Facilities Location Policy: GSA Should Propose a More Consistent and Businesslike Approach

Published by the Government Accountability Office on 1990-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United   States   General   Accounting   Office
                   Report to the Honorable
                   Kent Conrad, U.S. Senate

September   1990
                   LOCATION POLICY,
                   GSA Should Propose a
                   More Consistent and
                   Businesslike Approach

General Government   Division


September 28, 1990

The Honorable Kent Conrad
United States Senate

Dear Senator Conrad:

In response to your request, this report provides information and analysis to answer your
specific question on (1) the policies that guide federal civilian agencies in selecting facility
locations, (2) whether rural areas receive first priority in location decisions as required by
the Rural Development Act of 1972, and (3) whether any changes in federal location policies
are warranted.

As arranged with your office, we are sending copies of this report to the cognizant
congressional committees, the Director of the Office of Management and Budget, the
Administrator of the General Services Administration, and other interested parties.

The major contributors to this report are listed in appendix II. If you have any questions
concerning this report, please contact me on 275-8676.

Sincerely yours,

L. Nye Stevens
Director, Government Business
   Operations Issues

Executive Summary

                   The location of an organization’s facilities has far-reaching and long-
Purpose            lasting impacts on such crucial elements as its operational costs and its
                   ability to attract and retain workers. Changes in telecommunications
                   technology in recent years have given employers more options to con-
                   sider when locating sites for administrative functions. In consideration
                   of these recent changes and the current budget situation, Senator Kent
                   Conrad asked GAO to examine (1) how federal civilian agencies make
                   location decisions, (2) the extent to which rural areas receive considera-
                   tion in these decisions, and (3) whether any changes in federal location
                   policies are warranted. (See pp. 10 and 11.)

                   Congress and the execut,ive branch have established federal facilities
Background         location policies intended to help promote economic development of both
                   rural areas (the Rural Development Act of 1972) and the central busi-
                   ness districts of cities (Executive Order 12072). Other federal policies,
                   such as the Public Buildings Act requirement to assure an “equitable
                   distribution” of projects throughout the nation, and a circular generally
                   requiring the location of agency regional offices in 10 regional cities,
                   also affect location decisions. (See pp. 8 to 10.)

                   Although the Rural Development Act of 1972 requires agencies to give
Results in Brief   first priority to rural areas, it has not been an important factor in loca-
                   tion decisions. Almost 88 percent of federal civilian workers are located
                   in metropolitan statistical areas-an increase of 3 percent since 1980.
                   Agencies that have grown during the last decade attributed mission
                   demands or the need to be in areas where the populations they serve
                   were located as the primary reasons urban areas received more facilities
                   than rural areas. Political considerations, inertia, and short-term budget
                   pressures also often affect location decisions in practice. Those agencies
                   that did locate in rural areas said it was more because they served rural
                   populations than because of their following the requirements of the
                    1972 act.

                   A growing number of corporations in the private sector have moved to
                   suburban and rural settings. The private sector is taking advantage of
                   incentives offered by localities to attract employers and of the ability to
                   separate administrative functions resulting from changes in telecommu-
                   nications technology.

                   GAO believes that federal agencies should more systematicallyconsider
                   locality incentives and technological advancements in making location

                   Page 2                                         GAO/GGINIC-109Facilities Location
                             Executive Summary

                             decisions and that a more consistent and cost-conscious federal location
                             policy is warranted. The new policy should reflect a more businesslike
                             approach in meeting agency mission and organizational needs by (1)
                             requiring agencies to maximize competition in identifying potential
                             facility locations; (2) comparing the costs and benefits of each, consid-
                             ering such factors as real estate and labor; and (3) selecting sites that
                             meet the needs while offering the best overall value to the government.
                             Some of the obstacles to such a change include the reluctance of agen-
                             cies to move once they are established in a community and a traditional
                             view that the government’s role should be to promote economic develop-
                             ment in either rural areas or central business districts of cities, regard-
                             less of its own economic interests.

                             Because the General Services Administration (GSA) is the central man-
                             agement agency responsible for governmentwide facility management
                             policies, GAO believes the Administrator of GSA should develop a pro-
                             posed location policy for congressional consideration that would provide
                             broad guidance for agencies.

GAO’s Analysis

Location Policies Followed   The agencies that experienced growth in full-time employment during
by Growth Agencies           the last decade have generally selected locations where the demand for
                             their services was greatest, despite the policies set forth in the Rural
                             Development Act of 1972 or Executive Order 12072. Several agencies
                             said political considerations affected their ability to close and relocate
                             facilities. (See pp. 12 I;0 16.)

Location Factors             The private sector generally views location decisions as labor market
Considered by the Private    decisions. Headquarters operations are generally located in major metro-
                             politan areas where professional and managerial personnel can be
Sector                       attracted. Administrative operations, characterized by clerical workers,
                             are generally located in smaller cities that have lower labor costs.

                             Technological changes, such as fax machines and personal computers,
                             have enabled the private sector to separate headquarters and adminis-
                             trative operations and have made less urbanized areas more attractive.

                             Page 3                                        GAO/GGDSk103 FadlitlesLocation
                      Executive Summary

                      The private sector is also well attuned to the incentives, such as infra-
                      structure development and training programs, that states and local com-
                      munities offer to attract businesses. (See pp. 16 to 18.)

Urban Areas Can Be    GAO'S analysis of Washington, DC., and the 10 standard federal regional
                      cities-which     together account for 30 percent of the total 1.8 million
Costly                federal civilian workers-showed      that the rental rates of central busi-
                      ness districts averaged about 26 percent higher than the suburban areas
                      of these cities.

                      Cost of living in 59 areas in the country with at least 5,000 white-collar
                      federal workers varied but averaged 5 percent higher than the national
                      average. Washington, D.C., and five of the 10 standard regional cities
                      had even higher costs of living-some as high as 47 percent more than
                      the national average.

                      Primarily because the private sector pays higher salaries than the fed-
                      eral government, the federal government is experiencing employee
                      recruiting and retention problems, reduced service delivery, increased
                      recruiting and training costs, more overtime pay, and the problem of
                      higher level employees having to do lower level work. If enacted, recent
                      congressional and Administration locality pay proposals will rectify
                      these problems but will make some areas less costly to employ federal
                      workers than others. (See pp. 18 to 20.)

Corporations Can      Localities routinely offer incentives to attract potential employers to
                      their communities, but the government typically does not take full
Capitalize on Local   advantage of such incentives. GAO found one case, however, in which the
Incentives            Bureau of Engraving and Printing was able to generate widespread com-
                      petition in meeting its space needs and was offered substantial conces-
                      sions by communities The Bureau received expressions of interest from
                      82 localities for an expansion facility, four of which offered no-cost land
                      and buildings. It ultimately selected the Fort Worth, Texas, offer. The
                      100 acres of land and a building shell that were offered were valued at
                      over $12 million. Bureau officials were confident that similar deals
                      could be obtained by other agencies if they sought them, due to the will-
                      ingness of communities to attract employment opportunities. (See pp. 20
                      to 22.)

                      Page 4
                        Executive Summary

GSA Should Propose      GSA, the central management agency for federal facilities, has responsi-
                        bility for leadership, oversight, and guidance in facilities management.
Governmentwide Policy   GAO, in its 1989 management review of GSA, reported that GSA had not
                        effectively fulfilled its policy guidance and oversight role.

                        GAO officials said that because of political obstacles and GSA'S belief that
                        agencies should make their own location decisions, GSA has not assisted
                        agencies in formulating procedures and specific guidelines to implement
                        the various existing location policies. The lack of a clear location policy
                        provides no counterbalance to the Office of Management and Budget
                        and Members of Congress, who sometimes interject short-term budget or
                        political objectives. This situation results in a general reliance on costly
                        long-term leases or the construction of federal buildings in areas with
                        low-priority needs. (See pp. 22 and 23.)

                        GAO believes that GSA should develop an alternative location policy that
                        considers a more businesslike approach, so that Congress could consider
                        whether factors such as the current and long-term budget implications,
                        changes in office technology, and the movement toward locality pay,
                        warrant endorsement of a revised policy. (See pp. 24 and 25.)

                        The Administrator of GSA should develop for congressional consideration
Recommendation          a more consistent and cost conscious governmentwide location policy.
                        This new approach should require agencies, in meeting their needs, to
                        maximize competition and select sites that offer the best overall value
                        considering such factors as real estate and labor costs. (See p. 25.)

                        GAO discussed its findings and recommendation with GSA officials on Sep-
Agency Comments         tember 13, 1990. GSA generally agreed with the report’s overall message
                        and recommendation but said the report’s characterization of its lack of
                        leadership did not reflect political constraints or the principle that agen-
                        cies are better able than GSA to determine their facility needs.

                        GAO made some changes to the report on the basis of GSA'S comments,
                        including a more explicit recognition that political considerations are an
                        obstacle to a consistent location policy. GAO does not believe that a more
                        active policy role for GSA would require GSA to determine agency needs;
                        rather, GSA would provide the framework for agencies to use in assuring
                        that their needs are met with locations offering the best overall value to
                        the government. (See p. 25.)

                        Page 5                                          GAO/GGD90409 FadUUes Location

Executive Summary                                                                               2
Chapter 1                                                                                       8
Introduction           Federal Policies on Location Decisions
                       Most Federal Jobs and Facilities Are in Urban Areas
                       Objectives, Scope, and Methodology                                      10
Chapter 2                                                                                     12
Location Policies in   Location Policies Followed by Growth Agencies
                       Actual and Planned Moves of Selected Functions
Chapter 3                                                                                     16
Federal Location       Location Factors Considered by the Private Sector
                       Urban Areas Can Be Costly
Policies Warrant       Competition Can Help Agencies Capitalize on Local                      20
Reconsideration            Incentives
                       GSA Should Propose Governmentwide Policy                               22
                       Conclusions                                                            23
                       Recommendation                                                         25
                       Agency Comments                                                        25

Appendixes             Appendix I: Important Private Sector Locational Factors                28
                       Appendix II: Major Contributors to This Report                         30

Glossary                                                                                      31

Tables                 Table 1.1: Civilian Federal Employment in MSAs and Non-                  9
                           MSAs, Fiscal Years 1980 and 1989
                       Table 1.2: Total Square Footage of Buildings Occupied by                10
                           Civilian Agencies, Fiscal Years 1986 and 1988
                       Table 2.1: Facility Location Factors Considered by High-                14
                           Growth Agencies
                       Table 3.1: Rental and Cost-Of-Living Rates for Selected                 19
                           Urban Areas

                       Page 6                                      GAO/GGDSO-168FmAlitie.eLmxtion

BEP       Bureau of Engraving and Printing
BOP       Bureau of Prisons
CBD       central business district
DEA       Drug Enforcement Administration
EPA       Environmental Protection Agency
FBI       Federal Bureau of Investigation
GSA       General Services Administration
INS       Immigration and Naturalization Service
IRS       Internal Revenue Service
OMB       Office of Management and Budget
OPM       Office of Personnel Management
MSA       metropolitan statistical area
USDA      Department of Agriculture

page 7                                      GAO/GGDSlUM) Facilities Location
Chapter 1


                      For the past 20 years, Congress and the executive branch have
                      attempted to set policies for locating federal facilities primarily from the
                      perspective of promoting economic development in certain types of
                      localities, such as rural areas or urban central business districts (CBD).
                      Such policies do not always provide for the best financial interest of the
                      government. Despite a requirement that first priority be given to rural
                      areas, most federal ,jobs and facilities are located in metropolitan areas.

                      Several laws and executive branch orders and regulations frame the
Federal Policies on   government’s general policy on location decisions. The guidance sets
Location Decisions    forth certain objectives-including economic development of rural areas
                      and CBDs-but does not always provide for the best financial interest of
                      the government.

                      The Rural Development Act of 1972 requires all executive departments
                      and agencies to “establish and maintain departmental policies and pro-
                      cedures giving first priority to the location of new offices and other
                      facilities in rural areas.” Executive Order 12072, promulgated by Presi-
                      dent Carter in August 1978, requires that centralized community busi-
                      ness areas be given first preference for locating federal facilities in
                      urban areas. Economic development is the goal of both of these policies.
                      The General Services Administration’s (GSA) Federal Property Manage-
                      ment Regulations require each agency to determine where its facilities
                      are to be located and to assure that its location decisions are in compli-
                      ance with the Rural Development Act of 1972 and Executive Order
                      12072, among other requirements. GSA says that it does not attempt to
                      steer agencies to one area or another.

                      Other laws that apply to location decisions are (1) the Competition in
                      Contracting Act of 1984, which requires that federal procurements be
                      made using full and open competition and (2) the Public Buildings Act of
                      1959, which requires congressional authorization of large lease actions
                      or construction projects by the House and Senate public works commit-
                      tees to assure an “equitable distribution” of such projects throughout
                      the nation. Further, Office of Management and Budget (OMB) Circular A-
                       105, issued in April 1974, generally requires that federal regional offices
                      be located in 10 federal regional cities that are among the largest cities
                      in the nati0n.l

                      ‘The 10 standardfederal regionalcities are Atlanta, Boston,Chicago,Dallas.Denver,Kansa City,
                      New York, Phdadelphia,SanFrancisco,and Seattlr.

                      Page 8                                                    GAO/GGD90109 Facilities Location
                                            Chapter 1

                                            Once agencies determine the area where their facilities are to be located,
                                            GSA then obtains the space for them, either in government-owned    or gov-
                                            ernment-leased space. GSA’s summary reports on owned and leased real
                                            property indicated that GSA provided space for federal employees in
                                            2,884 government-owned and 4,225 government-leased buildings during
                                            fiscal year 1988.

                                            Although the Rural Development Act of 1980 rescinded the requirement
Most Federal Jobs and                       established by the Agricultural Act of 1970 to report on the location
Facilities Are in Urban (                    rural or urban) of new federal offices and other facilities (and some
Areas                                       data sources no longer use the terms urban and rural),2 data that are
                                            available show that most federal jobs and facilities are in metropolitan

                                            Data from the Office of Personnel Management (OPM) indicate that in
                                            fiscal year 1989, I.6 million full-time government civilian employees
                                            (excluding U.S. Postal Service employees) worked in metropolitan areas
                                            and 0.2 million worked in non-metropolitan areas. In fiscal year 1980,
                                            1.5 million full-time government workers were in metropolitan areas and
                                            0.3 million were in nonmetropolitan areas. As shown in table 1.1, while
                                            the civilian workforce grew slightly in the last decade, the net effect was
                                            a ‘i-percent federal employment increase in metropolitan areas and a 21
                                            percent decline in nonmetropolitan areas.

Table 1.1: Civilian Federal Employment in
MSAs and Non-MSAs, Fiscal Years 1980                                     Fiscal year                 Fiscal year                  Percent
and 1989                                                                        1980     Percent            1989     Percent      change
                                            MSA                             1,504,573        85 0       1,610,083        aa 5          7.0
                                            Non-MSA                           265,931        150          209,579        11 5       -21.2
                                            Total                          1.770.504       100.0 --l.s19.661%ki.iZ--22
                                            Note Excludes U S Poslal Service employees

                                            Source Offlce of Personnel Management

                                            Similarly, GSA data on the amount of space occupied by civilian agencies
                                            in 1988 indicated that 419 million square feet were in urban areas and
                                            208 million square feet in rural areas.3 In fiscal year 1986, the govern-
                                            ment occupied 407 million square feet in urban areas and 185 million

                                            ““Metropolitan statistical arm” (ZISA)ha replaced“urban,” and “non-MSA”has replaced“rural.”
                                            Seeglossaryfor definitions.
                                             ‘GSAhad not yet compiledfwal year 1989data and said that data for years beforefiscal year 1986
                                             were no longer availablr.

                                             Page 9                                                    GAO/GGD99-109Facilities Location
                                           Chapter 1

                                           square feet in rural areas. The amount, of square footage grew from
                                           1986 to 1988, both in urban and rural areas. (See table 1.2.)

Table 1.2: Total Square Footage of
Buildings Occupied by Civilian Agencies,                                                      Fiscal year         Fiscal year          Percent
Fiscal Years 1986 and 1988                 Location’                                                 1986 ._____.        1988          change
                                           -_____-__                       ~~
                                           Urban                                              407.080,589        419.436,186                3.0
                                           Rural                                              184,773,496        207,905,223               12.5
                                           Both urban and ruralb                               28,555,308          33,418,790   ___--~     17.0
                                           Not desIgnate@                                     164,861,472         194,013,209              177
                                           Total                                             765,276,065 -      054,773,400                 a.9
                                           Ylata excludes all U S Postal Serwce facllltles

                                           ‘Bulldlngs   reported with both urban and rural acreage
                                           ‘Bulldlngs not designated as &her urban and rural
                                           Source General Serv~es Admlnlstratw

                                           As agreed with Senator Conrad’s office, the objectives of our work were
Objectives, Scope,and                      to (1) identify the policies that growing federal civilian agencies follow
Methodology                                in choosing facility locations; (2) determine if rural areas receive first
                                           priority in such decisions; and (3) determine if any changes to federal
                                           location policies are warranted, considering policies followed by the pri-
                                           vate sector and changes in office and telecommunications technology.

                                           To identify the federal location policies, we reviewed the laws and exec-
                                           utive branch guidance affecting location decisions. We interviewed offi-
                                           cials at the government’s central management agencies--oMB, GSA, and
                                           oPM-and obtained their views on location policies. We also interviewed
                                           officials in eight civilian agencies that had grown in full-time permanent
                                           employment between fiscal years 1980 and 1989-the Department of
                                           Agriculture (USDA), the Bureau of Prisons (BOP), the Customs Service, the
                                           Drug Enforcement Administration (DEA), the Environmental Protection
                                           Agency (EPA), the Federal Bureau of Investigation (FBI), the Immigration
                                           and Naturalization Service (INS). and the Internal Revenue Service
                                           (IRS)-and discussed how they made location decisions.

                                           To determine the rationale used for site selections, we reviewed actual
                                           and planned moves of data processing, payroll processing, teleservicing
                                           facilities, detention centers, and research and development laboratories
                                           for these agencies for fiscal years 1989 to 1991. We limited our work to
                                           these types of facilities because facility experts in government and the

                                           Page 10                                                           GAO/GGB90.109FacilitiesLoeation
private sector said they offered the most flexibility   as to where they
could be located.

Further, we reviewed the process followed by the Bureau of Engraving
and Printing (BEP) to select an expansion facility in the western United
States. GSA officials had identified the process the Bureau followed as
unusually innovative.

To determine private sector policies on location decisions, we researched
literature on this subject since 1985 and retained the services of a con-
sultant-Real    Estate Sciences International, Inc.-to assist us. Our con-
sultant did a more extensive literature search, covering 1971 to the
present; surveyed several corporations that made recent site selection
decisions (Travelers Insurance, Citicorp, GTE, Rockwell, Mack Truck,
and J.C. Penney) and several experts in the corporate real estate consul-
tation field; and surveyed all 50 states to determine what programs they
have to assist corporations in making location decisions.

To obtain an indication of where federal workers and buildings were
located, we also reviewed data maintained by OPM on federal employ-
ment from 1980 to 1989 and data maintained by GSA on federally owned
and leased space from 1986 to 1988. GSA did not have data available for
 1989 or years before 1986.

We did our work from .January to July 1990 in accordance with gener-
ally accepted government auditing standards. At your request, we did
not obtain official agency comments on a draft of this report, but we did
discuss our findings with GSA officials and included their views in the

Page 11                                         GAO/GGD-90199Facilities Location
Chapter 2

Location Policies in Practice

                     The eight civilian agencies that experienced growth in full-time perma-
                     nent employment during the last decade generally selected facility loca-
                     tions where the demand for their services was greatest, irrespective of
                     the policies set forth in the Rural Development Act of 1972 or Executive
                     Order 12072. These agencies, which are primarily engaged in law
                     enforcement and revenue collection, generally selected sites in urban
                     areas where the populations they serve were located. The agencies also
                     located support facilities requiring little or no direct client contacts, such
                     as computer operations and records management facilities, in urban
                     areas in order to consolidate operations or to be near their operational

                     Generally, the eight agencies said the determinant factor in selecting
Location Policies    locations was agency mission and that they selected locations where the
Followed by Growth   demand for their services was greatest, which usually was in urban
Agencies             areas, irrespective of the Rural Development Act of 1972 requirement or
                     the guidance in Executive Order 12072. OMB said that it has not enforced
                     Circular A-105 regarding regional offices for many years because it was
                     not a high priority in recent administrations. For the most part, agencies
                     whose mission required them to be in rural areas specifically or urban
                     areas specifically said they gave first priority to locations that fit this
                     specific location need but not because of the policies and guidance in
                     applicable site location law.

                     DEAsaid it selects field office sites by considering drug pattern usage,
                     size of the city, and commuting distance to courts and local police
                     departments. DEA said it is primarily concerned with apprehending
                     major drug traffickers, and therefore locates its offices in major popula-
                     tion centers and cities where local police forces are overwhelmed by
                     drug traffickers. DEA said it has also established offices in more rural
                     areas in Arizona and Washington to combat drug trafficking along U.S.

                     BOP said it always tries to obtain sites near large population centers and
                     where land is offered at no cost. To assure an adequate workforce to
                     draw from and housing opportunities for its employees, BOP said it only
                     considered cities with populations of 50,000 or more inhabitants.

                     Several agencies cited the location of the target population as the most
                     important factor in selecting sites. BOP said it locates prisons in areas
                     with growing inmate populations. IRS said the location of its district
                     offices is dependent on the location of taxpayers. In recent years, this

                     Page12                                          GAO/GGD-90109FacilitiesLocation
Chapter 2
Location Policies in Practice

has meant that IRS has opened offices in the West to meet the shift in
population and the demand for services. The FBI also said that it estab-
lishes offices in areas with the greatest workload.

EPA’S facilities are often specialized, such as facilities for research and
development and environmental science laboratories, and are located
near major universities. USDA’S Federal Grain Inspection Service officials
said they locate their offices near grain elevators. Similarly, Customs
and INS officials said their offices are located at ports of entry into the
linited States.

Several agencies’ officials also mentioned that political considerations
affected their ability to close and relocate offices and facilities. DEA and
1RSmentioned that more consideration is given to certain areas
depending on the influence of local Members of Congress and their com-
mittee assignments. FBI said that political intervention caused it to keep
open its Butte, Montana, office in spite of a decreased workload in that
office. The office in Butte now primarily does word processing work for
the FBI’s San Francisco office, where word processing personnel are dif-
ficult to recruit due to relatively uncompetitive government wages in
San Francisco.

FBI also said that low government wages were impeding its ability to
retain employees for its Washington, DC., Identification Division. FBIis
in the process of finding a new location for the division in West Virginia.
FBI said that a Member of Congress had approached the FBI Director with
a proposal to relocate to West Virginia.

The factors the eight high-growth agencies said they considered in
choosing sites for new facilities are listed in table 2.1.

Page 13                                         GAO/GGB9@103Fmilities Location
                                       Chapter 2
                                       Location Policies in Practice

Table 2.1: Facility Location Factors
Considered by High-Growth Agencies     Factors considered           USDA         BOP     Customs        DEA      EPA       FBI      INS      IRS
                                       Locatlon of target
                                          population or clIentsa       x             x             x        x                 x       x          x
                                       Polltlcal lnterventjon                                               X                 X                  X
                                       Proxlmlty to courts and
                                          local pohce                                                       X
                                       Avallablllty of no-cost land                  X
                                          development of locality                    X
                                       Proxlmlty to major
                                          universities                                                               X
                                       %cludes agriculture storage fachtles. inmates, ports of entry, drug traff!ckers, crlmlnals, lmmlgrants,
                                       and taxpayers

                                       Because the mission of the primary offices of the eight agencies
Actual and Planned                     appeared to be directly related to their target populations, which were
Moves of Selected                      generally in urban areas, we asked the eight agencies detailed questions
Functions                              concerning any facility openings and relocations involving computer
                                       operations, cash and payroll processing, records management, and
                                       supply and warehouse storage for fiscal years 1989 to 199 1. These func-
                                       tions are good candidates for location in rural areas since they require
                                       little or no direct client contact and can be done in many locations.

                                       The surveyed agencies informed us of 10 planned or actual moves
                                       involving these fmkctions for these years. All of the moves were to
                                       urban areas. The moves included relocating one computer center, four
                                       records management offices. and five warehouse and supply facilities.

                                       DEA moved its records management operations and computer operations
                                       from Washington, D.C.. to its headquarters in Arlington, VA, to consoli-
                                       date operations in a central location and did not consider a rural area.
                                       IRS relocated two records management offices and two warehouse and
                                       supply facilities within urban areas that were close to its headquarters
                                       and major service centers, without considering rural areas. IRSsaid it
                                       locates records management and warehouse operations as close as pos-
                                       sible to its main computing centers.

                                        IKSis also planning to move three other warehouse and supply facilities
                                        to urban areas this year. Two of the warehouses are being expanded and
                                        will be located near existing IRS service centers. The third warehouse
                                        move involves an exl)iration of an existing lease.

                                        Page 14                                                          GAO/GGD90199 Pacilities Location
Chapter 2
Location Policies in Practice

The only planned move for fiscal year 1992 involves relocating FBI’S
records management division from Washington, DC., to Hagerstown,
MD. FBI said it considered communities within a 150-mile radius of
Washington and selected Hagerstown based on travel time to headquar-
ters, economic stability of the town, its slow growth, cost of living,
appeal to transferees, and a labor market to support recruitment of sev-
eral hundred employees.

Page 16                                      GAO/GGDW109 Factities Location
Chapter 3

Federal Location Policies
Warrant Reconsideration

                    As indicated in chapters 1 and 2, existing federal location policies pri-
                    marily are concerned with economic development of certain areas and
                    may not be the determinant factors used by agencies to make actual
                    location decisions. Factors considered by the private sector in making
                    location decisions, the relatively high cost of urban areas where most
                    federal facilities are located, and the potential benefits that can be
                    achieved through wide competition, also indicate that current federal
                    location policies need reconsideration. Further, changes in office tech-
                    nology also point to the possibility that current policies are out of date,
                    particularly in light of the current budget situation.

                    Because one of GSA’S roles as a central management agency is to set
                    governmentwide facilit,y management policies, GSA should develop a pro-
                    posed locational policy for congressional consideration. Congress could
                    then decide whether the current budget situation permits continuation
                    of policies that give priority to local economic development over policies
                    that would take a more’ competitive, businesslike approach.

                    Recent literature indicates that in the private sector, location decisions
Location Factors    are viewed as labor market decisions. The private sector uses different
Considered by the   criteria for locating “front” offices (or headquarters operations) and
Private Sector      “back” offices (or administrative operations).

                    Front office location decisions are affected primarily by the ability to
                    attract professional and managerial personnel. Companies consider such
                    factors as the number of job opportunities available in a community for
                    two-career families, cost of living, and quality of life. Also, the private
                    sector considers access to various aspects of communications-such          as
                    travel time and distance to other operations, availability of air and mail
                    services, and opportunities for professional “networking’‘-that        are
                    usually available in larger cities. Many front office relocations result
                    from changes brought about by mergers or reorganizations that result in
                    separation of headquarters from divisional functions. Changes in tech-
                    nology allowing the transmission of data over long distances-such as
                    fiber optics, high-technology electronic switch systems, electronic mail,
                    fax machines, personal computers, and modems-have also enabled the
                    separation of headquarters functions from administrative functions and
                    have made less urbanized areas more attractive to the private sector.

                    We found numerous examples of front offices being relocated from high-
                    cost urban areas in part because of the inability to recruit and retain
                    professional and managerial personnel; from small cities with limited

                    Page 16                                        GAO/GGlMO-109Facilities Location
    Federal Location Policies
    Warrant Reconsideration

    opportunities to develop business networks, few jobs for spouses, and
    limited lifestyles; and from areas with high real estate costs.

    Back offices are characterized by customer service, claims processing,
    telemarketing, credit and accounting processing, and order processing
    operations. The majority of workers are in clerical positions. Minimizing
    labor costs is a major concern when locating back offices. Small cities
    are likely candidates for many back offices, especially those requiring
    little travel and support services. However, back offices that have a
    high percentage of professional and managerial employees and that
    require support services, large workforces, frequent travel, or use hard-
    ware requiring a high degree of t,echnical service are more likely candi-
    dates for larger cities.

    The corporate trend appears, in recent literature, to be in favor of
    locating back offices in small cities to get away from competition for
    labor in larger cities and to take advantage of lower space costs avail-
    able in smaller cities.

    Our consultant, Real Estate Sciences International, Inc., performed an
    extensive literature search, surveyed several major corporations and
    real estate experts, and asked all of the states about factors they consid-
    ered in attracting the private sector. Twenty-six states provided infor-
    mation to our consultant. Our consultant identified the primary factors
    considered by the private sector in making location decisions (listed in
    app. I) and the following trends in the private sector:

l Labor issues, such as the availability of basic skills in the labor pool,
  workers’ ability to train for specific functions, labor costs, and attitudes
  towards a work ethic, are among the most important factors facing busi-
  ness today.
. Many major metropolitan cities are becoming unattractive to the private
  sector because of their shrinking supply of skilled labor, deteriorating
  infrastructure, poor school systems and lower educational levels of
  workers, traffic congestion, excessive real estate costs, high taxes, busi-
  ness regulation, and high crime rates.
l Nonmetropolitan locations often offer more potential for higher worker
  productivity, lower space costs, higher quality of life for employees,
  proximity to both managers’ homes and quality higher education institu-
  tions, and lower operating costs.
0 Transportation systems, whether airports, highways, railroads, or
  waterways, are important to locational decisions for both manufac-
  turing and service industries.

    Page 17                                       GAO/GGD-90109Facilities Location
                       Federal Location Policies
                       Warrant Reconsideration

                     s Virtually all state and local communities now offer incentives, such as
                       funding for infrastructure development, training programs, promises to
                       provide qualified labor, or reduced taxes, to attract businesses. These
                       incentives usually become a deciding factor when companies are unable
                       to differentiate among acceptable alternatives.
                     . Metropolitan areas for headquarters offices are still favored by many
                       service-oriented corporations, such as insurance companies, financial
                       institutions, brokerage and financial advisory organizations, communi-
                       cations and utilities firms, and general business service organizations,
                       because they can offer prestige locations and easy access to major cli-
                       ents and support services.

                       Although many location decisions of agencies-particularly       the high-
Urban Areas Can Be     growth agencies that are involved with law enforcement and revenue
Costly                 collection-often    require the government to locate in large metropolitan
                       areas, costs could still be reduced by selecting sites in non-central busi-
                       ness districts or in t.hc more suburban areas of cities.

                       We analyzed the average commercial rental rates for office space in the
                       10 federal regional cities and Washington, D.C. As shown in table 3.1,
                       rental rates for CBDS averaged $24.83 per square foot, which was $5.09,
                       or about 26 percent, higher than the non-cBD average rate of $19.74. The
                       CBD rate was higher than t,he non-cRD rate in 9 of the 11 cities.

                       We also analyzed cost-of-living data for these cities. We used cost-of-
                       living data obtained by a consultant for our work on comparability pay,
                       which was gathered for 59 areas in the country, each with at least 5,000
                       white-collar federal workers. The cost-of-living index for all 59 cities
                       averaged 1.05, or 5 prrcent higher than the national average. As shown
                       in table 3.1, Washington, D.C., and five of the standard regional cities
                       had cost-of-living indexes higher than 1.05, and the average index of the
                       11 cities was 1.14, or 14 percent higher than the national average. Of the
                       total 1.8 million civilian government workers, 0.6 million, or about 30
                       percent, work in these 11 cities.

                       Page 18                                        GAO/GGD90-109Facilities Location
                                       Chapter 3
                                       Federal Location Policies
                                       Warrant Reconsideration

Table 3.1: Rental and Cost-Of-Living
Rates for Selected Urban Areas                                                                        Average rental rates per square
                                                                           Employee cost-of-            foot for commercial space’
                                       City                                      living indexb            CBD Non-CBD        Difference
                                       Atlanta                                             1 03         $21 56      $20 32          $1 24
                                       Boston                                              1.33         $32 00      $22.00         $1000
                                       Chicago                                             114          $35 00      $24 00         $1100
                                       Dallas                                              0 97         $15 50      $13 50          52 00
                                       Denver                                                0.97       511 00        512 50            (51 50)
                                       Kansas City                                           0 98       $18.00        $18 00             $0 00
                                       New York                                              1.47       542 52        5% 22              $7 30
                                       Philadelphia                                          1 14       523.50        51700              56 50
                                       San Francisco                                         1 33       $25 01        $19 76             $5 25
                                       Seattle                                               1.02       51977         513.07             56.70
                                       Washington, D C                                       1 14       $29 24        $21 72             57 52
                                       Average                                               114        524 83        519.74             55 09
                                       Y990 Guide lo Industrial and Offlce Real Estate Markets, WashIngton, D C Society of lndustrlal and
                                       Off102 Realtors, 1990

                                       bPlan on Lung Cost Standards, a report prowded to GAO from Runzhelmer lnternatlonal I” April 1989
                                       Runzhelmer International IS a management consultant group for travel and liwng costs, located in Roch-
                                       ester, Wisconsin The cost-of-llvlng data include houslng, taxes, transportation, goods and services, and
                                       other expenses, based on a family of four earning 530,000 annually currently buyang a home

                                       The labor market also affects the costs of location policies. We reported
                                       that the private sector paid more than the federal government about 90
                                       percent of the time in over 60 metropolitan statistical areas for the 10
                                       job occupations studied. These occupations were file clerk, stenogra-
                                        pher, secretary, typist, computer operator, computer programmer, com-
                                        puter systems analyst, key entry operator, accounting clerk, and
                                        drafter.’ The federal government’s noncompetitive salary rates in these
                                        cities were cited by agency officials as the major cause of recruiting and
                                        retention problems, particularly in areas where nonfederal salary rates
                                        and the cost of living were the highest. Agency officials said these low
                                        salary rates also lead to high turnover rates, which cause numerous
                                        operational problems. These problems include reduced service delivery,
                                        increased recruiting and training costs, more overtime pay, and upper-
                                        level employees having to do lower-level work.

                                        In response to the widening gap between federal and private sector sala-
                                        ries-which   was estimated to be about 25 percent at the time of this
                                        report-the   House Post Office and Civil Service Committee and Senate

                                        ‘Federal White-CollarEmployeeSalary Reform(GAO/T-GGD-90-22,Mar. 14, 1990),and Federal
                                        Pay:ComparisonsWith the Private Sectorby .Joband Locality, (GAO/GGD-RO-SlFS,May 15, 1990)

                                        Page 19                                                         GAO/GGD90)-109Facilities Location
                         Chapter 3
                         Federal Location Policies
                         Warrant Reconsideration

                         Committee on Governmental Affairs recently approved legislation that
                         would create a more systematic annual adjustment process to prevent
                         the overall pay gap from widening. The legislation would also institute a
                         “locality pay” approach whereby federal white-collar salary rates
                         would vary by geographic area. Federal blue-collar employees’ wages
                         have differed by area for many years, on the basis of prevailing private
                         sector wage rates in each area. The Bush Administration has advocated
                         a similar proposal, but it initially is limited to New York, San Francisco,
                         and Los Angeles.

                         The final outcome of such proposals remains to be settled. It is clear,
                         however, that by locating employees in high-cost metropolitan areas, the
                         government’s operational costs-either through lost productivity or in
                         higher wages-are higher. An OPM official said that if locality pay is
                         implemented, agency costs in some locations will increase and agencies
                         will be forced to find a way to minimize costs.

                         Localities routinely offer incentives to attract potential employers to
Competition Can Help     their communities. Because of the way the government usually obtains
Agencies Capitalize on   space-agencies determine where they want to locate and then have GSA
Local Incentives         obtain suitable space in that area for them-it typically does not take
                         advantage of such incentives. We found one case, however, in which the
                         government was able to create competition over a wide area for its
                         space needs. As a result, this agency--%+--received       a substantial

                         BEP needed to expand its ability to print currency, which at the time of
                         this report was all done in its Washington, DC., facility. BEP made a deci-
                         sion to locate its expansion facility in the western area of the country, to
                         help reduce currency shipment costs to western Federal Reserve Banks.
                         Lacking construction funding and authority to build its own space, BEP
                         initially sought to find an offeror who would lease space to the govern-
                         ment for a 20-year period, after which the title to the facility would
                         revert to the government. In 1985, BEP announced its plans and asked
                         for interested parties in 13 western states for expressions of interest.
                         BEP published its minimal needs and explained how offers would be
                         evaluated. Among BEP’S needs were availability of labor, short distance
                         to an airport that offered frequent flights to selected Federal Reserve
                         Banks, and security requirements for the building.

                         BEP received expressions of interest from 82 localities. BEP screened this
                         initial list of offers and went back to the 11 top-ranked offerors, who

                         Page 20                                        GAO/GGD9@109Facilities Location
Federal Location Policies
Warrant Reconsideration

were then asked to submit proposal packages addressing more detailed
BEP project requirements. During this phase of the evaluation, BEP
received four offers to donate land and a building from Fort Worth,
Texas; Aurora, Colorado; Las Vegas, Nevada; and Pierce County, Wash-
ington. The Pierce County proposal did not include as much land as the
other three and did not include the construction of the building. There-
fore, the Pierce County offer was not considered further. BEP evaluated
the other three offers in more detail and ultimately selected the Fort
Worth offer. This offer included a donation of 100 acres of land and the
construction of a building shell, both of which have been valued at
between $12.5 million and $15 million.

BEP officials said that BEP will spend about $110 million to complete the
building, which is scheduled to become operational in January 1991. The
annual operating cost of the facility is estimated to be between $30 mil-
lion and $35 million, including salaries for about 300 workers in the Fort
Worth area. BEP officials said that due to the willingness of communities
to attract employment opportunities, they were confident that similar
incentives could be obtained by other agencies if they sought them.

GSA officials said that a competitive procedure like the one BEP used
would probably be beneficial to the government, especially for computer
centers, warehouses, training facilities, and laboratories but would be
harder to implement for regional offices and offices that have to serve
particular clients. Although we agree with GSA in some respects, we
think that when selecting a site for a regional office serving five states,
for example, an agency should consider locations in all five states and
select, among those offers that meet its needs, the one that offers the
best overall value considering such factors as real estate and labor costs.
Further, if an agency has to be located in a particular metropolitan area
to serve its clients, it should not be expected to consider areas that will
not meet its needs but should entertain offers from suburban and non-
CBD areas within that metropolitan area.

The GSA officials also said that individual agencies would be better
equipped to handle broad competitions than GSA, which is organized on a
regional basis. The GSA officials also said that equal employment oppor-
tunity goals would have to be considered by agencies if they used proce-
dures similar to the one used by BEP to make location decisions.

OMB officials also said that using competition to obtain local incentives
offered some promise of reducing the government’s space acquisition    _a
costs, but some Members of Congress would resist such a policy because

Page 21                                        GAO/GGBSO-109FacilitiesLoeation
                         chapter 3
                         Federal Location Policies
                         Warrant Reconsideration

                         they view competition as contrary to the government’s role of assisting
                         local communities. They also said that agencies often cite relocation
                         costs as an inhibitor to moving from a location but in reality the agen-
                         cies do not really analyze long-term costs and benefits and due to inertia
                         are reluctant to consider relocating. In addition, the OMB officials said
                         that GSA needed to provide broad guidance to agencies on how to select
                         facility locations.

                         GSA officials said that, because of political obstacles and GSA’S belief that
GSA Should Propose       agencies should make their own location decisions, GSA has not assisted
Governmentwide           agencies in developing procedures and specific guidelines to implement
Policy                   the various existing location policies. As a central management agency,
                         GSA has a responsibility in federal buildings management to provide
                         leadership, oversight, and help in developing effective governmentwide
                         management programs and policies. At least partly as a result of GSA’S
                         failure to exercise its leadership role in facility management policies, the
                         government’s ability to provide quality space for its employees at a rea-
                         sonable cost has seriously diminished, particularly in recent years with
                         large budget deficits.

                         In our management review of GSA last year,2 we reported that GSA has
                         had difficulty balancing its concurrent roles of making policy, providing
                         oversight, and delivering services. We said that GSA’S primary role
                         should be to set governmentwide policy. We also reported that

                     l     has done little to provide the necessary leadership and guidance for

                       effective governmentwide facilities management;
                     . Congress sometimes interjects itself into operational decisions by, for
                       example, directing GSA to construct a new building in a specific location
                       even though GSA had not identified that sit,e for a new facility or had
                       assigned a higher priority to other locations; and
                     . GSA should focus more attention on overseeing governmentwide facilities
                       management functions-including       those over properties not under its
                       control-in  view of changing technologies and the recognition that
                       quality workspace affects performance and productivity of the govern-
                       ment workforce.

                          2General&vies Admimstratlon;‘;ustainedAttention Requiredto Improve Performance(GAO/
                          GGD-90-14,NW 6, 19891

                          Page 22                                              GAO/GGD99-109Facilities Location
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                  Federal Location Policies
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                  More recently we testified on the government’s ability to provide quality
                  office space for its employees at a reasonable cost.3 In that testimony,
                  we reported the following:

              l One of the serious consequences of budget deficits has been to short
                change the investment in facilities, people, and computers needed to
                efficiently maintain government operations.
              . Pervasive shortfalls in financing the government’s infrastructure needs
                threatens to compromise the ability of federal agencies to accomplish
                their missions.
              l More than half of the government’s buildings are more than 40 years old
                and some are in poor condition.
              l   GSA’slack of a comprehensive capital investment strategy leaves it in a
                weak position to guide federal facilities decisions and encourages others,
                like OMB, to substitute their own agendas, such as relying on costly long-
                term leases for most space needs.
              . OMB has argued against capital investment initiatives over the years
                because it perceived a tendency for Congress to “pork barrel” the funds
                with little regard for maximizing return on investments.

                  Multiple laws and regulations guide federal agencies in selecting facility
Conclusions       locations, but they do not always provide for consideration of the best
                  financial interest of the government as a factor in the decision-making
                  process. Some have a primary goal of providing economic development
                  assistance to localities. For example, the Rural Development Act of 1972
                  requires agencies to give first priority to rural areas when considering
                  any facility location whereas Executive Order 12072 requires agencies
                  to first consider central business districts for space in urban areas.
                  Other policies that affect location decisions include those that require
                  regional offices of agencies t,o be located in 10 standard federal regional
                  cities, congressional authorization of large leases and construction
                  projects to assure an equitable distribution of federal buildings
                  throughout the nation, and agencies to use full and open competition
                  when procuring property and services. GSA, the responsible central man-
                  agement agency, has not provided leadership to assist agencies in imple-
                  menting and complying with these policies. In practice, agency location
                  decisions seem to be guided more by politics and inertia than by govern-
                  mentwide policy.

                  “The Disinvrstment in FederalOffwe Spacr(GAO/T-GGD-90-24,Mar. 20,1990).

                  Page 23                                               GAO/GGDSO-109Facilities Location
Chapter 3
Federal Location Policies
Warrant Reconsideration

Most civilian federal jobs and facilities are located in urban areas, which
can have high real estate and operational costs. Agencies that have
grown in the last decade, primarily those dealing with law enforcement
and revenue collection, attribute the need to be in areas where they can
best accomplish their missions or attend to the populations they serve as
the primary reason urban areas receive more federal jobs and facilities
than rural areas.

The private sector is more cognizant of cost considerations for both
facilities and labor in deciding where to locate than the government. The
private sector views location decisions primarily as labor market deci-
sions As a result of changes in telecommunications and automated data
processing technologies, which make it easier for many operations to be
done in dispersed locations, the private sector has been able to take
advantage of economic benefits offered by suburban and rural locations.

Congress has primarily considered location policy as a means of stimu-
lating economic growth in rural or urban areas. An alternative policy,
which would give more emphasis to the need to conserve limited finan-
cial resources, would be to obtain locations-whether      urban, rural, or
suburban-that      offer the best overall value to the government while
still meeting its needs. Such a policy would (1) maximize competition; (2)
where possible, take advantage of incentives offered by localities to
attract jobs; (3) create a more businesslike approach to location deci-
sions; (4) incorporate the effects of any future change to a locality pay
concept; and (5) possibly reduce the impact of politics in such decisions.
BEP’s competition process for Selecting a location for its new currency
plant is a successful. but unique example of a government agency using
this approach.

Because one of GSA’S roles as a central management agency is to set
policy for governmentwide facility management functions, we believe
GSA should develop a proposed policy along these lines for Congress to
consider. We realize that developing a revised location policy will not
solve the broader capital investment problems facing GSA, but we believe
it will be a step in the right, direction in GSA’S efforts to assume a greater
governmentwide leadership role over facilities management.

 Resistance to change-both because of agencies being reluctant to move
 once established in a community and because of the well established tra-
 dition that local economic development is a prime consideration in
 locat,ing federal facilities-is an obstacle that a new policy would have
 to overcome. There, are also possible impacts on the government’s equal

 Page 24                                        GAO/GGD90-109Facilities Location
                  Chapter 3
                  Federal Location Policies
                  Warrant Reconsideration

                  employment opportunity goals involved in location decisions that the
                  proposed policy would need to incorporate.

                  We also realize that some functions are better candidates for large area-
                  wide competitions than others, but we believe that more competition for
                  all space needs is possible. Thus, GSA should develop an alternative loca-
                  tion policy that considers a more businesslike approach so that Congress
                  can consider that policy in light of such factors as the current and long-
                  term budget implications, changes in office technology, and the move-
                  ment toward locality pay.

                  The Administrator of the General Services Administration should
Recommendation    develop for congressional consideration a more cost conscious and con-
                  sistent governmentwide location policy that would replace the require-
                  ments in (1) the Rural Development Act of 1972, (2) the Public Buildings
                  Act of 1959, (3) OMn Circular A-105, and (4) Executive Order 12072. The
                  new policy should reflect a more businesslike approach in meeting
                  agency mission and organizational needs by (1) requiring agencies to
                  maximize competition in identifying potential facility locations; (2) com-
                  paring the costs and benefits of each, considering such factors as real
                  estate and labor; and (3) selecting sites that meet the needs while
                  offering the best overall value to the government.

                  We discussed our findings and recommendation with GSA officials on
Agency Comments   September 13, 1990. They generally agreed with the report’s overall
                  message and recommendation. However, the officials said our discussion
                  of GSA’S lack of leadership in location policy matters did not adequately
                  reflect political constraints or GSA’S attempts in recent years to be less
                  “dictatorial” in its relationships with agencies. The officials said that
                  since agencies are better able than GSA to determine their needs and to
                  fit them to the various policy requirements and political considerations,
                  our report should more clearly reflect that location decisions are the
                  responsibility of the agencies. They also said that agencies should select
                  locations that provide the best overall value to the government, not nec-
                  essarily the lowest overall cost.

                  We made some changes to the report on the basis of GSA’S comments. We
                  recognized more explicitly that politics are often a factor in location
                  decisions and that the objective of good facilities management is best
                  value rather than lowest cost. We do not believe that our recommenda-
                  tion should make GSA more dictatorial over agencies or substitute GSA’S

                  Page 25                                       GAO/GGD-90109Facilities Location
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Federal Location Policies
Warrant Reconsideration

judgment for the agency’s in determining facilities needs. On the con-
trary, a revised location policy should be developed in close collabora-
tion with the agencies and should have as its objective consideration of
 broader geographic areas to meet agencies’ self-determined needs.

Page 26                                      GAO/GGD9@109Facilities Location
Page 27   GAO/GGDfi@lOSFacilities bcation
Appendix I

Important Private Sector Locational Factors

                Geographic location
                  Sector of the country
                  Urban/rural setting
                  Larger city or town

                Transportation systems
                  Airport access/proximity
                  Highway access/proximity
                  Port access/proximity

                Labor composition
                  Skilled/unskilled attributes
                  Work ethic

                Proximity to special education
                  Technical schools/training

                  Availability and reliability
                  Communication networks

                Proximity to markets, services, and raw materials

                Community incentives
                  Other (including image building)

                Community chemistry
                  “Fit” with the corporation
                  Local economy and taxes
                  Environmental regulations

                Land and building

                Political issues

                 Page 28                                     GAO,WXH@lO!l Fadlitiee Location
Appendix I
Important private Sector Lwxtioml Factors

Quality of life
  Housing availability/cost
  Public schools
  Cultural opportunities
  Recreational facilities
  Crime rate
  Medical services
  Police/fire and environment
  Spousal opportunities
  Cost of living

Future real estate value/markets
Source: Real Estate Sciences Internatmal.   Inc.

 Page 29                                           GAO/GGIMt&199Facilities Location
Appendix II

Major Contributors to This Report

                        John S. Baldwin, Senior Evaluator
General Government      Lucy M. Hall, Senior Evaluator
Division, Washington,   Eduardo N. Luna, Evaluator
                        Helen M. Walsh, Secretary

                        Jeffrey S. Forman. Senior Attorney
Office of General

                        Page 30                              GAO/GGDS@lO9Fadlith   LocatIon

MSA        An area with a city of at least 50,000 population or any urbanized area
           of at least 50,000 with a total metropolitan population of at least
           100,000, together wit.h adjacent counties with a high degree of economic
           and social integration with the main nucleus. (OMB)

Non-MSA    h‘o official definition   OMR   considers any area not located in a MA to be
           in non-M&k

Urban      Any large cities and suburbs plus places of 2,500 or more inhabitants
           and other territory, incorporated or unincorporated, included in urban-
           ized areas. An urbanized area consists of a central city or a central core
           together with continuous closely settled territory, which together have a
           total population of at least 50,000. (U.S. Bureau of the Census)

Rural      Any area not classified as urban area constitutes a rural area; the open
           countryside area and places with fewer than 2,500 inhabitants that are
           not in the suburbs of large cities. (U.S. Bureau of the Census). However,
           the Rural Development Act of 1972 defines rural as any area in a city or
           town with a population less than 10,000 inhabitants.

           Note: Section 401 of the Rural Development Act of 1972 amended Sec-
           tion 901 (b) of the Agricultural Act of 1970, by changing areas of “lower
           population density” to rural areas. The Agricultural Act of 1970 consid-
           ered areas of lower population density to be areas located in a county
           not in a Standard Metropolitan Statistical Area or any city located in a
           Standard Metropolitan Statistical Area, which, along with its continuous
           urban areas, has a population of 35,000 inhabitants or less.

(240013)   Page 31                                           GAO/GGD90-103Facilities Location


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