UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D C. 20548 GENERAL GOVERNMENT DIVISION JUL 19 1977 Assistant Postmaster General Alfred C, Maevis Real Estate and Bulldlngs Department United States Postal Seavxe Dear Mr. Maevis: Weshave reviewed th; U.S Postal Servxe's site selection actlvltles In the Central and Western Regions Our efforts centered around Service pollcles and practices in obtalnlng land for faclllty construction needs. This report summarizes our observations In this area. 1 In the past, the Service encountered community opposl- ' tlon when attempting to buy sites due to its practice of not contacting local officials until a particular site was decided upon. We found this to be a maJor cause for delays in obtaining sites. On June 14, 1976, the Service Issued a new polic~~ofi~ community contact which requires that local officials be notlfled by letter as soon as possible after defining the neighborhood where the new bullding should be located. The letter should describe the prolect and the site neighborhood, and contain an offer to have a postal representative meet with local officials and participate in public dlscusslons to obtain local input Further, local governments should be asked to submit in wrltlng any llmltatlons on Its concur- rence in the site nelqhborhood and any suagested alternatrve areas. We view the policy charlge as constructive We have also developed lnformatlon on other aspects of the site selection process which we believe could be improved These concern weaknesses in the methods the Service used for identifying srtes and subsequent management evaluations of these sites for meeting Service needs. A detailed dlscusslon of our findings follows. SITE IDENTIFICATION PROCEDURES COULD BE IMPROVED -a In surveying for sites, postal policy provides that, if possible, Initial Jnqulrles be directed to owners. Though advertlslng and/or real estate brokers could be used to identify sites, these techniques generally are not used. Regional postal officials exolalned that sites are normally found by performnng "qlndow surveys"--dLIvIng around the area to spot sites posted for sale The Service's practice of relying pramarlly on wlndow surveys to lderltlfy sitesp however p does rot assilre that ail potentnal s3t 5 are consldered. r - All available sites are not ldenti?i'led -PI_- * r To determine whether the Service was overlooking potential sites, we reviewed seven Central and Western Region prolects rn which site selections had been recently completed We i found that potential sites were overlooked on five of these , prolects. One of these pro-Jects 1s descrabed below. d A site planning report completed May 10, 1975, showed a postal real estate speclallst ldentlfled four possible sites for a new post offlce in Yorba Linda, California. The sites were found by drlvlng around- the neighborhood and dealing directly with owners The real estate specialist did not contact real estate agents nor did the Service publicly announce Its Interest ln a site. Two sites were ellmlnated due to rough terrain and high site preparation costs. The report recommended one of the remalnlng sites. The site was later purchased for $240,000 on December 17, 1975. By talking to relators, we identified the followlnq sites in Yorba Linda that were not considered by the Service but were available at the time the Service was ldentlfylng sites, -2- --- ---__- Size Price Total Site Zoning (acres) -- ger acre price A Residential 2.75 $20,000 55,000 B Commercial 2.34 73,000 $170,820 C Resldentlal d/ 4 22,000 88,000 D a Residential 3.36 30,000 100,800 E Resldentlal in/ 3.6 14,000 50,400 Selected Site Residential ' * *2.77 86,643 240,000 r a/According to yreiators, these sites could be subdivided and all the land would not necessarily have to be purchased. . All of the sites are within 2 miles of the selected site and, as the table shows, were from $13,643 to $72,643 an acre less than the Service pald for its site. We did not evaluate whether the SIX alternative sites would have met the Service's needs and recognize that, had they been considered, they might have been reJected However, the Service did not determine whether any of these sites would have been as suitable as the one pur- chased, even though they were all in the same area. Had it done so, the Service may have been able to I%$- a suitable site for less than it paid. In an earlier GAO report entitled "Postal Service Acquisition of Land in Hamllton TownshIp, New Jersey," dated February 12, 1976, (GGD-76-44), we identified sites through area realtors which the Service had not considered because of its practice of not advertlslng or contacting realtors. We concluded that while Service policy does lot prohlblt it from using real estate brokers or advertising to identify potential sites, such practices were not used in this case and may have resulted in purchasing an expensive site when a considerably less expensive site was available, Use of advertlslng could improve site ldentlflcation Service policy recommends advertising as a procedure for quickly identifying all avallable sites. It states that the time required to conduct a realty survey and prepare a site planning report may delay proJects, thus, the use of adver- tising could be used to speed up the site selection process. Service policy 1s silent on the use of real estate brokers as a means of ldentlfylng sites -3- , Although advertising is considered a feasible method for quickly ldentlfylng all readily avallable sites, the the Central and Western Regions avoided using this procedure unless problems occurred in obtaining sites. Reglonal officials maintain that advertising reveals Service interest in an area and may cause increased land prices Further, contacting local brokers gives them an opportunity to list avallable sites, and thus collect a commlsslon on a sale, Service offlclals, how- ever, could not supply any evidence to support the contention that advertising or use of brokers would increase acsulsltlon costs. On the other hand, in one instance in which advertising was used in the Western Region, Dubllc knowledge of postal plans apparently did not Eause site costs to increase In January J.975, the Western Region experimented bv advertising for a site in Aptos, Callfornla. By February 14, 1975, 16 sites had been offered to the Service. Although, the Service's appraised fair market value of the selected site was $101,700, the cwner sold it to the Service for $70,000. 1'I In contrast to the Service's normal practices, GSA publl-I clues its plans to buy building sites. At the start of each prolect, GSF (1) sends announcements requesting proposals & for sites to real estate firms in the area, and (2) places advertisements with newspapers having the largest clIculatlon in the community We believe these techniques could help the Service ldentlfy more sites. -c. - ; c Western Region officials noted that the lack of advertising has delayed prolects and has caused the Service to overlpok possible sites. The Region plans to use advertising on ruture prolects. However, the Regional Director of the Real Estate and Buildings Department believes that advertising would eliminate the need for directly contacting real estate brokers MANAGEMENT REVIEW PROCESS NEEDS STRENGTHENING- Real estate specialists make preliminary estimates of each site's fair market value and the total estimated costs to the Service. Speclallsts also consider such factors as physical features, suitability for Service needs, and public accesslbllity/vlslbillty dhlch are difficult to measure in dollar amounts Service policy, however, neither provides guidance on the weight to be given to such features nor emphasizes the need to hold site costs to a minimum. Service policy specifies that a representative from the regional real estate dlvlslon be designated as a member of the site selection committee, but provides no additional -4- guidance on what other offlclals should be members of the committee or the procedures and crlterla to be followed in evaluating alternative sites We found that the site selection committees usually did not meet to discuss the alternatlve sites ldentlfled by the real estate dlvlslon. Further, m revlewlng the site planning reports, the least expensive site was usually not recommended for purchase, In some cases, other less costly sites appeared as suntable as those that were purchased As a result, the Service may not be selecting the least expensive but suitable site. Site selection committee . * review 1s-- weak 6 . In the We&te;n Region, after the real estate dlvlslon pre- pared and approved the site planning reports, they were given to the members of the site selectlon commlttee. Normally, the committee consisted of offlclals from the real estate dlvlslon, the operational requirements branch, the area engineering office, and the dlstrlct office These officials usually did not meet to discuss site planning report recommendations. The d area engineering office vlslted sites to review their suit- ability for constructing a postal building. Officials from the operational requirements branch and the dlstrlct offices usually did not vlslt sites before selecting one. Thus, the management review process appeared cursory at best. Reg16hal offlclals agreed that exlstang practices resulted In a weak management review. * In the Central region, after site planning reports were approved by the real estate dlvlslon, the district office manager alone had the authority to select one of the recommended sites. The site selection committee usually consisted of the dlstrlct manager and the local postmaster where the new bullding was to be located. We were told that offlclals from regional departments could challenge the dlstrlct manager's declslon but this was never done. Least expensive sites usually not selected More than one suitable site was ldentlfled for each of the new buildings planned for 19 of the 25 prolects we reviewed in the Western Region. The least expensive site was selected in only five instances or 26 percent of the time. Our review of site selectron files showed that site features such as public accesslblllty and site prominence weLe usually used to Iustify buying expensive sites even -5- though the value of these features are dlfflcult to measure. The following example shows how a lower priced site may have been as sultable as the site selected. Three suitable sites were ldentlfled for a new post office In San Brunol Callfornna, The least expensive site consisted of two parcels of land; the largest parcel --about 90 percent of the site--was owned by GSA. The site planning report estimated that this site would cost the Service about $360,000 including site preparation costs. The report recommended buying either of the two other sites khlch nere prnced by tne owners at $496,585 and $516,150. The least costly of these, however, was withdrawn by the selEer shortly after the site planning report was completed, The most expensive site is located neaf a shopping center which 1s within one mile of the GSA site. The most ex-Denslve site was approved by the regional site selection committee. An independent appraiser estimated 1 $387,000 as the fair market value, which was considerably less than the the price asked by the owner. A Service headquarters appraiser revlewed the site with the 46 independent appraiser and adlusted the fair market value to $465,000 On October 31, 1975, the owner agreed to sell the site for this price. Western Region officials Justified purchasing the?uosX expensive site prlmarlly because It 1s located on land set aside for future growth of the shopping center. The offlclals pointed out that the site 1s more vlslble and 1s more accessible to the public. Some reqional officials said that post offices located in or near shopping centers will increase revenue and thereby offset the higher land costs. However, the Service has not made a study to determine whether this 1s true. On the other hand, some postal officials we Interviewed disagreed with this idea. These officials explalned that any Increases in revenue at one post office would be offset by reductions In revenue at other nearby post offices. In addition to being less expensive, the GSA site is centrally located for service City offlclals added that the GSA site was preferred for the new post offlce because the city could lose revenue from the Service purchasing the shopping center site The selection of expensive sites may be traced, in part, to the views of Western region offlclals who told us that the Service should consider future dlsDosa1 value and should buy the best site avallable We believe that this point of view 1s not consistent with the Service's foremost goal of provldlng mail service at the lowest posslbl,e cost. -6- L . In the Central Region prolects we revlewed, the most ex- pensive sites were often consldered the most desirable. More than one sultable site was Identified for each of the new bulldlngs planned‘ior 5 of 12 prolects reviewed The site planning reports recommended that the Central Region buy the least expensive site in only one instance. Public accesslbl- llty and future property disposal values were important site selection factors. However, at the conclusion of OUL audit work, the Region had not obtaaned sates for any of these prolects. Closer management review could reduce site acaulsltlon costs A member of the West&n Region site selection committee told us that site planning report recommendations were rarely questioned and that approval by members other than the real estate dlvlslon was nearly automatic However, we believe that management, by taklnq a closer look at the site planning report recommendations, can reduce the chances of the Service 's purchasing a more expensive site than needed. For example, two suitable sites with a cost difference of $37,600 were identified for a new post office in Sierra #Vista, Arizona. The site planning report recommended buying the expensive site because it 1s located on a corner with traffic signals and provided better public access 4 Western Region offical said that he carefully studied the Sierr-a __ Vista report after we had inquired about the effectiveness of the management review process. A review showed that the alternate site was the best one operationally because zt pro- vided space for mall loading operations and customer parking. Thus, this official recommended against purchasing the most expensive site in Sierra Vista. 9s a result, the less ex- pensive alternate site was selected Western Region officials said that the review process would be changed. Someone from the operational requirements branch will be resulred to vlslt each suitable site to review Its adequacy from the standpoint of postal operations and cost. District office managers have also been instructed to take a closer look at site planning reports and to visit the sites before approving one to be purchased by the Service. CONCLUSIONS AND RECOMMENDATIONS - Although postal policy permits advertlslng, this technique was usually not used to identify sites. By not using this technique, we believe the Service has little assurance that all potential sites are being identified and the most advanta- geous site, cost and other factors considered, 1s being purchased. - 7 - The Service's management review of recommended sites also does not assure selectlon of the most advantageous sites Some members of the site selection committee in the Western Region ucually dlb not take a close look at the recommenda- tions made in site planning reports and usually did not visit avallable sites The Service has not established a uniform polacy governing membership of the reglonal site selection committees or procedures they are to follow, nor has it emphasazed the need to hold site costs to a mlnlmum. The lack of emohasls on mnnlmizlng site costs together with no guidance on the weight to be given to unmeasurable site features may be causing the Service to purchase some sites when less expensive and equally suitable sites were known to be avallable. I - The'Service should ,t&ke advantage of every opportunity to hold site costs down, Therefore, we recommend that the Assnstant Postmaster General, Real Estate and BulldIngs Department --require regional offlclals to place advertisements for site offers with newspapers having the largest clrculatlon rn the community with any devlatlons d from this policy to be lustlfled and approved; --provide addltlonal guidance and direction on the membership of the reglonal site selection committees and procedures they are to follow in carrying OU$ -- review functions; and --require regional offices to obtain the lowest prlczd sites which are adequate to meet postal needs with any devlatlons from this policy to be Justlfled and approved. ---e-B We wish to express our appreclatlon for the cooperation given us by both Headquarters and regional offlclals during our review. We would appreciate being informed of any changes In the Service's site selectlon pollcles and/or procedures. Arnold P. !X&es Associate Director -8-
Review of the Postal Service's Site Selection Activities
Published by the Government Accountability Office on 1977-07-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)