oversight

General Services Administration: Secret Service Uniformed Division Lease

Published by the Government Accountability Office on 1999-09-07.

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

                 United States General Accounting Office

GAO              Report to Congressional Requester
                 House of Representatives



September 1999
                 GENERAL SERVICES
                 ADMINISTRATION
                 Secret Service
                 Uniformed Division
                 Lease




GAO/GGD-99-153
United States General Accounting Office                                           General Government Division
Washington, D.C. 20548




                                    B-283063
                                    September 7, 1999

                                    The Honorable Bob Franks, Chairman
                                    Subcommittee on Economic Development,
                                      Public Buildings, Hazardous Materials and
                                      Pipeline Transportation
                                    Committee on Transportation and Infrastructure
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    This report responds to your request concerning new leased space
                                                                                                           th
                                    acquired for the Secret Service’s Uniformed Division (SSUD) at 1111 18
                                    Street, N.W., Washington, D.C., by the Public Buildings Service (PBS) of
                                    the General Services Administration (GSA). Specifically, you asked us to
                                    assess the circumstances that resulted in this lease being awarded without
                                    PBS’ first submitting a prospectus for the project to GSA’s Senate and
                                    House authorizing committees, as provided for by law and PBS’ policy and
                                    procedures. Appendix I provides a chronology of events in the acquisition
                                    of the SSUD lease.

                                    A lack of adequate internal controls over the leasing process at GSA’s
Results in Brief                    National Capital Region (NCR) resulted in PBS’ awarding a lease for SSUD
                                    on August 5, 1998, above the prospectus dollar threshold without first
                                    preparing and submitting a prospectus for the lease to GSA’s Senate and
                                    House authorizing committees. First, there was confusion about the costs
                                    that were to be considered in determining whether a prospectus was
                                    needed. Specific written guidance on how to calculate the cost did not
                                    exist. Second, although the space requirements increased about 40
                                    percentfrom about 50,000 square feet to about 70,000 square
                                    feetduring the acquisition process, procedures did not call for the
                                    revalidation of the decision that a prospectus was not needed when the
                                    space requirements and/or market rental rates used to make the decision
                                    changed during the acquisition process.

                                    After a congressional staffer asked questions about the lease on August 31,
                                    1998, NCR officials reviewed the award of the lease and determined that a
                                    prospectus should have been prepared and submitted to GSA’s Senate and
                                    House authorizing committees as provided for in section 7(a) of the Public
                                    Buildings Act of 1959, as amended, 40 U.S.C. 606(a), and PBS’ policy and
                                    procedures. Subsequently, NCR has instituted a new policy requiring its



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             Portfolio Management Division to verify all leases before they are
             awarded. Still, GSA has not developed specific guidance on how to
             calculate the cost to be used to determine whether a prospectus should be
             prepared, nor has GSA determined that it needs to revalidate prospectus
             decisions when space requirements or market rental rates change. We
             believe that these internal control weaknesses need to be corrected and
             are recommending that actions be taken to address these issues.

             On August 5, 1998, PBS entered into a lease with Jack I. Bender & Sons,
Background   General Partnership to provide lease space and parking for SSUD at an
             annual net rent of $2,129,461. This figure exceeded the prospectus
             threshold of $1.93 million for fiscal year 2000, the year in which occupancy
             is to commence. A prospectus was not submitted to GSA’s Senate and
             House authorizing committees at the time the lease was signed.

             As the federal government’s primary real estate agent, GSA, through PBS,
             provides space for agencies in federally owned buildings or by leasing
             space in privately owned buildings. NCR is responsible for providing space
             for agencies in the Washington, D.C., metropolitan area.

             Pursuant to section 210(h)(1) of the Federal Property and Administrative
             Services Act of 1949, as amended, 40 U.S.C. 490(h), the Administrator of
             GSA is authorized to enter into lease agreements for periods of up to 20
             years on such terms as the Administrator deems to be in the interest of the
             United States and necessary for the accommodation of federal agencies.
             Section 7(a) of the Public Buildings Act of 1959, as amended, 40 U.S.C.
             606(a), among other things provides for a detailed project description,
             called a prospectus, containing a project cost estimate and justification to
             be submitted to GSA’s Senate and House authorizing committees. A
             prospectus is (1) called for if the average annual rental of a lease is
             expected to exceed the prospectus threshold, as specified in the statute,
             and (2) adjusted by GSA annually, as authorized by the statute, to reflect
                                                          1
             changes in costs during the preceding year.

             Annually, the PBS National Office issues a Capital Investment and Leasing
             Program call asking all GSA regional offices to submit their prospectus-
             level projects. Each year the National Office provides the regions with the
             prospectus-level threshold and general guidance on preparing
             prospectuses. The National Office reviews the prospectuses submitted by
             the regions and the prospectuses that it approves are then consolidated

             1
              The actual prospectus thresholds for fiscal years 1998, 1999, and 2000 were $1.81 million, $1.89 million,
             and $1.93 million, respectively.




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              into GSA’s Capital Improvement and Leasing Program and submitted to
              the Office of Management and Budget (OMB) for approval. Once OMB
              approves the program, it is sent to GSA’s authorizing committees. PBS
              stated that its policy since 1972 has been not to enter into any lease
              agreement if the annual rental exceeds the prospectus threshold unless the
              authorizing committees have approved a prospectus.

              At your request, we assessed the circumstances surrounding the award of
Scope and     the SSUD lease. As agreed, we did not evaluate NCR’s overall process for
Methodology   identifying prospectus-level leases or for preparing prospectuses.

              To determine the circumstances surrounding the award of the lease for
              SSUD, we spoke with the cognizant NCR officials in the Regional
              Counsel’s Office, Portfolio Management Division, and Property Acquisition
              and Realty Services Division; reviewed GSA’s leasing policies and
              procedures; and discussed policy issues and guidance provided to regional
              offices with officials in PBS. We also spoke with two former NCR
              staffers—the original contracting officer for the SSUD lease and an
              attorney from the Regional Counsel’s Office—since both played significant
              roles in this acquisition.

              We reviewed the contract file for the lease to determine the acquisition
              process used and the critical decision points. Only limited documentation
              was available to support some of what we considered to be the critical
              decisions, such as the initial decision that this action was not a prospectus-
              level acquisition. Thus, some of the information being provided in this
              report is based on what current and former GSA officials remembered
              about events that occurred up to 3 years ago. We also obtained information
              on actions taken by NCR to help prevent prospectus-level leases from
              being awarded without a prospectus being prepared.

              Further, we obtained and reviewed GSA’s policies and guidance related to
              the preparation of lease prospectuses, and we verified that the rental-of-
              space account in the Federal Buildings Fund (FBF) had sufficient
              appropriated funds to cover the obligation for the SSUD lease. We
              discussed the specifics of the SSUD lease with an official in PBS’ Office of
              Portfolio Management. We also contacted regional officials in 9 of GSA’s
              10 other regions to determine whether they had guidance in place
              specifying how to calculate the lease costs to be used to determine if a
              prospectus is needed for an acquisition, and whether the decision that a
              lease is not prospectus-level is revalidated when space requirements or
              market rental rates change. We were unable to contact the appropriate
              official in the remaining GSA region in time for inclusion in this report.



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                      We did our work between March and July, 1999, in accordance with
                      generally accepted government auditing standards. On July 26, 1999, we
                      requested comments on a draft of this report from the Administrator of
                      GSA. GSA’s written comments are discussed near the end of this letter.

                      In NCR, it is initially the Portfolio Management Division’s responsibility to
The Lease Was         review expiring leases to identify new leases that might be above the
Awarded Without       prospectus threshold and to prepare the prospectuses for those leases. In
Adequate Evaluation   the case of the SSUD lease, there was no indication that Portfolio
                      Management identified the lease as potentially needing a prospectus.
of the Need for a
Prospectus            According to the contracting officer, who has since left GSA, even though
                      Portfolio Management had not identified this lease as needing a
                      prospectus, when she began working on the SSUD lease in April 1996, she
                      confirmed her expectation that the lease would be below the prospectus
                      threshold. Her estimate of the lease costs was made by multiplying the
                      expected market rental rate ($29 to $30 per square foot) by the estimated
                      space requirement (50,000 square feet). This calculation resulted in an
                      estimated total rent of $1.45 million to $1.5 million, which was below the
                      fiscal year 1998 prospectus threshold initially being used for this lease of
                      $1.81 million. Therefore, she went forward with the acquisition process as
                      a nonprospectus-level lease.

                      In the contract file, we found documents showing that early in the
                      acquisition process there was information available indicating that the
                      SSUD lease could be closer to the fiscal year 1998 prospectus threshold. A
                      letter, dated June 27, 1996, to NCR from a Secret Service official estimated
                      that SSUD would need 55,000 to 60,000 square feet of space. Using the
                      contracting officer’s estimated market rental rate ($29 to $30 per square
                      foot), the dollar range of $1.6 million to $1.8 million for that much space
                      would have been much closer to the fiscal year 1998 prospectus threshold.
                      Although the actual space requirement had not yet been determined, it
                      appears to us that PBS should have recognized that if the space
                      requirement or rental rate were higher than expected, the lease could
                      possibly exceed the fiscal year 1998 prospectus threshold.

                      When the Solicitation for Offers (SFO) was issued in November 1997, it
                      stated that SSUD required 69,500 to 72,250 rentable square feet of office
                      and related space and 78 parking spaces. The SFO stated that this was not
                      a prospectus-level lease. Therefore, to be considered, any offer must be
                      below the prospectus threshold. There was nothing in the contract file to
                      indicate that a check had been done after SSUD’s space requirements were
                      finalized to verify that NCR could still expect lease offers for this project to



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B-283063




be below the prospectus threshold. Because of the increase in space needs
over SSUD’s June 1996 estimate, it would seem prudent to have done
another prospectus-level calculation before issuing the SFO. Had this
calculation been done using the actual minimum space requirement in the
SFO (69,500 square feet) times the low end of the estimated market rental
rate ($29) that the contracting officer had initially used, the estimated
annual rent would have been about $2.02 million. This amount exceeded
both the fiscal year 1998 prospectus threshold of $1.81 million that was
initially used for this lease and the fiscal year 2000 threshold of $1.93
million that was later used. We believe that if an update of the prospectus
calculation had been done at this point, the need to reevaluate the
prospectus decision would have been apparent to NCR.

Early in 1998, there were three offerors competing for the SSUD lease.
About the time that NCR received the best and final offers, the original
contracting officer left GSA. When the new contracting officer took over
responsibility for the SSUD lease, he raised the question about the need for
a prospectus on the basis of the offers received. In May 1998, the
contracting officer reopened negotiations on the lease to clarify the
calculation for determining compliance with the prospectus threshold.
Before this time, there was no indication in the contract files that the
offerors had been informed about how to calculate whether their offers
would comply with the SFO requirement that the offer be below the
prospectus threshold.

In an attempt to clarify how to calculate the prospectus threshold, the
contracting officer sent the offerors two letters in May 1998. His first letter,
on May 8, 1998, specified that parking, operating expenses, and the cost of
amortizing the tenant allowance for above standard requirements should
be subtracted from the total full-service rental rate to determine if the offer
would be below the prospectus threshold. A week later, on May 15, 1998,
the contracting officer sent the offerors a second letter, amending the May
8 letter. This letter stated that only operating expenses and any
concessions offered to the government should be subtracted from the total
full-service rental rate when determining compliance with the prospectus
threshold. Officials at the National Office and in NCR’s Portfolio
Management Division, stated the same calculation mentioned in the May
15 letter as the correct way to determine if an offer met the prospectus
threshold.

After receiving these letters from the contracting officer, attorneys for two
of the offerors expressed concerns about the changes in the calculation
being used to determine prospectus compliance at such a late stage in the



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B-283063




process. Before the new contracting officer reopened the negotiations,
correspondence between the offerors and NCR indicated that the offerors
had been informed or led to believe that their offers met the basic
requirements for the acquisition, including compliance with the
requirement that their offers be below the prospectus threshold amount.
Ultimately, none of the offers met that requirement on the basis of the
calculation provided in the May 15 letter.

The NCR officials involved with this lease said that there were discussions
about how to respond to the letters from the offerors’ attorneys and how
to proceed with the acquisition. The officials said that their decision to try
to complete this acquisition without a prospectus was based on the (1)
time already invested in this acquisition, (2) concerns raised by the
offerors’ attorneys, and (3) need to award the lease in time for the new
space to be ready when SSUD’s current lease expires in February 2000. We
found little written documentation in the contract files of the discussions
that were held and the decisions made regarding the SSUD lease. The
contracting officer said that he consulted primarily with an attorney in the
Regional Counsel’s Office on this matter. By telephone and E-mail, the
attorney sought input from both the National Office and regional Portfolio
Management officials. However, a consensus opinion on how to proceed
with this lease was never developed.

It appears that the contracting officer acted on advice from the attorney
when he issued an amendment to the SFO in July 1998 informing the
offerors that (1) the calculation for determining prospectus compliance
was the aggregate cost of the contract, minus operating expenses, minus
any tenant improvement allowance, and divided by the 20-year term of the
lease and (2) the fiscal year 2000 prospectus threshold of $1.93 million
would be used for this lease. According to the attorney, who has since left
GSA, his advice was based on his understanding and interpretation of the
guidance he received from various sources. Specifically, he said he advised
the contracting officer that the cost of SSUD’s above standard tenant
requirements could be excluded from the prospectus calculation on the
basis of discussions with his supervisor and his interpretation of a 1990
                                2
Comptroller General decision.

However, the Comptroller General decision stated that the cost of
“specials” (i.e., items above standard tenant requirements) could be
excluded from the prospectus calculation because GSA elected to pay for

2
Peter N .G. Schwartz Companies Judiciary Square Limited Partnership, B-239007.3, Oct. 31, 1990, 90-2
CGPD 353.




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                      B-283063




                      the specials on a lump-sum basis from the tenant agency’s appropriation.
                      The general rule relating to above standard requirements is that if the costs
                      are paid on a lump-sum basis, they are not included in the annual net rent
                      payment. But, if the costs are amortized in the lease, they are included in
                      the annual net rent payment. In the case of SSUD, it was clear early in the
                      acquisition process that the cost of the above standard tenant
                      requirements would be amortized over the term of the lease because the
                      Secret Service did not have the funds available to pay for these costs by
                      lump-sum payment.

                      The attorney advised the contracting officer to use the fiscal year 2000
                      threshold because it will be the year when the lease payments begin. The
                      contracting officer confirmed that this was consistent with the oral
                      guidance provided by Portfolio Management in the National Office.

                      The contracting officer ultimately set July 10, 1998, as the date for final
                      revisions to the offers for the SSUD lease, and two final offers were
                      received. The third offeror withdrew because it said that it could not meet
                      the economic requirements specified in the amended SFO. Only one of the
                      offers actually fell below the prospectus threshold as defined in the July
                      1998 amendment to the SFO. According to the contracting officer, once it
                      was determined that only one offer met the requirements, he had the
                      attorney in the Regional Counsel’s Office, in accordance with NCR’s
                      practice, review and concur in the lease award before it was awarded. The
                      Budget Office also reviewed the lease as an operating lease and certified
                      that funds were available for the award. The contracting officer signed the
                      SSUD lease for GSA on August 5, 1998.

                      NCR reviewed this acquisition after the lease was awarded and questions
A Prospectus Should   were raised by a congressional staffer about whether it should have had a
Have Been Prepared    prospectus. According to an NCR official, it is GSA’s policy to prepare
for the SSUD Lease    lease prospectuses for all leases that exceed the prospectus threshold.
                      NCR concluded that the SSUD lease did exceed the prospectus threshold,
                      and that a prospectus should have been prepared in this case. NCR then
                      prepared a prospectus and submitted it to GSA’s authorizing committees
                      on September 25, 1998. During NCR’s review of this lease, it also
                      determined that while the lease was treated as an operating lease when it
                                                                  3
                      was awarded, it was in fact a capital lease. As a result, about $22 million in
                      budget authority had to be counted against GSA’s fiscal year 1998 rental-of-
                      space account for the lease. We verified that at the time the SSUD lease

                      3
                       According to OMB Circular A-11, a capital lease is “one that transfers substantially all the benefits and
                      risks inherent in the ownerhip of the property” to the lessee.




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                        B-283063




                        was signed, there were sufficient unobligated funds in the FBF rental-of-
                        space account to cover the obligation.

                        NCR officials said that in their opinions, awarding the SSUD lease without
                        a prospectus resulted from NCR employees’ “creatively” interpreting the
                        prospectus threshold. According to a senior NCR official, this action was
                        in response to the specific circumstances of this lease and does not
                        indicate that there is a systemic problem within NCR. Although we did not
                        evaluate NCR’s overall process to determine if there were systemic
                        problems, we found no specific written PBS guidance on what costs are to
                        be included in the calculation to determine whether a lease will need a
                        prospectus. Also, NCR’s internal controls were not sufficient to ensure that
                        the SSUD lease was correctly identified as prospectus-level, and that a
                        prospectus was prepared and submitted to GSA’s authorizing committees
                        before the lease’s award.

                        To strengthen the internal controls, on October 26, 1998, NCR began
                        requiring the Portfolio Management Division to verify all leases before they
                        are awarded. The staff was told that “this verification must be made in
                        sufficient time prior to award so that a different course of action (other
                        than making an award) is available.” However, there still is no written
                        guidance on how to calculate the costs that should be used to determine if
                        a lease is prospectus-level or not. Also, there is still no requirement to
                        revalidate the prospectus decision when space requirements and/or
                        market rental rates change during the course of the acquisition.
                                                                                                                4
                        We spoke with officials in 9 of GSA’s 10 other regional offices to ask
Similar Internal        whether they had guidance in place specifying how to calculate if a
Control Weaknesses      prospectus is needed for a lease, and if they revalidate the decision that a
Reported in Other GSA   lease is not prospectus-level when space requirements or market rental
                        rates change. None of the officials with whom we spoke said they
Regions                 currently had specific written guidance to follow when determining if a
                        lease prospectus was needed beyond the general guidance provided by the
                        National Office. However, some of the officials said that the old leasing
                        handbook, which is no longer used as guidance, specified that when
                        determining whether a lease was prospectus-level, operating expenses
                        should be subtracted from the total rent. Several officials said that it would
                        be helpful to have specific written guidance on what costs to include and
                        exclude when determining if a lease is expected to exceed the prospectus
                        threshold.

                        4
                         We did not speak with the appropriate official in the other regional office in time for inclusion in this
                        report.




                        Page 8                                 GAO/GGD-99-153 Secret Service Uniformed Division Lease
                  B-283063




                  When we asked, these nine regional officials said they also did not
                  specifically require that the decision that a lease was not prospectus-level
                  be documented or revalidated when space requirements or market rental
                  rates change. However, many of the officials said that this recheck is
                  inherent in the process. The officials said that when the final offers are
                  received, if those offers are above the prospectus threshold, the region
                  cannot and does not go forward with the award.

                  The lack of adequate internal controls over the leasing process at NCR
Conclusions       resulted in PBS’ signing a prospectus-level lease for the SSUD space on
                  August 5, 1998, without first preparing and submitting a prospectus for the
                  lease to GSA’s authorizing committees. While NCR has instituted a new
                  policy requiring its Portfolio Management Division to verify all leases
                  before they are awarded, written guidance on how to calculate the average
                  annual rental to be used to determine whether a prospectus is needed still
                  does not exist. Also, NCR still does not require that the decision that a
                  lease is not prospectus-level be documented when that initial decision is
                  made, or that the decision be revalidated and documented when one or
                  both of the factors on which such a decision is basedagency space
                  requirements and market rental rateschange. Officials in nine other GSA
                  regions with whom we spoke said that written guidance on how to
                  calculate the average annual rental and a requirement to document and
                  revalidate decisions that a lease is not prospectus-level is also missing in
                  these regions.

                  We recommend that the Administrator of GSA direct the PBS
Recommendations   Commissioner to issue explicit written guidance defining the specific cost
                  elements that may be excluded from the total full-service rental rate when
                  calculating whether a prospectus should be prepared for a proposed lease.
                  This guidance should also cover the fiscal year threshold that should be
                  used for making this determination for a capital lease and for an operating
                  lease.

                  We also recommend that the Administrator of GSA direct the PBS
                  Commissioner to establish a requirement specifying that the decision that
                  a lease is below prospectus-level be documented and revalidated whenever
                  there is a change in one or both of the factors on which such a decision is
                  basedagency space requirements and market rental ratescould affect
                  the outcome of the decision on whether a prospectus would be required.

                  On August 20, 1999, we received written comments on a draft of this report
Agency Comments   from PBS’ Commissioner. He said that the report accurately reflects the




                  Page 9                      GAO/GGD-99-153 Secret Service Uniformed Division Lease
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factual circumstances surrounding the award of this lease. While the
Commissioner believes that the awarding of the SSUD lease without a
prospectus was an anomaly, he said that he agrees with our
recommendations that current written guidance is needed and has directed
his staff to prepare such guidance. The Commissioner’s letter is
reproduced in appendix II. In addition, an NCR official provided some
technical comments, which we incorporated as appropriate.

We are sending copies of this report to Representative Robert E. Wise,
Ranking Democratic Member of your Subcommittee; Senator John Chafee,
Chairman, and Senator Max S. Baucus, Ranking Minority Member, Senate
Committee on Environment and Public Works; the Honorable David J.
Barram, Administrator, GSA; Mr. Nelson B. Alcalde, Regional
Administrator, NCR, GSA; and to others upon request.

If you have any questions about this report, please call me or Ron King on
(202) 512-8387. Key contributors to this assignment were Maria Edelstein,
Shirley Bates, and Susan Michal-Smith.

Sincerely yours,




Bernard L. Ungar
Director, Government Business
 Operations Issues




Page 10                    GAO/GGD-99-153 Secret Service Uniformed Division Lease
Page 11   GAO/GGD-99-153 Secret Service Uniformed Division Lease
Contents



Letter                                                                                                 1


Appendix I                                                                                            14

Chronology of Events
on Secret Service
Uniformed Division
Lease
Appendix II                                                                                           16

Comments From the
General Services
Administration
Tables                 Table I.1: Chronology of Events on Secret Service                              14
                         Uniformed Division Lease




                       Abbreviations

                       FBF           Federal Buildings Fund
                       GSA           General Services Administration
                       NCR           National Capital Region
                       OMB           Office of Management and Budget
                       PBS           Public Buildings Service
                       SFO           Solicitation for Offers
                       SSUD          Secret Service Uniformed Division




                       Page 12                     GAO/GGD-99-153 Secret Service Uniformed Division Lease
Page 13   GAO/GGD-99-153 Secret Service Uniformed Division Lease
Appendix I

Chronology of Events on Secret Service
Uniformed Division Lease

                                           Table I.1 contains a chronology of major events that transpired in relation
                                           to the award of the lease for the United States Secret Service Uniform
                                           Division (SSUD).


Table I.1: Chronology of Events on Secret Service Uniformed Division Lease
Date                                       Event
April 1996                                 The General Services Administration’s (GSA) National Capital Region (NCR) and SSUD
                                           began discussing relocation from 1310 L Street.

June 1996                                  Secret Service provided NCR information on location requirements, generic security
                                           standards, and estimated space needs (55,000 and 60,000 square feet) so NCR could
                                           begin advertising the need for space to assess the properties that might be available for
                                           lease.

November 1997                              NCR issued Solicitation for Offers (SFO) seeking leased space for SSUD. Solicitation was
                                           for a 20-year lease of between 69,500 and 72,250 rentable square feet with 63,408 to
                                           64,500 occupiable square feet of space. The SFO stated that this was not a prospectus
                                           level procurement and thus the economics of any lease offer must be below the
                                           prospectus threshold. (Note: the initial SFO did not specify the threshold amount or how
                                           compliance with the prospectus requirement would be calculated.) Initial offers were due
                                           to NCR January 20, 1998.

January 1998                               Four offers were submitted on the basis of NCR’s SFO. Offers were submitted by Jack I.
                                           Bender & Sons, General Partnership c/o Blake Construction, Inc.; 17 H Associates L.P.
                                           and 17 H II Limited Partnership c/o Carr America; Associated General Contractors c/o
                                           Dickstein Shapiro Morin & Oshinsky LLP; and 1920 L Street LLC c/o Leggat McCall
                                           Properties.

February 1998                              The offerors were given an opportunity to present their offers and were notified of the
                                           areas in which their offers did not meet the requirements and were given the opportunity to
                                           correct these areas. Representatives from 1920 L Street LLC did not attend a scheduled
                                           meeting and failed to submit a best and final offer. Therefore, at this point there were
                                           three remaining offerors.

March 1998                                 Original contracting officer left GSA to work for the Secret Service and a new contracting
                                           officer took over the SSUD lease. The new contracting officer said that when he became
                                           involved with the SSUD lease he saw the need for a prospectus.

May 8, 1998                                Current contracting officer tried to clarify calculation for determining if offers meet the
                                           prospectus threshold. Letter to offerors defined the calculation as the total full-service
                                           rental rate, minus parking, minus operating expenses, and minus the cost of amortizing
                                           the tenant improvement allowance. The letter also specified that using the above
                                           calculation, the offers must not exceed the fiscal year 1998 prospectus threshold of $1.81
                                           million.

May 15, 1998                               Contracting officer sent another letter to the offerors amending the May 8, 1998, letter. In
                                           this letter, the calculation for determining if offers meet the prospectus threshold was
                                           defined as the total full-service rental rate, minus operating expenses, and minus any
                                           concessions offered to the government. This letter also amended the prospectus
                                           threshold to fiscal year 2000, which is $1.93 million.




                                           Page 14                           GAO/GGD-99-153 Secret Service Uniformed Division Lease
                     Appendix I
                     Chronology of Events on Secret Service Uniformed Division Lease




Date                 Event
May 20, 1998         Associated General Contractors of America withdrew from the competition for the SSUD
                     lease because it said that it could not meet the economic requirements. Attorneys for the
                     two remaining offerors, Jack I. Bender & Sons, General Partnership and 17 H Associates
                     L.P. and 17 H II Limited Partnership, both wrote letters to GSA expressing concerns about
                     the changes to the calculation for determining compliance with the prospectus threshold.

May - June, 1998     Internal NCR discussions about how to calculate compliance with the prospectus
                     threshold and which fiscal year to use for the threshold were held.

June 22, 1998        Amendment number 6 to the SFO issued stating that the prospectus threshold being used
                     for the SSUD lease is fiscal year 2000 ($1.93M) and the calculation for determining
                     prospectus compliance is the aggregate cost of the contract (including parking), minus
                     operating expenses and any tenant improvement allowance, and then divided by the 20-
                     year term of the lease.

July 1, 1998         Final amendment (number 7) to the SFO was issued setting July 10, 1998, as the date for
                     final revisions to offers.

July 20, 1998        Analysis done on offers, including initial offer submitted by Associated General
                     Contractors of America, found that only the offer from Jack I. Bender & Sons, General
                     Partnership met the prospectus threshold requirement as defined in amendment number 7
                     to the SFO.

August 5, 1998       GSA signed a 20-year lease with Jack I. Bender & Sons, General Partnership for 72,250
                                                                             th
                     rentable (64,500 usable) square feet of space at 1111 18 Street, Washington, D.C.

August 31, 1998      A Senior Professional Staff Member for the Subcommittee on Economic Development,
                     Public Buildings, Hazardous Materials and Pipeline Transportation called NCR to ask
                     about the SSUD lease that was reported in the newspaper. He asked why the
                     Subcommittee had not seen a prospectus for the lease since the reported size and cost of
                     the lease appeared to be prospectus-level.
                                                                 th
September 25, 1998   A prospectus for the SSUD lease at 1111 18 Street was prepared and transmitted to
                     GSA’s authorizing committees.

                     Source: GAO review of SSUD lease file.




                     Page 15                           GAO/GGD-99-153 Secret Service Uniformed Division Lease
Appendix II

Comments From the General Services
Administration




              Page 16   GAO/GGD-99-153 Secret Service Uniformed Division Lease
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