oversight

GSA's Cost Analyses for Relocation of Federal Agencies to a Leased Building at Buzzard Point

Published by the Government Accountability Office on 1977-02-07.

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

                            DOCUREVT RESUME
01158 - [A0751187]   (eet
([SA'sCost Analyses for Relocation of Federal Agencies to a
Lerased Building at Buzzard Point. LCD-77-317; B-95136. February
7, 1977. 4 pp. + enclosure (2 pp.).
Report to Rep. John D. Dingell, Chairtan, House Committee on
Interstate and Foreign Commerce: Energy and Power Subcommittee;
by Robert F. Keller, Deputy Comptroller General.
Issue Area: Facilities and material Ranagement: Building,
    Buying, or Leasing Federal Facilities and Equipment (706).
Contact: Logistics and Communications Div.
Budget Function: General Government: General Property and
    Records Management (804).
Organization Concerned: General Services Administration; Federal
    Energy Administration.
Congressional Relevance: House Committee on Interstate and
    Foreign Commerce: Energy and Power Subcommittee.
Authority: Executive Order 11512.
          The General Services Administrationes economic analyses
of alternatives or combinations of alternatives concerning the
use of a leased building at Buzzard Point in UasLington, D.C.,
were reviewed, In considering potential tenants for the
building, GSA compared the first year costs or savings to be
incurred in moving various Federal offices to the building,
including: leases to be cancelled on vacated buildings, lease
costs avoided by use of the Buzzard Point building, and space
modifications in the building and in vacated buildings.
Findings/Conclusions: The analysis prepared by GSA contained
several minor errors which did not materi.liy affect either
estimated net costs or savings. The alternative which resulted
in the highest net savings ($564,000) involved certain offices
of the Federal Energy Administration (PE), the FBI, and the
Energy Research and Development Administration. Iajor factors
influencing the ranking of the nine alternatives included: an
estimated S1.1 million annual savirgs based on ncnrenewal of a
lease on a building occupied by FSA, relative low backfill costs
for t.re3 alternatives, and high costs of special alterations.
In several instances, the space assigned to an agency in a
building has changed since the analysis was prepared. (RRS)
_.3   *   s   ~COMTROLIAR                     GENERAL OF THE UNITED STATE
                                             WAMNINSOIT'. COX-



                                                         Febrtary 7, 1977
 3-95136                               e'                     ,e'ern      -''e   V,



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 ยท ne Honorable John D. Dingell                                                         '
 Chairman, Subcommittee on Energy
    and Power
 Committee on Interstate and
    Foreign Commerce
 VEuse of Representatives

 Dear Mr. Chairman:

      In your letter of December 6, 1976, you requested
 us to review the General Services Administration's economic
 analyses of various alternatives or combinations concerning
 the use of the leased building at Buzzard Point in Washington,
 D.C. Your office requested a report by the end of January
 1977. The agency did not make its analyses available to us
 until January 4, 1977. In view of the limited time available,
 our review of the analyses was restricted primarily to inter-
,viewing agency officials, testing the accuracy of calculations,
 and identifying the major cost factors influencing the ranking
 of alternatives. The question about the validity of the lease
 award will be discussed in a separate report.

      We noted that the analyses prepared by General Services
 contained several minor errors.  There were calculation and
 typing errors and also variances between data shown in the
 analyses and the space assignment records.  These errors and
 variances did not materially affect either the estimated net
 costs or savings for the nine alternatives considered by
 General Services or the overall ranking of these alternatives
 as shown in the enclosure.

  BACKGROUND

       In March 1974, the Securities and Exchange Commission
  requested space from General Services to consolidate its
  operations into one or two closely located buildings. At
  General Services' request, the Committees on Public Works,
  in October 1974, approved a prospectus for acquiring space
  for the Commission in Washington, D.C., through a 5-year
  lease at an estimated annual rental of $2.8 million.


                                                                                       LCD-77-317
B-95136



     Although the Commission on December 9, 1974, did
concur in a General Services solicitation for offers to
procure 460,000 square feet of space in Washington, D.C.,
for full consolidation of the Commission or 263,000 square
feet within six blocks of 500 North Capitol Streets, NW.,
for partial consolidation, it wanted General Services to
lease space in a building at 400 North Capitol Street, NW.
General Services considered the rental offer for that build-
ing to be excessive and also in excess of the $2.8 million
annual rental in the approved prospectus.

      On June 3, 1975, General Services awarded a _-year
-lease, with three 5-year renewal periods, to the Southwest
Joint Venture, a partnership, for space in a building to
be located at Buzzard Point. The annual rental was $2.7
million. However, the Government was to have free use and
occupancy of the office space and garage space for the last
 4 months and 12 months, respectively, of the 5-year lease
 term. The term was later established as August 15, 1976,
 to August 14, 1981. This resulted in an effective annual
 rental of about $2.5 million, or about $210,000 a month.

     General Services asked the Commission on June 3, 1975,
to concur in the Buzzard Point location, but the Commission
appealed the space assignment decision to the Office of
Management and Budget. On Jannary 3, 1976, the Office if
Management and Budget ruled the Commission did not have to
relocate at Buzzard Point because General Services had not
adhered to the right to appeal procedures required and
intended by Executive Order 11512.

     As a result, General Services had to find another
tenant. It offered the building to the Agency for Inter-
national Development, the Treasury Department, the
Department of Agriculture, and the Federal Bureau of
Investigation. Only the Federal Bureau of Investigation
agreed to accept space in the building. The building still
has not been occupied, although it was available for the
Government's occupancy on August 15, 1976. General Services
negotiated an agreement with the lessor to have the rent-
free period transferred from the end to the beginning of
the lease. The inability of the Govenrnent to occupy the
building when it became available decreased the period of
2ffective occupancy provided in the lease. The effective
rental for the 4-months ended December 15, 1976, was
about $840,000.


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B-95136



     On October 29, 1976, General Services using assignment
authority in Executive Order 11512, ordered the Federal Energy
Administration to move some of its offices to the Buzzard
Point building. On December 30, 1976, the Federal Energy
Administration appealed this decision to the Office of
Management and Budget. The Office is currently considering
the matter.

ECONOMIC ANALYSIS

     In considering potential tenants for the   Buzzard Point
building, General Services compared the first   year costs
(or savings) it would incur in moving various   Federal
offices there. Major cost factors considered    were:
     -- Leases to be canceled on vacated buildings.

     -- Lease cost avoided by filling expansion
        requirements at Buzzard Point rather than
        leasing new space.

     -- Space modifications in the Buzzard Point
        building to meet occupant agencies' special
        requirements, such as computer installations.

     -- Space modifications in vacated buildings to
        make them ready for new occupants (known as
        "backfill').

     Costs for moving furniture, files, and similar items
were not included because all Federal offices under con-
sideration are located in the Washington metropolitan area
and General Services assumed that the costs to move them
would not vary greatly. Also, costs associated with the
efficiency of consolidated agency operations, building
location, employee morale, or subsidized employee parking
were not included in the analyses. We recognize that it
may not be possible to quantify some of these factors.

     The General Services analyses considered nine offices
or combinations of offices. The offices generally were con-
sidered i;cause the agencies had either requested new space
or asked General Services specifically for space in the
Buzzard Point building. Results of the analyses ranged
from a net savings of about $584,000 to a net cost of
about $4,236,000 (see enclosure).


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B-95136



     The alternative which was estimated to save about
$584,000 included certain offices of the Federal Energy
Administration, the Federal Bureau of Investigation, and
the Energy Research and Development Administration.

     Major factors which influenced the ranking of the
nine alternatiVes were:

     -- Estimated $1.1 million annual savings based on
        the assumption that the lease is not renewed
        for a building at 2000 M Street, NW., which is
        occupied by the Federal Energy Administration.
        This savings affected alternatives 1, 2, and
        3.

     -- Relatively low backfill costs for alternatives
        1, 2, and 3.

     -- High costs of special alterations, such as
        $700,000 for a printing plant for alter-
        natives 7 and 9, and $1.1 million for a
        computer facility for alternative 8.

     As stated previously the analyses contained calculation
and typing errors.  In addition, in several instances the
space assigned to an agency in a building had changed since
the analyses were prepared. The General Services space
assignment records are periodically updated and show only
the current assigned space. Therefore, the assigned space
shown on the analyses did not always agree with current
space assignment records.

                           Sincerely yours,




                     DEPUTY Comptroller General
                            of the United States
Enclosure
ENCLOSURE I                                          ENCLOSURE I


               ESTIMATED FIAST YEAR NET COSTS

            OR SAVINGS IN RELOCATING VARIOUS

              FEDERAL OFFICES TO BUZZARD POINT

                          Number of buildings
                             now occupied            Estimated first
                          Government-            year net cost or savings(-
Alternatives                 owned     Leased        to the Government

1.   Federal Energy
     Administration
     (partial con-
     solidation)--
     Federal Bureau
     of Investigation
     -- Energy Research
     and Development
     Administration            1           5         a, b/   $ - 5E4,445
2.   Federal Energy
     Administration
     (partial con-
     solidation)--
     Federal Bureau
     of Investigation
     -- Department of
     Agriculture               3           5            a/    -      9,710

3.   Federal Energy
     Administration
     (total consoli-
     dation)                   2           3           a/          108,625
4.   Federal Trade
     Commission--
     Federal Bureau
     of Investigation
     ---Department of
     Argriculture              3           6           c/         334,055

5.   Federal Bureau
     of Investigation
     -- Law Enforcement
     Assistance Admini-
     stration--Depart-
     of Agriculture            3      .4               d/    1,492,235
 ENCLOSURE I                                     ENCLOSURE I


                      Number of buildings
                        now occupied            Estimated first
                     Government-            year net cost or savings(-)
Alternatives             owned    Leased        to the Government
6.   Agency for
     International
     Development                      7             d/     $1,535,345
7.   General Services
     Administration,
     Region 3 (partial
     consolidation)        1          2             e/     2,311,065
8.   Department of
     the Treasury          3        10              e/     2,893,295
9.   General Services
     Administration,
     Region 3 (total
     consolidation)        1         2              e/     4,235,835
a/   Relatively low backfill costs were estimated for alter-
     natives 1, 2, and 3 because space in the old Post Office
     building, which is Government-owned, is scheduled to be
     renovated and a lease for a building at 2000 M Street,
     NW., Washington, D.C., will not oe renewed. Also, there
     is an estimated $1.1 million annual savings assuming this
     lease is not renewed.

b/   Analyses assume that there will be an annual savings of
     about $400,000 for alternative 1, if space needed for
     expansion requirements of Energy Research and Development
     Administration is not leased.

     For alternative 4, analyses assume that there will be
     an annual savings of about $1.2 million if space needed
     for Federal Trade Commission is not leased.

d/   Our calculation shows estimated net cost of $1,497,235
     for alternative 5 and $1,491,170 for alternative 6.

e/   Relatively high costs of space modifications to the
     Buzzard Point building for special requirements of
     occupant Agencies affect net costs of alternatives
     7, 8, and 9.



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