National Accelerator Laboratory’s  contractor was storing IT equipment, which had not been classified as  equipment held for future projects, dating back to 1998. The report  recommended that the contractor review all IT equipment for  continued need and that certain items be removed from the active  inventory in their asset management system.

BOP headquarters officials told us that, when assisting regional office  personnel in training a new property official at an institution, they  noticed the institution was storing inmate clothing that exceeded the  institution’s needs. According to the officials, they worked with the  new property official to transfer the clothing from the institution to  another BOP institution that needed it.

Stakeholders Identified Systematic Methods to Assess Property for Ongoing Need

Selected agencies’ limited guidance on how to identify unneeded property  and reliance on professional judgment were not unique to the agencies in  our review. For example, in a previous review that examined five  agencies—Environmental Protection Agency, Forest Service, GSA,  Department of Housing and Urban Development, and Internal Revenue  Service—we found that selected agencies did not have policies and  processes for identifying unneeded property on a proactive basis and  relied on “triggering events,” such as an office move to make excess  property decisions. Moreover, the industry and standards-setting groups  we interviewed for this review indicated that these approaches were  common across the federal government.

However, the industry stakeholders and federal agencies that participated  in ICPM that we interviewed identified more systematic ways to identify  unneeded property. For example:

Periodic justification for continued storage. One agency  implemented a policy in 2013 requiring written justification to retain  certain accountable property for certain time periods, with the time  period varying for different types of property. After the initial storage  time period, written justification for continued storage must be  reviewed and approved by an official who is above the property  custodian. According to property officials, this policy has contributed  to an estimated 35 to 40 percent reduction of property held in storage.

Data analytics. Officials from another agency stated that they use a  logistics management application to track and analyze information,  such as property age, amount, rate of usage, and warehouse space  availability. As a result, the agency has identified and disposed of  excess property at various warehouses that otherwise would likely  have been retained. For example, according to officials, analysis  conducted using this application on idle property in one warehouse  informed the decision to identify as unneeded a significant amount of  furniture. A previous manager had acquired the furniture for use in  staff housing, but the items were not well-suited to available housing  in the area.

Utilization reviews. Industry groups we interviewed advocated for  increased use of data to assess utilization to inform decisions on  whether to retain stored property, such as utilization reviews that  systematically assess property utilization and continued need. For  example, when conducting a utilization review, one stakeholder  recommended a process that begins with pinpointing where the  inactive population of property items reside. Upon locating anything  that has been inactive for a certain period of time, within a certain  storage area, those items are identified as candidates for disposal.  After the results come in, the property custodians can recommend  that a certain amount of items on the overall list are marked for  disposal.

Limited Guidance Exists for Property Management

While some stakeholders identified systematic ways to identify unneeded  property in certain circumstances, limited government-wide guidance  exists for agencies to use to determine whether property in warehouses is  still needed and being used. Specifically, there are two sources for  guidance related to assessing property in warehouses for ongoing need:

ASTM’s standards for strategic warehousing and storage of  property. The standard for strategic warehousing notes that entities  often continue a warehouse activity largely because it is easier than  going through the effort of dismantling it. It urges that entities consider  whether warehousing is needed. Furthermore, the standard asserts  that a sound business case should be in place to support storage of  property, including a decision of whether the items need to be  warehoused. The standard for storage of property notes that entities  should deploy an inventory management system to track incoming  and outgoing assets; such a system can help in developing  performance metrics for stored items.

GSA’s federal warehousing bulletin. This bulletin references the  two ASTM standards identified above and discusses the importance  of critically assessing the need for items in storage, but provides  limited information on how to make such assessments.

According to GSA officials, the use of voluntary consensus standards,  such as ASTM standards, can assist agencies with property  management. However, only one agency official we interviewed stated  that voluntary consensus standards informed the agency’s policy; the  others we interviewed were either unaware of the standards or said the  standards were not relevant to agency policy or practice.

The FPPMA requires agencies, in accordance with GSA guidance, to  inventory and assess property. As part of such assessments, it calls for  evaluations of the age and condition of the property and the extent to  which the agency uses it. According to officials at the selected agencies,  they are waiting for guidance from GSA before taking steps to implement  FPPMA.

According to GSA officials, they are in the process of developing informal  guidance on minimizing and identifying excess property to meet this  requirement because FPPMA did not provide GSA additional authority to  issue regulations or formal guidance. In particular, GSA developed draft  guidance, which incorporated principles from a new ASTM standard on  identifying and reducing excess property that GSA officials expect will be  issued in early 2020, and provided it to ICPM participants for review and  comment in September 2019. According to GSA officials, this informal  guidance will be issued in December 2019. GSA officials plan to include  the guidance on the GSA website and disseminate it to ICPM participants  and may provide it in hard copy at relevant GSA events.

The draft guidance we reviewed encourages agencies to designate an  individual to manage an agency’s asset management program and use  that system to capture and provide information on property age, condition,  utilization, and mission dependency on a real-time basis, among other  things. The draft guidance also included some criteria agencies could use  to identify excess property.

However, the guidance did not provide specific approaches or practices  agencies could use to assess property utilization, including property  stored in warehouses. The draft guidance and an accompanying strategy  document indicate that GSA will collect best practices and incorporate  them into the guidance, but GSA officials did not specify what types of  best practices it plans to include or provide a timeline for doing so.  Including additional information on approaches or practices agencies can  use to assess property use and ongoing need—such as periodic property  justifications, data analytics, and utilization reviews—could assist  agencies in fulfilling their FPPMA requirements.

Moreover, GSA officials did not provide a documented plan or time frame  for communicating the guidance beyond publishing it on GSA’s website  and disseminating it to ICPM members, an approach that can limit the  reach and awareness of this information to agencies government-wide.  As we have previously reported, work by others has shown that inaction  on unneeded government property can limit its efficient use.

As agencies continue efforts to manage their warehouse space in  accordance with government-wide initiatives, improvements to how  agencies assess property utilization and identify unneeded property in  warehouses could enhance these efforts. The agencies in our review did  not systematically assess their property for ongoing need and in some  cases, retained unneeded property. More broadly, agencies across the  government are operating without the benefit of government-wide  guidance that could help assess their property for ongoing need in a  systematic manner. With the recent enactment of FPPMA, an opportunity  exists for GSA to develop and communicate guidance to help agencies  assess property utilization and identify unneeded property in warehouses  more efficiently that includes practices GSA identifies as being useful.  Such guidance could help agencies avoid retaining property that is no  longer needed and, as a result, allow them to better manage the use of  their warehouse space.

The Administrator of GSA should direct the Office of Government-wide  Policy (1) to incorporate into its guidance approaches or practices that  agencies could use to assess utilization of and the ongoing need for  property—approaches such as recommendations for periodic  justifications, data analytics, and utilization reviews—and (2) to develop a  plan and timelines for communicating the guidance to agencies  government-wide. (Recommendation 1)

We provided a draft of this report to GSA, DOT, DOE, and DOJ for review  and comment. GSA concurred with our recommendation and provided  written comments, which are reprinted in appendix II and summarized  below. DOT, DOE, and DOJ each stated in an email that they had no  comments on the draft report.

In its written comments, GSA agreed with our recommendation and  stated that it is further developing its guidance as well as a plan and  timeline for dissemination of that guidance to executive agencies.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the GSA  Administrator, the Secretary of Energy, the Attorney General, and the  Secretary of Transportation, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff members have any questions regarding this report,  please contact Lori Rectanus at (202) 512-2834 or rectanusl@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

This report addresses: (1) what is known about property in selected  federal agencies’ warehouses and how much they spend to store this  property and (2) the extent to which selected agencies assess the  ongoing need for property stored in warehouses.

To address both objectives, we selected three agencies for analysis—the  Federal Aviation Administration (FAA) within the Department of  Transportation; the Office of Science within the Department of Energy  (DOE); and the Bureau of Prisons (BOP) within the Department of  Justice. We limited our scope to civilian agencies because we have  already done extensive work on property management within Department  of Defense. At the department level, we used Reduce the Footprint data  from fiscal year 2017 because they were the most current data available  when we conducted the analysis to identify the top 10 departments in  terms of warehouse square footage. To obtain variation among these  agencies, we categorized these departments as large, medium, or small  in terms of warehouse square footage and selected one from each  category based on changes in square footage between fiscal years 2015  and 2017 using fiscal year 2017 Reduce the Footprint data and on the  proportion of leased warehouse space to owned warehouse space using  fiscal year 2017 Federal Real Property Profile (FRPP) data. Because  none of the selected agencies manages property at the department level,  we then selected a component within each department. For the  Department of Transportation and the Department of Justice, we selected  the components with the most warehouse square footage according to  fiscal year 2017 FRPP data—FAA and BOP, respectively. For DOE, we  used the agency’s fiscal year 2017 real property data to identify the  components with the most warehouse square footage because DOE  reports most information to FRPP at the department level rather than for  specific offices, such as the Office of Science. We then selected the  Office of Science, which had third highest amount of warehouse square  footage, because of security concerns with one of the components with  more warehouse square footage and because the other component with  more warehouse square footage used a greater proportion of warehouse  space to store nuclear and nuclear-related material.

To determine what is known about property in selected agencies’  warehouses, we interviewed headquarters-level officials regarding the  agencies’ property data, conducted site visits to view and photograph  property stored in warehouses, and gathered information in interviews  with agency officials. In selecting sites, we selected at least one site per  agency that was among the largest in terms of warehouse square feet for  that agency and at least one other site that was near one of the large  sites, as described below:

FAA: Mike Monroney Aeronautical Center in Oklahoma City,  Oklahoma; Staging Area and Mobile Asset Deployment Center in  Independence, Missouri; and Charles B. Wheeler Downtown airport in  Kansas City, Missouri.

Office of Science: Argonne National Laboratory and Fermi National  Accelerator Laboratory in the Chicago area.

BOP: U.S. Penitentiary Leavenworth in Leavenworth, Kansas, and  Federal Correctional Institute El Reno in El Reno, Oklahoma.

For each agency, we also interviewed officials at the headquarters and  regional levels. Information obtained from these sites and regional  officials is not generalizable to the selected agencies, and information  from these agencies is not generalizable to other agencies.

To determine how much selected agencies spend to store property in  warehouses, as well as the numbers and square footage of these  warehouses, we analyzed FRPP data from fiscal year 2018 for FAA and  BOP, and DOE fiscal year 2018 real property data for the Office of  Science because DOE reported most data to FRPP at the department  level; both sources included information about direct costs such as rent,  operations, and maintenance costs. We used FRPP data from fiscal year  2018 because that was the most recent data available when we  conducted our analysis and DOE data covering the same period to be  consistent. We reviewed documentation related to these data sources,  interviewed knowledgeable officials, and determined that these data were  sufficiently reliable for providing information about warehouse numbers,  square footage, and the costs listed above.

To determine the extent to which selected agencies assess the ongoing  need for property stored in warehouses, we reviewed statutes,  regulations, GSA guidance, our prior work, reports by federal agencies’  Offices of Inspector General, and relevant industry standards related to  property storage and warehousing practices. In addition, for selected  agencies we analyzed property policies and procedures for identifying  and disposing of unneeded property and interviewed headquarters,  regional, and site officials. We also interviewed three industry  stakeholders—two property-management and one standards-setting  organization—to discuss property storage and warehousing processes,  practices, and standards that agencies could use to assess the ongoing  need for property. We selected these organizations based on their  knowledge about property management practices. Furthermore, we  interviewed officials from four agencies—Census Bureau, Department of  State, Internal Revenue Service, and National Aeronautics and Space  Administration—that participate in the Interagency Committee on Property  Management (ICPM), a committee chaired by GSA that consists of  executive agency representatives interested in federal property. We  invited all ICPM participants to speak with us regarding their practices for  identifying unneeded property and interviewed all participants who  volunteered to participate to understand how other agencies assess  property for ongoing need. Finally, we reviewed FPPMA’s requirements  and interviewed GSA’s Office of Government-wide Policy officials about  GSA’s role in assisting agencies in identifying unneeded federal property,  how FPPMA could affect GSA’s roles and responsibilities going forward,  and GSA’s progress in implementing FPPMA.

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the individual named above, the following individuals made  important contributions to this report: Nancy Lueke (Assistant Director),  Rebecca Rygg (Analyst-in-Charge), Terence Lam, Malika Rice, Kelly  Rubin, Patrick Tierney, Laurel Voloder, and Crystal Wesco.

3 federal agencies—the Federal Aviation Administration, the Department of Energy’s Office of Science, and the Bureau of Prisons—spent over $50 million in FY 2018 on warehouses, many of which contain property (like vehicles, furniture, and computers). However, these agencies do not systematically assess whether they still need all of their property.

Federal agencies are required to use General Services Administration guidance to assess the ongoing need for property. However, we found that GSA’s guidance doesn’t describe useful practices for such assessments.

We recommended that GSA include this information in its guidance.