oversight

General Services Administration's Use of New Construction Concept for Federal Buildings Not Yet Successful

Published by the Government Accountability Office on 1977-10-06.

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

                          DCCUMENT PESUME
0 3849 - [ B2834084 J             ]E            A    tA
General Services Administration's Use of New Construction
Concept for Federal Buildings Not Yet Successful. LCD-77-322;
B-164031 (4). October 6, 1977. Released October 10, 1977. 46 pp.
+ 3 appendices (12 pp.).
Report to Sen. Quentin N. Burdick, Chairman, Senate Committee on
Environment and Public Works: Regicnal and Community .nvelopment
Subcommittee; by Robert F. Keller, Acting Comptroller General.
Issue Area; Facilities and Material Management: Building,
    Buying, or Leasing Federal Facilities and Equipment (706);
    Facilities and Material Management: Design and Construction
    of Federal Facilities (707).
Contact: Logistics and Communications Div.
Budget Function: General Government- General Property and
    Records Management (804).
Organizaticn Concerned: General Services Administration.
Congressional Relevance: Senate Colmitt+e on Environment and
    Public Works: Regional and Community Development
    Subcommittee.
          The General Services Admni;istration (GSA) used the
 "innovative building systems concept" in constructing three
Social Security Administration (SSA) program centers at a cost
of about $115 millicn. This was the pilot for the new concept,
which emphasizes performance spciltications--eetti.ng down what a
building should do regardless of the materials used--rather than
the traditional specifications, such as how to build and what
materials to use. Bidders had to prepare acceptable technical
proposals before bidding competitively on the entire prckage of
seven individual systems to be included in e-ch of the three SSA
centers. Findings/Conclusions: Although GSA established
adequate procedures to monitor contract compliance, they did not
use them to assure that the building systems portion met the
performance specifications. Despite GSA's project controls, the
project goals were not fully met because the project was not
complete in 3 years due to site, funding, design, and foundation
problems. The project cost was more than $110.5 million due to
additional fire protection, acoustical work, and the cost
incident to schedule delays, and the proJect did not provide
buildings with lower life-cycle costs such as energy
conservation and reduced cost of maintencnce and operation. The
project has not stimulated innovative approaches to construction
and precipitated demand for the building systems concept in the
Government and private industry, since only a few firms that
participated in the program centers project are participating in
the GSA followcn projects using the concept. (Author/SC)
          REPORT OF THE                                             "
   t?' 'COMPTROLLER    GENERAL
..co~.    OF THE UNITED STATES



       General Services Administration's
       Use Of New Construction Concept
       For Federal Buildings Not
       Yet Successful
       General Services used the "innovative building
       systems concept" in constructing three Social
       Security Administration program centers at a
       cost of about $115 million. This was the pilot
       for the new concept which emphasizes per-
       formance specificatior,s--setting down what a
       building should do ,egardless of materials
       used--rather than the traditional specifications
       (how to build and what materials to use).
       Bidders had to prepare acceptable technical
       proposals before bidding competitively on the
       entire package of seven individual systems to
       be included in each of the three centers.

       However, the pilot project did not

            -- meet estimated completion schedules
              and total costs;
            --meet life-cycle objectives, such as ener-
              gy, conservation, and reduced cost of
              maintenance and ope,ation; and
            --stimulate use of the systems concept by
              private industry or other public
             agencies.


       LCD-77-322                                         OCTOBER 6, 1977
               COMPTROLLR G'fNIRAL OF THE UNITED STATES
                         WA"lNHTON. D.C. O




B-164031(4)




The Honorable Quentin N. Burdick, Chairman
Subcommittee oil Regional and Community
  Development
Committee on Environment and Public Works
United States Senate
Dear Mr. Chairman:
     In response to the February 16, 1975, request from the
Chairman, former Subcommittee on Buildings and Grounds, Senate
Committee on Public Works, this report describes the General
Services Administration's experience in its initial use of an
unconventional design and construction technique--the building
systems concept--to acquire three Social Security Administra-
tion's program centers. It discusses both the contracting
and the adverse conditions encountered during actual applica-
tion of the concept.
     As arranged with your Committee, we are sending copies
of this report to the Chairmen, Senate Committee on Environ-
ment and Public Works and House Committee on Public Works and
Transportation; and the Administrator of General Services.

                                 Sincerely yours,




                         Acting Comptroller General
                                of the Uni.ted States
  REPORT OF THE COMPTROLLER          GENERAL SERVICES ADMINISTRATION"'
  GENERAL OF THE UNITED STATES       USE OF NIEW CONSTRUCTIuN CONCEPT
                                     FOR FEDERAL BUILDINGS NOT
                                     YET SUCCESSFIL
              DIGEST
             The General Services Administration used a ne~i
             building systems concept in constructing three
             Social Security Administration's program cen-
              ters. A single seven subsystem contract was
             awarded for structure, heating, ventilating
             and air conditioning, electricity, finished
             floor, finished ceiling, lighting, and space
             dividers to be constructed of any materials
             desired as long as what was being built met
             certain standards when completed. Although
             contracts are normally awarded for an entire
             building, in this case, other t-lding parts
             ,ere designed and contracted for separately.
             This pilot project die' not meet the cost or
             performance goals set for it and did not re-
             sult in a widespread adoption of the systems
             concept. The systems portion of the buildings
             made up about 28 percent of the e 11 5 million
             total cost.
             A further innovation was using the team
             approach for constructing the centers. Gen-
             eral Services followed Federal procurement
             regulations in hiring its team members--the
             construction manager, the executive architect,
             the three regional architects, and the build-
             ing systems contractor. (See p. 5.)

            The building systems contract was awarded on
            the basis of performance specifications (set-
            ting down what the building should do, regard-
            less of materials used) under the two-step,
            formal advertising method of contracting.
            The other 67 construction contracts were
            awarded on the basis of prescriptive specifi-
            catiors (how to build and what materials to
            use) under the formal advertising and
            competitive-bid method. On the building sys-
            tems contract General Services
            -- obtained considerable competition in step
               one but only limited competition (only
               three of nine firms qualified) in step two.

Iear SLb. Upon removal, the report
cover date should be noted hereon.                       LCD-77-322
  The competition at. each step may have been
  limited because no single firm could do the
  work, firms had to form consortiums, and
  specification interpretations and technical
  proposal preparations were complex and
  costly (see p. 15);
-- did not properly include finance costs in
   its life-cycle cost analyses (see p. 22);
   and

-- caused problems by including a 9-year obli-
   gat.ion for maintenance in the award price
   (see pp. 23 and 38).
General Services established adequate proce-
dures to monitor contract compliance but did
not use them to assure that the building sys-
tems portion met performance specifications.
For example,
-- constructioi. on the building systems began
   before prototype test approvals (see p. 27),
-- General Services did not enforce strict com-
   pliance with the specification requirements
   (see p, 28), and
-- compliance of certain items with the spec-
   ifications could not be determined (see
   p. 29).
The lack of assurance regarding building sys-
tems initially meeting performance specifica-
tions could hinder establiuhing liability
should any part of the centers systems fail.
Despite General Services' project controls,
the project goals were not fully met because

-- the project was not complete in 3 years
   due to site, funding, design, and founda-
   tion problems (see p. 33);
-- the project cost was more than $110.5 mil-
   lion due to additional fire protection, and
   acoustical work, and the cost incident to
   schedule delays (see p. 34);


                     ii
-- the project did not provide buildings with
   lower life-cycle costs (the two centers
   which have been in operation for a while
   a.e high energy users and maintenance of'
   the buildings has been unsatisfactory and
   costly) (see p. 38);
-- the projects' inflexible water-cooled lights
   and the poor air flow have created problems
   in the operation and management of the
   buildings (see pp. 44 and 45); and
-- the project has not stimulated innovative
   approaches to construction and precipitated
   demand for the building systems concept in
   the Government and private industry, since
   only a few firms that participated in.the
   program centers project are participating
   in the G:.aeral Services follow-on projects
   using the concept (see p. 47).
The building systems concept was responsible
for the failure to meet the maintenance goals.
GAO could not determine the extent to which
the concept was responsible for failing to
meet other project goals, because the concept
was interrelated with other procurement con-
cepts.
MERITS OF THE CONCEPT

GAO briefly looked into the General Services'
building systems concept on the follow-on
Social Security Administration's expansion
project.  (See p. 47).   Although the project
is in the early stages of construction, Gen-
eral Services
-- has not reduced the development and design
   timeframe as expected, and
-- will probably take over 4 years to complete
   building design and construction.
General Services was justified in experiment-
inq with the building systems concept as a way
to reduce acquisition costs and to increase
operation and maintenance efficiency.



                    iii
Numerous problems arose on the pilot project
after General Services awarded contracts and
began construction on the follow-on building
systems project. General Services appears to
have rushed its follow-on project and may
incur problems like those with the pilot
project.
Tlie declining competition for the systems con-
tracts on the follow-on projects is a serious
problem.
The construction industry needs to participate
more if anticipated berefits are to material-
ize.
AGENCY COMMENTS

General Services generally agreed with GAO'a
findings and conclusions. It said that it
has corrected some of the pilot project's
shortcomings and is taking steps to correct
other probltems. (See app. II.)
General Services further stated that after
the projects are constructed, it proposes to
thoroughly evaluate the advantages and dis-
advantages of the systems approach for build-
ing acquisition.




                     iv
                     C o n t e n t s

                                                    Page
DIGEST                                                   i
CHAPTER

      1    INTRODUCTION                              1
               Background                            1
               Building Systems concept              2
               Team approach                         5
               Scope of review                       7
      2    SUBCOMMITTEE'S INTEREST IN GSA'S
             CONTRACTING PROCEDURES AND
             PROJECT CONTROtS                        8
               Contracting procedures                8
               GSA controls project costs and
                 schedclea                          19
               Testing procedures                   22
  3        OBSERVATIONS AND COMMENTS ON USING
             BGILDING SYSTEMS CONCEPT               28
               Project schedule                     28
               Project costs                        29
               Operation and Maintenance Problems   33
               Declining participation in the
                 Building Systems method            42
               Summary observations                 43
   4       AGENCY COMMENTS AND OUR EVALUATION       45
APPENDIX
   I       Letter dated February 16, 1975, from
             the Chairman, Subcommittee on
             Buildings and Grounds, Senate
             Committee on Public Works              47
 II        Letter dated June 29, 1977, from
             the Administrator of General
             Services
III        Principal officials responsible
             for administering activities
             discussed in this report               58
                  ABBREVIATIONS
AE     architect engineer
Btu    British thermal units
CM     construction manager
UIEW   Department of Health, Education, and
         Welfare
RAE    executive architect engineer
GAO    General Accounting ¢cffice
G!jA   General Services Administration
HVAC   heating, ventilating, air conditioning
OMB    Office of Management and Budget
SSA    Social Security Administration
                          CHAPTER 1

                        INTRODUCTION
     The Chairman of the former Subcommittee on Buildings
and Grounds, Senate Committee on Public Works, in his letter
to us (see app. I), expressed concern over the General Serv-
ices Administration's (GSA's) proposed use of a new building
systems concept in the construction of new £ocial Security
Administration (SSA) facilities in the Baltimore metropoli-
tan area. Be questioned the further use of this concept
since three similar SSA buildings (Program Centers 1/ in
Philadelphia, Pennsylvania; Chicago, Illinois, and Richmond,
California), previously authorized as pilot projects to dem-
onstrate the experimental features of such a concept, were
incomplete and had not progressed sufficiently to justify
committing funds for the new facilities.

     The Chairman stated that the Subcommittee, In fulfill-
ing its assigned oversight responsibilities, desires to ex-
amine all facets of the building systems concept as applied
in SSA's program centers and ascertain whether' continued im-
plementation on other projects should-beiconsldered. He regques-
ted us to 1T-1-ii-itiate-an iniensive review and submit a com-
prehensive report on all contract matters, from solicitation
through award, with particular emphasis on aspects which
could be construed as inhibiting competition, including tht
selection of principals and mandatory large scale procurement
of material, (2) provide the Subcommittee with our observa-
tions regarding the degree of direct control GSA exercised
over the projects, considering GSA's delegation of major re-
sponsibility by contract to the executive architect engineer
(EAE) and construction manager (CM), and (3) comment on the
superiority of the building systems concept over conventional
construction and on any adverse conditions encountered during
actual application of the building systems concept.
BACKGROUND

     Prior to the 1970s GSA used the conventional lump-sum
method of contracting for the construction of buildings.
Under this method, GSA would contract with architects to


1/Late in the project, SSA changed the name of these build-
  ings from "payment center" to "program center." Since the
  latter term is the current usage, it has been used through-
  out this report.
completely design the buildings, including preparation of de-
tailed prescriptive specifications. Construction contracts
would then be formally advertised and would normally provide
for the submission of lump-sum bids by general construction
contractors for the entire buildings. The buildings would
then be constructed in a,'cordance with the architects' de-
tailed prescriptive specifications.

     In the late 1960s with costs escalating, Federal con-
struction agencies encountered a serious cost-budgetary
squeeze. Efforts were increased to find new and better ways
to enhance the efficiency and effectiveness of the construc-
tion process. During this period, GSA's Public Buildings
Service, which is responsible for the design and construc-
tion of most civilian Federal buildings, undertook the devel-
cpment of a new approach to Federal construction called the
building systems concept in cooperation with the National
Bureau of Standards.
     GSA's 1970 study report on construction contracting pro-
cedures indicated that the Public Buildings Service was not
following the practices of private industry and commercial
builders who had attacked the problem of rising costs by
adopting new practices to reduce design and construction time,
and maximize other cost-saving techniques. The report also
stated that GSA's sequential method of contracting took too
long for design and construction of major building projects
compared to similar projects in the private sector. The
recommendations in the report included the early completion
of building systems' performance specifications and the
use of CM and phased construction of buildings.
BUILDING SYSTEMS CONCEPT

     Eissntially, GSA's building systems concept incorporates
performance specifications that define the functional require-
ments of seven subsystems of an office building in lieu of
the traditional prescriptive specifications that detail the
specific requirements for the entire office building.
     The building system for the three SSA program centers
is a closed one of interrelated components designed to act
only with one set of other components. Each closed system
solution to a building design is unique, with subsystem in-
terchanges or replacements not allowed. Therefore, selecting
a system automatically includes selecting all its subsystems
and their characteristics, performance, materials, and costs.
In an open system, all components are interchangeable and can
be coordinated with other subsystems.


                              2
     In undertaking the procurement of the centers using the
building systems concept, GSA expected to (1) deliver the
buildings at a cost that would be equal to or lower than con-
ventional construction cost (in this case, at about $110.5
million); (2) deliver the buildings ir,a shorter time (3
years) than under the conventional method (5 years); (3) con-
sider cost and time factors together, provide that buildings
have lower operating costs over time, or in other words, lower
life-cycle costs; (4) deliver buildings of a higher--measured
performance quality, principally in space flexibility, acous-
tics, illumination, and conditioned air; (5) stimulate new
approaches to construction; and (6) precipitate a market de-
mand for using the building systems concept in the Government
and the private sector.

     The Public Buildings Service's "Performance Specification
for Office Buildings" includes the seven subsystems (often
referred to as the insystem) described below for the typical
office space.

     1.   Structure
     This subsystem provides the structural frame and entire
building framing above the foundations. It excludes the
foundations, anchor bolts or dowels, keys in foundation con-
crete, recesses in foundation walls, finishes for areas out-
side the typical office space, and stairs in the core and
stair wells.

     2.   Heating, ventilating, air conditioning
     This subsystem provides for the conditioning, supplying,
diffusing, controlling, and returning means in the floor-
ceiling sandwich and mechanical spaces in the cores, and in
specially designated mechanical rooms. It provides an appro-
priate atmospheric and thermal environment when used with
out-of-system elements and processes. It excludes:

    -- The perimeter zone heating, ventilating, air condi-
       tioning (HVAC), i.e., the elements within an area
       extending 15 feet inward from the exterior wall.

    -- HVAC elements in the space between the ceiling and
       upper floor, instailed by others.

    -- Smoke detectors, out-cuf system room outlets, and HVAC
       elements for the core and core corridor.




                              3
     3.   Electrical distribution

     This subsystem provides all pow,- distribution raceways
in the space between the ceiling and upper floor of the proj-
ect building, between the interface boundaries in the usable
floor space, excluding electrical conductors, switching de-
vices, and terminal outlets unless specified.
     4.   Finished floor

     This subsystem provides the uppermost part of the space
between the ceiling and upper floor, means of access to the
electrical distribution subsystem, if applicable, and floor
outlets and door stops. It excludes finished flooring in
the out-of-system rooms or floor outlets and door steps in
the core corridor and out-of-system rooms.

     5.   Finished ceiling
     This subsystem includes all parts of the uppermost fin-
ished surface, includinc access to the space above the fin-
ished surface, means of support, and fire stops, if required.
It excludes the finished uppermost surface in the core corridor
or out-of-system rooms.

     6.   Luminaires
     This subsystem provides 'he illumination in conjunction
with the electrical distribution subsystem and out-of-system
electrical conductors, excluding connection of out-of-system
electrical conductors to lighting service terminals, core
corridor lighting, and out-of-system room lighting.
     7.   Space dividers
     This subsystem provides the vertical partitions, service
panels in partitions, and doors through the partitions, includ-
ing all necessary door hardware, connection devices between
out-of-system electrical subsystems in the service panels,
and enclosures or finished surfaces of the structure subsys-
tem's columns or hangers. It excludes partitions, enclosures,
or doors in out-of-system rooms and spaces,

      On the SSA program centers project, bidders were asked
to submit technical proposals on the entire seven subsystems
package, with a single contract being awarded for this portion
of the project that represented about 25 percent of the total
cost.
     Competitive bids were tequested, and 67 individual con-
struction contracts were awarded for the out-of-system work,

                              4
including site preparation, foundation, building facade, elec-
trical and mechanical equipment, and elevators. This differs
from the traditional method or contracting where each building
project is awarded to a single general contractor.
      In addition to the three program centers, the building
systems concept is being applied to two buildings near
Baltimore to expand SSA's Administrative Headquarters facili-
ties. In congressional testimony during February 1975 on the
prospectus for that project, a GSA official stated that this
second application of the building systems concept was neces-
sary to get finalization and termination of the innovation
already experienced on the program centers. The official
added that after the expansion project, the concept will be
used on relatively small projects (i.e., from $5 million to
$20 million). GSA is currently using the building systems con-
cept in constructing an estimated $14 million Federal office
building in Norfolk.
TEAM APPROACH

     According to GSA officials, there is little communication
between key personnel involved under the traditional method
of construction; architects design the buildings and contrac-
tors build them, each performing independently. GSA adopted
the team approach in constructing the program centers to over-
come this obstacle. The team consisted of GSA's project man-
ager, EAE, three regional arci tect engineers (AEs), CM, and
the building systems contractor.
     GSA officials believe that the team approach created a
cooperative working relationship between the owner, AEs, and
contractors, making early formulation of critical project
decisions possible by drawing on the experience and knowledge
of AEs and CM under contract with the owner.
     The primary responsibilities of each team member are
summarized below.
Project manager

     On July 30, 1971, the GSA Administrator issued an order
governing the use of project management and setting forth the
roles and responsibilities of project managers.
     The use of project management was permitted when one or
more of the following conditions existed:

    -- The estimated cost of the project exceeded $2 million.



                             5
     -- Concurrent design reviews and either phased or turn-
        key construction was contemplated.
     -- Unusual organizational complexity was involved, includ-
        ing extensive interoffice or interagency coordination
        and support.
     -- Significant technological problems were anticipated.
     -- Expeditious handling was needed to satisfy urgent re-
        quirements.
     A GSA order states in part that project managers:

     -- Would operate under a charter that assigned him by
        name, defined the scope of the project, and described
        his authority, responsibility, operating relationship,
        and assignment and control of resources.
     -- Would be assigned full time to head a project.
     -- Must review and approve all major changes affecting
        plans, objectives, procurement, performance, schedules,
        or costs.
     The manager's June 14, 1972, charter for SSA's program
centers designated the manager the single source of decision-
making within GSA and responsible for planning, directing,
and controlling the definition, development, and execution of
the project. He was also the contracting officer with final
authority over all project funds.
     The project manager operated with a small staff, relying
on other GSA personnel for technical, administrative, budget,
and legal procurement support. A GSA resident engineer repre-
sented the manager at each job site during construction of
the program centers.
Executive architect/engineer
     EAE was responsible for preparing design concepts, pro-
viding technical direction, coordinating and reviewing the
three regional AEs work, providing postconstruction contract
service, and assisting the project manager in requesting,
reviewing, and evaluating building systems proposals and
documentation.
     EAE's role has been described as that of an integrator who
aides and supports other team members to focus on the project's
overall goals and objectives.



                               6
Regional architect/engineers
     Each of the three regional AEs was responsible for de-
velopina the overall building configuration and desigi of
the subsystems not included in the insystem portion (f the
respective buildings. They were also responsible fo: incor-
porating the insystem portion of their buildings into the
total building design. Separate regional AEs were hired for
diversity in building plans and exterior appearances. and
compatibility of buildings with the surrounding environment.

Construction manager
     Under the general direction of the project manager, the
construction manager was responsible for (1) managing procure-
ment, (2) furnishing the project manager and the AEs construc-
tion technique and market condition information to assure
that the building design stayed within the budget, (f) super-
vising and inspecting the construction, and (4) pro' ding
advice on labor relations, construction estimating, and other
problems.
Building systems contractor

     The building systems contractor for the program centers
was a joint venture of manufacturing, designing, and general
contracting firms. Th.e joint venture was responsible for
designing, manufacturing, and installing the insystem portion
of the project.

SCOPE OF REVIEW

     Our review was performed primarily at GSA's headouarters
office, where the project manager responsible for the con-
struction of SSA's program centers was located. In addition
to examining project records, we had many meetings with the
project manager and his staff, the construction manager, and
with EAE representatives. We also discussed the operation
and maintenance of the two completed program centers with GSA
regional officials.

     Our review was primariy directed toward (1) evaluating
GSA's contracting procedures for selecting principal project
participants and for large purchases of materials, (2) re-
viewing the extent and adequacy of GSA's control over the
project's expenditures and timeframe, and (3) identifying
situations and conditions that were indicative of the super-
iority or inferiority of the building systems concept over
the conventional construction method.



                               7
                          CHAPTER 2

              SUBCOMMITTEE'S INTEREST IN GSA'S
         CONTRACTING PROCEDURES AND PROJECT CONTROLS
     GSA generally complied with Federal procurement regula-
tions in contracting for the principals' services on the
program centers, obtained competition for the building
systems contract, and had adequate controls over the con-
tracto:s' obligations regarding costs and project schedules.

     The principal problems we observed were:
     -- Two firms had a possible advantage over other firms
        in the selection process for regional A/Es.
     -- Exclusion of inte:est costs from the analysis of life-
        cycle costs.
     -- Complication of contract awards and administration by
        including a 9-year maintenance requirement in the
        building systems contracts.
     --Poor control over the building systems contractor's
       co'pliance with performance specifications.
CONTRACTING PROCEDURES

     The principals who received contracts for the program
centers project were EAE, three regional AEs, CM, and the
building systems contractor.
Architect engineers

     The policy and procedures for obtaining the professional
services of AEs are contained in the Federal Procurement Regu-
lations. We also studied the selection of AE firms and con-
tract awards by Federal agencies, including GSA. Cur findings
and recommendations are included in a report entitled
"Greater Emphasis On Competition Is Needed In Selecting Archi-
tects And Engineers For Federal Projects," which was issued on
July 21, 1976.

     We did not attempt to perform an indepth evaluation of
GSA's AE selection and contract award procedures in connection
with the acquisition of the program centers since the pioce-
dures followed were the same as those for other GSA projects,
and these procedures are also discussed in the above report.
     GSA selected AEs for contract awards from lists of firms
recommended by advisory panels on architecture. The panels
consisted of three members selected by GSA's Administrator
from a list of firms nominated by regional universities and
architectural and engineering societies.

     For each prospective award an advisory panel screened
the qualifications of AE firms and examined in more depth
those considered to have the required capabilities. The
panel then recommended the best qualified firms to GSA's
Administrator for selection.

     In selecting the program centers, the panels recommended
the following number of firms to GSA's Administrator.
                                  Number of firms
                             Considered   Recommended


     EAE                          31          7
     AE:
       Philadelphia               35          5
       Richmond                   32          6
       Chicago                    39         10
     In selecting regional AEs for the Philadelphia and
Richmond program centers,, regional advisory panel members may
have had an advantage over other firms considered. Of the
three members serving on the panel (drawn from the full re-
gional panel) that recommended EAE, two members subsequently
served on the panel drawn to select regional AE for tta
Philadelphia center. This panel recommended, as one of the
final five firmns, the third member of the former panel who
participated in selecting EAE.   This member was subsequent.y
awarded the AE contract for the Philadelphia center by GSA's
Administrator.

     Also, a principal of one of the AE firms recommended
for the Richmond center (subsequently awarded the contract
by GSA's Administrator) was a member of the full regional ad-
visory panel. The letter that forwarded the list of recom-
mended firms to the Administrator said that thp principal
of the firm in question did not attend the meeting in which
the decision was made as to the firms to recommend.

     We were informed that GSA has revised its procedures to
exclude from consideration those AE firms whose members are
serving on any GSA advisory panel.

                              9
Construction manager

     GSA procures the services of construction managers
under sections 302(c)(10) and 307 of the Federal Property
and Administrative Services Act of 1949.  The former sec-
tion permits contracts to be negotiated without advertising
if it is impractical to secure competition for the property
or services required. The latter section stipulates that
the determinations and decisions made by GSA's Administra-
tor concerning contracts negotiated pursuant to section 302
shall be final.

     Selecting the construction manager was performed under
a two-step competitive negotiation procedure. The first
step consisted of determining which of the 30 offercrs were
most qualified based on preliminary proposals and management
questionnaires. The second step consisted of the contract
award based on the step-one rankings and the six bidders'
step-two bid prices.

     We are currently reviewing GSA's and other Federal
agencies' construction management at the request of another
congressional subcommittee.  Our limited review of GSA's pro-
cedures in selecting and evaluating prospective construction
managers and in awarding a construction manager's contract
for the program centers disclosed no impropriety or prefereni-
tial treatment.

Building systems contractor

     The building systems contractor was awarded a contract
unler the twc-step formal advertising contracting method.
Under the prevailing conditions GSA was justified in using
this method and had made sufficient effort to solicit pro-
posals from all qualified sources.  However, we believe
that some of GSA's actions in approving technical proposals
and in awarding the contract are questionable.

     Solicitation for technical proposals

     The program centers project was the pilot project for
the building systems concept.  By combining into a single
project the construction of three buildings in widely dis-
persed locations, GSA hoped that it would be large enough
to attract industry competition and innovative approaches
to construction.  A strenuous attem
                                  tpt
                                  1   was made to attract
industry's interest in the concept and to foster competition.




                              10
     GSA sent October 29, 1971, reques's for technical
proposals to about 640 firms and individuals, and advertised
in the Commerce Business Daily.  A questionnaire and a copy
of the performance specifications was sent to each.  Replies
were received from 224 firms, most of which were interested
in segments of the building systems rather than the entire
system.

     Recognizing that no one had the capability alone to under-
take the building systems contract, GSA encouraged and as-
sisted the interested firms to form consortiums during the
12 months it took for the preparation of technical proposals.
To keep prospective offerors abreast of program developments,
GSA's project manager distributed weekly or biweekly project
reports.  GSA held conferences in November 1971, January
1972, and March 1972 to brief interested firms on the build-
ing systems concept and related program aspects.  Representa-
tives of about 100 firms attended the January conference.

     The initial request for technical proposals had a due
date of March 30, 1972, but was later extended to June,
August, September, and finally October 6, 1972.

     One reason for the extensions was the delay in acquiring
sites for the three centers, which meant preliminary drawings
could not be issued while there was a possibility of a site
shift.  The preliminary drawings for the Philadelphia and
Chicago centers were issued on June 22, 1972, and for the
Richmond center on August 5, 1972.  On August 5. 1972, a
Chicago center design change eliminated the mezzanine level
to reduce the amount of special design required.

     Major changes in the performance specifications also
required a delay in the date for submitting technical pro-
posals.

     During the development of technical proposals, the sys-
tems offerors required considerable assistance in interpre-
tino thsh performance specifications and suggested numerous
cia-ges.   GSA published nine amendments, some of which were
based on requests of prospective systems offerors.

     The first amendment, dated March 13, 1972, had 96 pages
of changes including:

     -- An expanded heating, ventilating, and air conditioning
        subsystem.




                             11
     -- Life-cycle costing as the contract award basis.

     -- Nine-year optional maintenance.
     -- Core placement permitting open-office planning.

     -- Energy cost considerations.

     -- Acoustical criteria.
     --A fire-protection-system evaluatio)n mechanism.
     The solicitation of technical pro     U.s covered about
one year. Nine offerors submitted pro, Als on the building
systems portion of the project. While generally favoring
building systems, officials of several offerors stated that
developing the proposals was costly. A GSA official esti-
mated that $250,000 to $500,000 was speJ t by each offeror
in developing the proposal. Several of the offerors devel-
oping proposals, however, told us that their estimated costs
were less than $100,000.
     GSA followed Federal regulations and its contracting pro-
cedures in soliciting proposals for tae building system from
all qualified sources. Despite the high costs of preparing
proposals, there was considerable competition in submitting
technical proposals for the building systems portion of these
buildings.
     There were some aspects of this building systems applica-
tion, however, that tended to limit competition, as follows:

    --No existing firm had the capability to undertake the
      project, requiring consortiums to be formed for up
      to 9 years after construction was completed.

    -- Twelve months were required fcr discussion, explana-
       tion, and interpretation of the specifications for
       interested offerors, demonstrating the complexity of
       the specifications, which may have discouraged some
       firms from submitting proposals.
    -- The high cost of prtparing technical proposals and
       bidding documents compared to normal construction
       contracting might have been an inhibiting factor.
    -- In the final round only three of the nine consortiums
       submitting technical proposals were qualified to bid,
       and only two submitted price proposals.


                               12
     Small business participation
     Small business firms showed considerable interest in the
project. Five of the nine joint ventures submitting techni-
cal proposals for the building system contract included small
firms. However, the development of technical proposals for
such a project is very costly and we believe that few, if
any, small business firms had the financial capability to
bid on the entire contract. However, we feel that this situ-
ation differed little from small businesses' financial inabili-
ty to bid on the construction contract for a typical multimil-
lion dollar project under the lump-sum method of contracting.

     Although small businesses may have been somewhat re-
stricted from independently bidding on the building systems
contract, small businesses could, as under a general con-
tractor, participate as subcontractors to the building sys-
tems contractor. In this connection, we noted that the
building systems contractor listed a number of small busi-
nesses that had participated in the construction of the
building systems portion of the project.

     Also, since the out-of-system portion of the project
represented the majority of the construction costs and
it was subdivided into 67 separate contract packages, small
businesses were able to bid on these packages. This provided
small businesses additional opportunities to bid competi-
tively and independently.
     Evaluation of technical proposals
     Technical proposals for the building systems were evalu-
ated in relation to the performance specifications. Each
technical proposal had to show how the offeror's proposed
building system complied with the performance specifications,
how it would be tested, and how the development, testing,
and construction would be managed.
     GSA received eight technical proposals from seven firms
by the deadline date of October 6, 1972, and proposals from
two firms shortly after this date. The contracting officer
determined that no unfair advantage had been gained by the
late firms, because prices were not involved and GSA planned
discussions with the offerors to clarify their proposals
and correct any noted deficiencies.




                            13
     For the evaluation, the project manager formed a
technical proposal evaluation team of "AE, the construc-
tion manager, and GSA's Public Buildings Service. The fol-
lowing responsibilities were assigned.
     -- EAE to evaluate the technical aspects of construction
        and materials.
     --Construction manager to evaluate the management plan
       and bid unit plan.
     --Public Buildings Service to evaluate maintenance
       and fire safety in conjunction with EAE.
     The evaluation team included the following professionals
and disciplines:
     -- Architect.

     -- Structural, mechanical, and electrical engineers.

     -- Construction management.
     -- Acoustician.

     -- Illumination.
     -- Fire.

     -- Health and safety.
     -- Maintenance.

     -- Legal.

     During the evaluation period, team members discussed pro-
posal problems with the offerors to help them meet the various
requirements of the performance specification. The offerors
had until December 27, 1972, to correct their deficiencies.
EAE said that "since time had been lost during the effort to
obtain funds and to select sites, the evaluation of the
technical proposals was condensed from 25 to 12 weeks."
     After these opportunties to meet the specifications,
a proposed system was considered to be unacceptable under
the following conditions:




                               14
     --The system did not meet criteria as verified by
       analysis (calculation tests).
     -- The system did not meet criteria which are
        verifiable by observation of drawings, specifi-
        cations, written descriptions, or samples submitted
        as part of the technical proposal.
     -- System's structure subsystem could not be qualified
        by any of the codes specified in the performance
        specifications.
     --The offeror's schedules were not compatible
       with the project schedules.
     The evaluation team judged four proposals from three
offerors to be acceptable. A project official told us that
proposals from two joint ventures that included small busi-
nesses nearly qualified, and that with a little more time
would likely have qualified.

     Our review showed that each technical proposal was
reviewed, and deficiencies were brought to the offerors'
 ttention for corrective action.
     On January 3, 1973, GSA notified each offeror of the
results and gave each unacceptable offeror, who was not
to be sent an invitation for bid, an opportunity to dis-
cuss his principal deficiencies during the week of February
5, 1973.

      In our opinion, the reduction of the evaluation period
by GSA from 25 weeks to 12 weeks may have limited the final
competition, because two offerors may have qualified with a
little more time. Only three offerors' technical proposals
were accepted, and only two of them submitted bids. Since
the sites were still being selected when technical proposals
were due, and acquisition was not completed for another
7 months, there does not aeem to have been any advantage
gained by shortening the evaluation period.

    Awarding of contract
     On January 12, 1973, GSA invited the three acceptable
offerors to bid, requiring a bid price for designing, manu-
facturing, and installing the system broken down into the
various system components. Each offeror was also required
to submit a bid on options for three successive 3-year
periods of maintaining the system.

                             15
     Only two of the three eligible firms submitted offers,
which were opened on February 20, 1973. A project official
said that the third eligible offeror did not bid because he
could not meet the $28 million ceiling price established by
GSA for the building system contract. Eecause each of the
offeror's systems affected the cost of the out-of-system
portions of the buildings, evaluation factors were estab-
lished and applied to the total cost of each of the offeror's
systems. The contract was awarded on the basis of a calcula-
tion composed of the following factors:

      1. The system price--the total cost of all material to
be furnished by the offeror as computed from the bid unit
plan.
     2. Bid equalization factors--a system of price adjust-
ments established for each system to account for costs imposed
by the insystem elements on out-of-system construction, such
as affect on the costs of exterior walls and elevators due
to offeror's planned thickness of the floor-ceiling sandwich.

     3. The prorated bid price tdctor--a calculation that
translated the equalized total price per building into equa-
lized total price per usable square foot of office space,
thus giving credit to a system with smaller columns which
provided more usable floor space within the same size
building.
     4.  The life-cycle cost factor--a computation of those
life-cycle costs that could be objectively measured by cal-
culation and confirmed by tests over the 40-year expected
life of the system.

     5. Nine-year optional maintenance cost--the bid of
each offeror to provide the Government with an optional
maintenance contract for the system for 3 years, with two
renewable options (to maintain performance of the system,
normal housekeeping of the system elements, and maintenance
of the HVAC and luminaire subsystems). The bid unit was
a firm fixed price only for the first 3-year period, with
prices for successive periods to be adjusted according to
the Consumer Price Index.
     The system offeror having the lowest total of the net
system price, 40-year life-cycle cost, and 9-year maintenance
cost 'W;s ruled the low bidder.

     The application of these factors in the award calcula-
tion is shown below. Although offeror "A" was low by about


                              16
$1.5 million excluding the optional maintenance factor, the
offeror's proposal for this option was more than double
offeror "B's" bid, bringing his total about $1.3 million
over offeror "B's" total bid.  Offeror "B" was awarded the
contract on March 8, 1973.

            SSA Program Centers Building Systems Project

                        Basis of Award Calculation


                                     A's bid                       B's bid

Total system price                  $24,647,100                   $26,958,286
Bid equalization
  factors:
     FCS thickness     $ -324,000                 $   -84,000
     Foundations          506,960                     574,022
     HVAC              -1,147,'54                  -1,595,626
     Conductors           116,000                     116,000

        Total factors                  -848,594                     -989,604

Equalized total                 23,798,506                         25,968,682
  price
Prorated bid price              23,906,241                         26,132,155
Life cycle cost:
     HVAC operation
        cost          4,591,389                       3,713,240
     Space adjust-
        ment cost        14,249                           6,960
     Luminaire opera-
        tion cost     4,119,320                       4,235,997

        Total life-
          cycle cost                  8,724,958                       8,006,197

Basis of award with-
  out maintenance                    32,631,199                      34,138,352
9-year optional
  maintenance cost                    5,544,926                       2,700,000
Basis of award with
  maintenance                       $38,176,125                     $36,838,352



     Our analyses of the factors used to weigh the bids is
described below.

    Bid equalization and prorated price factors

     No objections were made by the industry or the system
offerors to the inclusion of the bid equalization factor



                                       17
and the prorated bid price factor. In our opinion, these
factors appeared to have been applied uniformally to both
systems offerors' proposals.
     Life-cycle cost factors
     Generally, life-cycle costing should include all owner-
ship costs over the lifespan of the building, which GSA has
determined to be 40 years for Federal office buildings. These
costs are for site acquisition and preparation, financing,
design, construction, operation, and maintenance. The life-
cycle cost factors considered in the bid proposals for the
building systems included only HVAC operation, alteration
costs, and lighting operation. They omitted financing costs
(i.e., interest costs for the systems ccsts discounted over
40 years to yield the present value of such costs) and all
other building operation costs, such as heating and cooling
plant costs.
     EAE said that the offerors' proposed building systems'
first costs were expected to be close; therefore, finan-
cing costs would not have made the final bid prices much
different. When the bids of the two offerors came in about
$2.5 million apart, EAE agreed that the difference discounted
over 40 years would have affected the final bid price.
     The project manager said that financing costs were ex-
cluded from the evaluation of the bid proposals because of
project personnel having little experience in the use of
life-cycle costing, problems In determining an appropriate
discount rate, and too little time and higher-priority
work to do.
     GSA's Operations Division Director said that unless
the total building, including heating a d cooling plant
operating efficiency, is included in the analysis, there is
no assurance that all of the energy conservation opportuni-
ties will be used to provide the most efficient building.
    Nine-year optional maintenance cost
     The maintenance option requires that the building sys-
tems' contractor modify, repair, and replace system elements
as necessary to meet the contract's performance requirements
and to clean certain components. The Government exercised
its option for the initial 3-year period in the systems con-
tract awarded on March 8, 1973.




                               18
     In a February 16, 1973, letter to GSA, the unsuccessful
bidder objected to the use of the maintenance option as a
basis for award because

     -- it did not contribute to achieving the design goals;

     -- potential bidders can unbalance their bids under the
        basis of award calculations;

     -- it sets up the possibility of potential claims for
        additional compensation resulting from the main-
        tenance variables contained in the bid documents;

     -- it prevented the bidder from securing bondable bid
        prices from responsible building maintenance com-
        panies; and

     -- it precluded comparable evaluation of bids due to
        the variables in maintenance responsibilities over
        a 9-year period inherent in the bid documents.

     During a meeting with GSA officials on March 15, 1973,
the unsuccessful bidder again expressed his opposition to
GSA's use of the maintenance option as well as the custodial
services in making the award.

      In its comments on our draft report (see app. II), GSA
said that the technical proposal evaluation team determined
that the unsuccessful bidder's objections were unfounded.
However, during our review we found no record of such a
determination; specifically, CSA's records did not show
what action had been taken concerning the objections.   A
project official told us that the unsuccessful offeror's
suggestion to eliminate the maintenance option was not ac-
cepted because GSA would have had to resolicit technical
proposals without the maintenance option.

GSA CONTROLS PROJECT COSTS AND SCHEDULES

     GSA exercised controls over the program center project
cost and schedule, and the authority delegated to EAE and
CM through the following system.

Management organization

     One management technique for controlling project oper-.-
tions was the project manager who, under charter frc., aLf
Public Buildings Service Commissioner, had overall respon-
sibility to (1) keep the project on schedule and within


                              19
the budget; (2) be the contracting officer; (3) review
progress reports; (4) approve all payment requests and pro-
ject changes over $10,000, and time extensions; and (5)
process claims and appeals.

     All funds transferred to GSA for obligation on the
project were assigned to the project manager and could not
be obligated or expended without the manager's approval.

     The project manager met periodically with members of
tne project team, the staff, and contractors to review proj-
ect progress, resolve interface or systems-modification prob-
lems, and follow up on previous problems.  The manager had
the authority and responsibility to oversee the contractual
responsibilities delegated to EAE and CM, who were responsible
on bebalf of GSA for many actions affecting costs, schedules,
and performance.  The GSA contracts awarded to EAE and CM
delegated responsibilities and authority singularly and
jointly with other team members.

     Some of EAE's principal responsibilities included:

     -- Preparing a preliminary activity network and schedule.

     -- Amending, as appropriate, the performance specifica-
        tions.

     ---Preparing design concepts.

    -- Directing the work of regional AEs to assure com-
       patibility with the insystem.

    -- Developing the format for the insystem technical
       proposals.

    -- Participating in the evaluation of the technical
       proposals.

    -- Reviewing and recommending for approval the insystem
       documentation prepared by the building systems
       contractor.

    -- Reviewing and recommending for approval the
       foundation designs for the potential insystem,
       prepared by regional AEs.

    -- Reviewing and recommending for approval each out-
       of-system bid package.



                              20
     Some of CM's principal responsibilities under the
GSA contract were:
     -- Implement a construction management control system.

     -- Review plans of regional AEs and suggest economies,
        prepare estimates, and comment on construction
        feasibility.
     -- Recommend packaging of phased out-of-system bids
        and review the packages prepared.
     -- Assist the Project Manlager; develop criteria for
        and evaluate technical proposals.
     -- Develop bid equalization factors for use in evalu-
        ating the technical proposals.
     -- Conduct value engineering workshop and studies.

     -- Provide general direction, inspection, and
        superintendence of construction.

     -- Establish procedures to coordinate the work of
        all project entities.
     -- Maintain jobsite records.
     -- Provide on a reimbursable basis such services as
        watchmen, fencing, first aid stations, temporary
        utilities, etc.
On-site controls

     GSA resident engineers and inspection staff represented
the Project Manager on each construction site for the
following functions:

     -- administration of construction contracts;

     -- inspection of construction to assure compliance with
        requirements;
    -- review of contractors' cost claims submitted to the
       Project Manager for payment;




                              21
     -- monitoring the CM's inspection procedures, and
        scheduling and coordinating periodic and final
        inspections between the CM and GSA inspection teams;
        and

     -- reporting monthly progress of construction.

Construction management control system

     A construction management control system implemented
by Cl provided the manager, CM, and EAE with the following
monthly financial and construction information:

     -- Work done during the period, planned work, problem
        areas, critical paths, and analyses of schedule
        slippages.

     -- Summary and detailed reports on incurred cost, pro-
        jected cost, and cost variances analyses.

     -- Financial status reports of commitments, expenditures,
        and uncommitted funds in the project manager's budget.

     The project manager was also assisted by GSA's internal
audit staff who examined CM's records to ensure propriety of
charges made and reviewed his controls to ansuire compliance
with contractual obligations.

     We believe that these controls were adequate to assure
compliance with contractual cost and schedule obligations.

TESTING PROCEDURES

     The building system contractor warranted that the entire
system was free from defects and guaranteed its performance
for 2 years.

     The performance specifications consisted of performance
requirements (e.g., control-conditioned air motion in the
HVAC subsystem), criteria for meeting the requirements (e.g.,
provide air motion of 20 feet to 50 feet per minute in
occupied areas), and tests to demonstrate that the require-
ments were fulfilled.   From the tests, SSA was to be assured
that equipment designed met its requirements.   The insystem
contractor was also required to construct and test a prototype
of the building system.   For the reasons described below,
GSA and SSA do not have full assurance that the specifica-
tions were met.



                              22
Construction before prototype approval

     The performance specifications state that, "With the
successful completion of subsystem tests, and the construction
and testing of the System prototype, the System is ready
for installation and use."  The program centers' activity
chart shows that the system prototype tests and approvals
were to have been accomplished before starting system con-
struction.

     The building systems contractor constructed a 30-by-30
foot mock-up of the systems considered to be representative
of each center.   On March 22, 1974, the system contractor
submitted the certified prototype test results for approval.
They were approved by EAE on May 13, 1974 and by the project
manager on June 10, 1974.   We found that insystem construc-
tion was being implemented at the Philadelphia and Richmond
centers before the project manager approved the prototype
test results.   Also, most of the out-of-system construction
contracts had been awarded and some completed before the
test results were approved.   If any prototype elements of the
building system had failed to meet specifications, they would
have had to be redesigned and installed elements pulled out
at additional contract costs.

     GSA, in commenting on our Craft report, stated that
these construction contracts were out-of-system contracts
and not affected by the prototype test results.  GSA also
stated that the project manager had indicated that at the
time test results were approved, no system components which
would have been affected by the test results had been in-
stalled in the buildings.

     We believe that any insystem construction and possibly
out-of-system construction performed on the program centers
prior to approval of the prototype tests, was subject to
being affected by failure of the prototype. While insystem
construction began with structural steel work, which may not
have been likely to fail, failure of this or other subsystems
could have caused redesign or refabrication of the struc-
turpl steel subsystem. Therefore, in our opinion, the start
of onsite construction prior to approval of the prototype
exposed GSA to possible financial and schedule losses.

Specifications not enforced

     Although the system contractor was required to submit
test reports and certifications demonstrating compliance
with the performance specifications, the contractor did not


                              23
do so during the first 6 months of construction. Structural
steel work was started at Philadelphia in January 1974 and
at Richmond in April 1974, but CM did not notify the system
contractor of his delinquency until July.
     The system contractor was also required to submit to
GSA a list of independent testers/observers, subject to
approval by the project manaacr, to certify that the systems
complied with the performance specifications. The initial
list approved in April i973 contained a tester from a firm
that participated in supplying the system's carpet. This
required another list to be submitted for approval.
     The "supplementary testers list" submitted later by the
system contractor was not apparently approved by the project
manager. By December 1975, about 5 months after the first
two program centers were occupied, Executive AE had lxot
received the independent testers/observers list from the
system contractor. At that time, EAE told the contractor
to develop a list and insert it after the supplementary
testers list. Among other conditions, the approval of the
contractor's testing plan was contingent upon the submis-
sion of this list.
     The project manager was unable to find evidence that
he had approved the contractor's testers/observers list and,
as a result of our inquiry, requested the contractor to
either demonstrate that the supplementary list had been ap-
proved or resubmit his list of independent testers/observers
with their qualifications.
     Some tests of the subsystems were not performed or
observed by independent testers/observers. All structural
steel calculations, for example, were certified by an engineer
of the steel supplier rather than an independent tester/
observer. According to the project manager, calculations
may be performed by a registered professional engineer and
do not have to be certified by an independent tester/observer.
The manager felt that a registered professional engineer's
seal was adequate proof of compliance with the performance
specifications and stressed that the engineer is required to
follow a stringent code of ethics.

     In commenting on our draft report, GSA confirmed that
all structural steel calculations were certified by an en-
gineer of the steel supplier in lieu of an independent tester/
observer. GSA cited the provisions of performance specifi-
cations 3c-la as authority.


                              24
     Performance specification 3c-la is not the applicable
provision since its sole purpose is to permit calculation
as a method of testing. The proper provision 3c-4a is con-
tained in the general requirements section governing testing-
certification/approval rather than the "testing-methods"
section where 3c-la is located.
     In our opinion, general requirement 3c-4a negates GSA's
comments because it states:
     "Certification shall be by an independent Tester/
     Observer who has previously been approved by the
     Project Manager."
     Extent of compliance undeterminable

     At the completion of construction of the insystem, the
contractor was required to submit a notarized certification,
to be subsequently approved by the project manager, that
the building system complied with the specified performance
requirements.
     On November 25, 1975, the systems contractor submitted
the required notarized certification to EAE stating that the
building system complied with the specified performance
requirements. Test reports and certifications for subsystem
tests and system field tests were also included in this
package for approval.
     EAE made his final inspection of the Philadelphia
building on November 24, 1975 and the Richmond building,
on December 16, 1975. Based on the final inspections of
the Philadelphia and Richmond buildings, EAE info-med the
prcject manager on December 19, 1975 that the buildings
were acceptable and met the requirements except for the
following:
    Philadelphia building only.
    -- Excessive cracking in penthouse floor.   These must
       be repaired.

    -- Random loose carpet tiles. The building should be
       irnpected and the loose tiles reglued. This should
       be handled under the maintenance contract.

    -- Light fixture lens are dirty. These should be cleaned
       under the maintenance contract.


                              25
     Philadelphia and Richmond buildings.

     -- The electrical outlet cover in use is not acceptable.
        We have informed the contractor that they present a
        clear danger to safety. This failure should be covered
        by the guarantee. We are waiting for a corrective
        proposal from the contractor.
     --The testing results have been questioned on some minor
       items, but we cannot accept this until it is complete.
On December 11, .975, EAE had rejected the system contractor's
test schedule.
     "The majority of field tests referenced for each sub-
     system have been conducted only at the Philadelphia
     project building. These tests are required to also
     be performed at the Richmond and Chicago Program
     Centers."
On December 23, 1975, EAE told the contractor to disregard
that comment because of the November 1973 understanding that
field tests would most likely be performed only on the Phila-
delphia building. The report on the project team's meeting
in November 1973 states that it was agreed that tests would
be performed on only one building--"probably Philadelphia
building." The systems contractor attended and participated
in the discussions.
     The data submitted by the systems contractor showed
that field tests for the Chicago building had not been com-
leted, and there are no plans to do so. Most of the field
testing for each subsystem was conducted only at the Phila-
delphia project site. We could not determine the extent to
which the system contractor corrected the performance defi-
ciencies noted by EAE.

     The project manager told us that in his opinion, all
three program centers' subsystems, except for the HVAC
subsystem, were generally the same. Although the manager
believed that there was no need to field test all the
Richmond and .hicago centers' subsystems, he said that be-
cause the HVAC lesign was different in each building, field
tests for this subsystem would have to be performed for all
three centers.

     The deficiencies noted by EAE in his December 11, 1975,
letter involved all seven subsystems of the system contract.



                              26
Some of the field tests not submitted for the structure
subsystem included:
     -- Requirement ld-7--control deflections. "This
        subsystem, when undergoing deflection due to
        any combination of specified loads, shall not
        damage or otherwise impair the performance of
        any other subsystem."
     -- Requirement ld-12--provide protection against
        damage.  "This subsystem's specified performance
        shall not be impaired by stresses due to volume
        change."
      In commenting on our draft report, GSA informed us that
the requirement for field teuts wis wrong. GSA stated that
these tests, made by calculations in lieu of field testing,
were submitted by the contractor and approved by the Govern-
ment.

     The Richmond building failed one of the HVAC tests,
and other required tests were either not included or were
incomplete as described below.

     -- Requirement 2a-3--control dry bulb temperature.
        "The rate of change of dry-bulb temperature at any
        point in the occupied zone shall not exceed 4 deg/hr
        if the peak to peak variation in the temperature
        cycle is two degrees or greater with the limits
        (f 730 and 770 F." The test results as indicated
        jy the system's report indicates that the Richmond
        building failed to meet this requirement.
    -- Requirement 2e-ld--conform to codes and standards.
       This requirement for the Richmond building is not
       complete and requires updating.
    -- The test results for the Richmond building did
       not include the following requirements:
      -- Control   maximum temperature deviation.
      -- Control   relative humidity.
      -- Control   mean radiant temperature.
      -- Control   fresh air quantity.
      -- Control   air mixture.




                                27
                           CHAPTER 3
             OBSERVATIONS AND COMMENTS ON USING

                   BUILDINGS SYSTEMS CONCEPT
     GSA did not fully attain the goals it set for construction
of the SSA program centers project through the building
systems method. Generally, (1) the centers were not completed
on schedule, (2) planned total construction costs were ex-
ceeded, (3) life-cycle cost objectives were not met, (4)
claimed energy savings could not be verified, (5) serious
and costly operation and maintenance problems have occurred,
and (6) the building systems concept has not spread.

     We were unable to determine the extent to which the
building systems concept contributed to the failure to meet
the project's goals because of its interrelatedness with the
team approach, phasing, and the out-of-systems components.

PROJECT SCHEDULE
     The schedule for the program centers was September
1971 to September 1972 for preconstruction and September
1972 to September 1974 for construction.

     The preconstruction began on time but ended July 1973
(22 months). Construction began in July 1973 and ended
July 1975 at the Richmond and Philadelphia centers, and in
September 1976 at Chicago (24 and 38 months, respectively).
The total time for the Richmond and Philadelphia centers
was about 4 years, and for the Chicago center, about 5
years.
Preconstruction schedule

     The preconstruction schedule slipped because of the
following problems.

    --Sites scheduled to be selected in February 1972 were
      not selected until 7 to 9 months later. The delay was
      due to lack of funds at the time to pay for options
      to buy and to disagreements between GSA and HEW on
      locations for the centers.

    --Acquisition of the sites was also delayed 11 months
      longer than planned because of the unavailability of
      funds, legal problems, and eviction of occupants.



                              28
     --The schedule for preparation of technical proposals
       allowed offerors 4 months, but this time had to be ex-
       tended to almost a year because of the uncertainty
       of site conditions and the complexity of the specifi-
       cations. Part of this delay was compensated for by
       reducing the planned 25 weeks for evaluation of pro-
       posals to only 12 weeks.  (see p. 17).
Construction sche .4 Le

     The Philadelph., and Richmond buildings were completed
in the scheduled-24 months. Construction of the Chicago
building took 14 months longer, primarily because most of
the pilings for the foundation were damaged from earth
movement and had to be replaced.
     A consulting engineering firm retained by GSA attri-
buted the foundation problems to the expedited excavation
schedule required, CM's passive rather than active role in
overseeing construction, and GSA's failure to provide for
specialized engineering personnel for this work on the
construction team.
PROJUCT COSTS
     OMB apportioned $6.1 million of the sites and ex-
penses funds to HEW in January 1972 to be used only for
design work from funds appropriated to HEW for the program
centers. OMB stated that financing the balance of the
project, including site acquisition and construction, would
be obtained under pending purchase contract legislation.
Legislation authorizing the purchase contract program was
approved by the President in June 1972. 1/
Overall project costs

     In February 1973 the Congress approved GSA's prospectus
for the centers, showing the following estimates.


1/Public Buildings Amendments of 1972, Public Law 92-313,
  Section 5, 86 Statute 219 (1972) 40 U.S.C. Section 6022
  (sub. 2 1972).




                             29
                                      Prospectus         Latest
                      Gross           estimated        estimated
 Progiam center       sq. ft.           costs            costs
Chicago, Ill.         757,600        $ 46,318,254   $a/51,877,268
Philadelphia, Pa.     567,700          29,269,231    B/29,061,256
Richamond, Calif.     554,900          34,942,189    c/33,988,402
    Total           1,880,200        $110,529,674   $ 114,926,926
a/Cost estimate as of 7/12/76.
b/Final cost report as of 3/22/76.

c/Final cost report as of 1/17/76.

     The project was financed by the $6.1 million apportion-
ment and the sale of $126 million in participation certifi-
cates. From the certificates sale $107,114,903 was budgeted
for construction, sites, and inspection; $5,116,365 for real
estate taxes during construction; and $13,768,732 for trustees'
fees, legal fees, advertising, interest on the certificates,
and other expenses. GSA budgeted $28 million for the
building systems portion of the project, about 25 percent of
total estimated costs.

     In addition to the latest estimated overrun of $4.4
million, there may be additional contractors' claims, as
well as possible recovery by GSA of remedial foundation
costs under pending insurance claims.
     About $3 .iillion was paid to remedy the foundation
problem as well as other contractors' costs at the Chicago
center. The project manager told us that a claim had been
filed with the insurer for reimbursement of this amount.
Claims in excess of $1.7 million have been filed against
GSA for delays imposed on contractors during remedy of the
problem.
     The use of the team concept on the project resulted in
the award of five professional service contracts (EAE, CM,
and three regional AEs).  As of July 1976 the project pro-
fessional services were estimated to cost about $7.5 million,
as shown Delow.




                                30
                        Professional service cost

              Philadelphia            Chicago         Richmond
               (note a)               (note b)        (note c)            Total

EAE           $     468,334       $     890,538   $     518,512        $1,877,384
Regional AE       1,023,196           1,662,082       1,139,714         3,824,992
CM                  399,397             934,396         446,297         1,780,090
              $1,890,927          $3,486,916      $2,104,523          $7,482,366

a/Final cost report--3/22/76.
b/Cost report--7/12/76.

c/Final cost report--3/17/76.
Building systems costs
     CM estimated that the building systems would cost $24.5
million if started in February 1973 using conventional con-
struction. EAE increased the estimate to $28 million as the
maximum for acceptance of bids For the building systems work.
     In March 1973 the building systems contract was awarded
for $26.96 million. The most recent estimate of July 1976
shows that the building systems work will cost about $5
million more, as shown below.

                              Original         Latest
Geographic location            award          estimate                Increase
Philadelphia, Pa.         I    8,043,000     $ 8,981,235          $     938,235
Richmond, Calif.               7,995,690       8,890,165                894,475
Chicago, Ill.                 10,919,433      14,274,116              3,354,683

     Total                $26,958,123        $32,145,516          $5,187,393
     The cost increases were due primarily to added fire
protection and acoustical work and transferring work from
the out-of-system contractors to the systems contractor.
For the Chicago center, costs also increased substantially
from contractors' claims paid for delays. The transfer of
work from the out-of-system contractors reduced their
contract prices.




                                        31
GSA cost comparison of SSA program centers

     While construction of the Philadelphia, Richmond, and
Chicago centers was managed as a single project using the
building systems method, the Birmingham center was privately
constructed to GSA prescriptive specifications and leased.
GSA compared squa:e foot construction costs of the Birmingham
center to those of the Philadelphia and Richmond centers,
which it considers to be functionally comparable.  GSA's
comparison, as noted below, indicates that construction
costs were significantly lower for the Birmingham center.

                    Building construction costs

                                      Cost per square foot
     Building                         Gross            Net
   Philadelphia                       $45.00           $62.00
   Birmingham                        a/30.00            35.00
a/Adjusted to Philadelphia construction prices.
  Actual cost in Birmingham was approximately $23.

           Construction cost for mechanical system
     (includes safety and all automated control systems)

     Building                         Cost per square foot

     Birmingham                                $5.00
     Philadelphia                               7.50
     Richmond                                   8.91
Also, there is an additional indication that the program
centers may have cost more to construct under the building
systems concept than under the conventional system.

     As previously stated, CM's estimate of $24.5 million
for the project was based on construction costs using con-
ventional methods.   EAE increased this amount by $3.5 million
to provide for the special d,:sign costs, test and prototype
costs, and the general development costs applicable to the
new building system.   Assuming that CM's estimate is rea-
sonable and EAE's reasons for increasing the estimate are
justified, it appears to us that the Federal Government is
expected to pay about $3.5 million more for the building
systems portion of the project by using the performance
specifications than by using prescriptive specifications
under the conventional method of construction.



                                32
     The project manager disagreed with our view. He said
it was not reasonable to isolate the cost of the building
systems without considering its effect on the project's
overall costs. The manager believed that the increased
costs of the building systems was a trade-off for a better
total project at a cost equivalent to or below that esti-
mated for a conventionally constructed project.

      In support of his position, the manager cited two
examples of improved construction techniques in the building
systems--the combining of the fire-protection-sprinkler
piping with the water-cooled lighting fixtures and the
manner in which the space dividers meet the ceiling to give
superior acoustical privacy while providing a very low
fixture-space adjustment cost.

     Based on GSA's experience with the building systems
in operation, it is doubtful that the increased costs of
the combined sprinkler and lighting system will be offset
by reduced operating anc maintenance costs.
OPERATION AND MAINTENANCE PROBLEMS

     GSA's Office of Building Management has had serious
problems operating and maintaining the Philadelphia and
Richmond centers, as described below. Because the Chicago
center was completed much later, GSA had no experience with
its operation at the time of our review.
Contract awarded on negotiated basis

      To avoid having two contractors responsible for the
operation and maintenance at each center, the project
manager requested award of a single contract to the system
contractor or to his maintenance subcontractor, Lor the
operation and maintenance of both the insystem and out-
of-system components at the two completed centers, noting
that:

    -- The system contractor's ability to assure proper
       performance of his equipment depends partly on
       maintenance and operation of out-of-system
       equipment.   For example, if the out-of-systems
       equipment does no'. provide water at the right
       temperature and condition, certain units of
       the system contractor cannot meet performance
       specifications.




                             33
     -- The custodial requirements of the system con-
        tractor under the maintenance option (primarily
        for carpeting) would be awkward to perform if
        another contractor had responsibility for
        general cleaning of the buildings.

     -- In the opinion of GSA's Assistant General
        Counsel, there would be a greater possibility
        of labor disputes with two maintenance and
        custodial contractors on the premises, as well
        as of conflicts between contractors over work
        schedules and security.

     For these reasons, the building systems contractor was
requested to submit a price proposal for the operation,
inspection, maintenance, and repair of the out-of-system
mechanical equipment and janitorial services.

      Because an agreement could not be reached with the
system contractor, GSA negotiated a 1-year contract with
its maintenance subcontractor on July 15, 1975 for these
services.   Thus, the system maintenance subcontractor was
awarded two separate contracts, one for the insystem and
the other for the out-of-system operation and maintenance
work.   The contract price at the Philadelphia center is
$21,272.35 a month for mechanical maintenance and
$29,583.32 a month for janitorial services, a total annual
cost of $610,268.04 for out-of-systems operation and
maintenance.   The total cost of such services at this
building during the first year of operation was over
$863,000 ($610,268.04 plus insystem work at $253,170.00).

     According to GSA's Office of Building Management,
negotiated contracting for the maintenance and operation at
the Philadelphia and Richmond centers resulted in much
higher costs than normally experienced for these services.
A GSA cost comparison of contracts for mechanical and
electrical maintenance and operation at seven Federal
buildings, including the Philadelphia and Richmond centers,
shows the following differences in cost per square foot.




                              34
                                                     Cost per
     Building                     Net square feet   square foot
Federal Building
RichmonJ, Va.                         252,690        $   .37
Wis-insin Building
Be-hesda, Md.                         105,682            .42
11601 Roosevelt Boulevard
Philadelphia, Pa.                     348,551            .46
Federal Building
Wilmington, Del.                      161,197            .51
Federal Building and Courthouse
Philadelphia, Pa.                     24k,519            .58
SSA Program Center
Philadelphia, Pa.                     425,414            .85
SSA Prcgram Center
Richmond, Calif.                      465,889            .89
     Unsatisfactory maintenance performance
     In August 1975 the Regional Chief of GSA's Building
Service Branch stated that the maintenance contractor was
not complying with contract provisions at the Philadelphia
center. The contractor was attempting to furnish all the
sites' custodial service (insystem and out-of-system) under
the out-of-system contract's minimum time requirement. The
inspected maintenance work was unsatisfactory. The Regional
Chief said he was proposing a substantial deduction from
the contractor's payments.
     GSA's San Francisco region was also dissatisfied with
the performance of the maintenance contractor at the
Richmond center. The region planned to do the work with
its own personnel after the contract expired, but could not
free the positions from other locations. By the time that
was settled, the region did not have time to advertise for
another contractor, and it negotiated a new maintenance
contract with the same contractor.

     Controls lacking over insystem maintenance

     The insystem maintenance contract does not require the
contractor to report to GSA on the work. To obtain some


                             35
control, GSA requested the contractor to either provide a
maintenance schedule or to report when such work was per-
formed.  The contractor agreed to do so but only if his
contract price was increased, which was unacceptable to
GSA.

     In May 1975 the Acting Director, Operations Division
of GSA's Office of Building Management, in commenting on
a draft inspection manual for the maintenance of the building
systems, expressed concern over how tests would be financed
and performed since the office did not have the required in-
srrumentation or technical expertise.

     In December 1975 the Director of GSA's Operations
Division wrote the project manager about the lack of a
systems design and operation manual, and stated that:

     "it was not surprising, therefore, that we would
     not find anyone in the building who completely
     understood all of the systems and their operation.
     We feel there should be a manual prepared by the
     designers which will have schematic diagrams of
     each system and the total building system explain-
     ing the operation. Without this type of document,
     information and possibly misinformation regarding
     the systems design and operation will be passed on
     from operator to operator, information wiLl be
     lost or changed in the telling and no one will
     ever understand the designer's intention."

     On February 11, 1976, the Director again wrote to the
project manager about the urgent need for a building
operations manual.

Conflict of building operation and
maintenance responsibilities

     GSA negotiated the cut-of-system operation and
maintenance contract with the insystem operation and
maintenance contractor to avoid having separate contractors
responsible for insystem and out-of-system operation and
maintenance at each center.  In spite of this, the first-
year's operating experience has shown that the single
contractor arrangement has not successfully avoided the
problem of identifying maintenance and operation re-
sponsibilities.




                              36
     In May 1975 the Assistant Commissioner for Building
Management said it was difficult to determine maintenance
and construction responsibilities in the insystem and out-
of-system interface areas. He also stated that there were
many such areas which will cause conflict. The following
are examples.
     "1.   The main control center will start and stop
           all equipment.   it will also reset the temp-
           erature controls throughout the building in-
           cluding the controls on the in-system air
           handlers. The in-system contractor, also has
           responsibility for the controls on the in-
           system air handlers, starting at the air
           handler control panels and is responsible for
           the temperature in the zones served by these
           air handlers.  in this case, there are two
           contractors with the capability and respons-
           ibility for adjusting and controlling the
           same air handlers. The out-of-system chillers
           and boilers also supply hot water and chilled
           water to these air handlers, which are de-
           pendent on the amount and temperature of the
           water supplied to them. This divided re-
           sponsibility for temperature control could
           result in one system trying to cool the
           load created by the other systems heating
           the adjacent space. This type of situation
           would affect utility consumption.
     2.    There is controversy between the in-system
           and out-of-system contractors over the
           interface of the electric feeders for the
           in-system equipment. The in-system con-
           tractors says if the fuses blow out in the
           fused disconnect switch serving a piece of
           in-system equipment, it is the responsibility
           of the group providing maintenance for the
           out-of-system work. The out-of-system con-
           tractor says it is the in-system contractor's
           responsibility.

     3.    We feel the responsibility for the elec-
           trical floor ducts is the in-system con-
           tractor's responsibility; however, the
           in-system contractor says it is the re-
           sponsibility of the out-of-system con-
           tractor.



                               37
      4.   Maintenance and cleaning of the rugs in the
           in-system area are the responsibility of the
           in-system maintenance contractor,  There is
           out-of-system cleaning responsibility for
           furniture and trash removal in the same
           areas."

     The Assistant Commissioner recommended that in future
maintenance options, both building maintenance and operation
be included.  In response to the Office of Buildings
Management's concerns, the maintenance option in the projects
following the program centers was modified as follows:

     "1. The option only includes mechanical maintenance.
     All cleaning has been eliminated.  (Elimination of the
     cleaning was made possible by strengthening the per-
     formance specification to control the quality of the
     finish materials provided in-system.)

      2. The option can be exercised by the Government in
     two ways. The first results in the system contractor
     being a prime contractor to the government and would
     be desirable when in-house forces were used for the
     out-of-system maintenance and operation. When the
     out-of-system maintenance and operation will be pro-
     cured by contract, the option can be exercised such
     that the in-system contractor becomes a subcontractor
     to the out-of-system maintenance contractor.  This
     arrangement puts the Government in the position of
     only having to deal with one contractor for the
     maintenance and operation of the entire building."

High energy use

     According to Executive AE, the contract for the building
systems portion of the program centers was awarded on the
basis of life costs, rather than first construction and
equipping costs, a first in the building industry.  Executive
AE stated that the emphasis on energy use in life-cycle
costing required energy-efficient designs even before the
energy crisis occurred.

     In December 1975 the Director of GSA's Operations
Division wrote the project manager that he took exception
to the claimed energy efficiency of the systems, based on
a visit to the Philadelphia center.




                              38
    "For example, the 'in system' lighting consists of
    water cooled three-tube fluorescent luminaire
    fixtures. This system collects a percentage of the
    heat of light by circulating water through the
    luminaires and rejecting it from the building
    through an evaporative cooler. The 'in systems'
    ventilation air and a percentage of 'out of system'
    air is also rejected from the building through this
    evaporative cooler. This collected heat could have
    been used to heat incoming ventilation air or in
    the perimeter system. Instead, this heating is
    being provided by steam from the building heating
    boilers."

     The Director pointed out that contrary to a recent
article in a heating and air conditioning trade magazine
which claimed that heat from the lighting system was re-
covered and used, in reality, heat was being rejected from
the building and wasted.
     The Director also referred to:    (1) the need for heating
or cooling outside air  to ventilate  the  restrooms, while
room temperature air is  exhausted  from  the insystems area
and wasted and (2) the  high energy  use  designed  into the
out-of-systems mechanical  equipment,  p3rimeter   induction
units, and cooling towers. The Director also objected to
the inflexibility of the designed lighting system, which
does not allow for removing some of the fluorescent tubes
to reduce energy consumption. EAE disagreed with the
Director that removal of flourescent tubes was the way to
accomplish energy conservation, but agreed that there weLe
areas where the level of light could be reduced. However,
EAE stated that this would require a rebalancing of the
air-water systems to maintain the mechanical balance.
     Subsequent visits by GSA officials to Philadelphia
resulted in the same findings of high energy use and the
impossibility of taking certain conservation measures
applied in other Federal buildings. They recommended
changes to the lighting system to permit removal of some
tubes and better computer control of the light switches.
The recommended changes, approved by the project manager
in July 1976, were estimated to cost about $195,000. A
contract for the modifications had not been let by
September 1976.
     EAE stated that his calculations showed that the
insystem design was 25 percent more energy efficient than

                               39
a conventionally designed system.  In September 1976 an
Office of Buildings Management official reported:

     "While low energy use was a factor in selecting
     the system in the SSA Payment Centers, the first
     year operating experience shows the two completed
     buildings are using approximately double the
     energy per net sq. ft. of building as our national
     average.   The utilities distribution systems serving
     the system also serve the out of system equipment and
     lighting in the buildings and there is no way to
     determine the actual energy use of the system.
     Therefore the claims that the system is using
     25% less energy than a standard design cannot be
     verified."

     GSA calculated the national average energy use in
Federal buildings to be about 300,000 Btus (British thermal
units) per net square foot of raw source energy.  GSA
measured the energy use at the Philadelphia and Richmond
centers to be 562,646 and 418,850 Btus, respectively.   By
comparison, it calculated that the conventionally con-
structed Birmingham program center used 342,278 Btus per
square foot, or about 40 percent less than Philadelphia
and 18 percent less than Richmond.

     In September 1976 the Chief of the Program Branch,
GSA's Operations Division stated:

     "Until all the mechanical equipment is included in
     the 'In System', there will never be a single design
     concept which will permit the designer to take full
     advantage of the energy used.  As an example the
     designer of the Philadelphia Payment Center could
     have used the chillers for heat pumps, extracted
     the heat of light from the water cooled luminaire
     system and used it to heat the buildings.  In-
     stead we are rejecting this heat from the building
     in the winter and the designer of the 'Out of
     System' portion of the building installed boilers
     for heating the building perimeter."

Other operating problems

     In addition to their concern over high energy use,
GSA officials were also concerned with other operating
problems, primarily, the airflow problems experienced by
the Richmond and Philadelphia centers' occupants.



                             40
     After a visit in April 1976 to the Philadelphia center,
Buildings Management officials reported to the Public
Buildings Service Commissioner a number of operational prob-
lems they attributed to malfunctioning equipment, design
deficiencies and, inherent characteristics of an insystem-
and out-of-system-type building project. They pointed out
that the interface between the two systems had been a con-
stant source of aggravation, citing the intermingling of
air supplies which affected the heating and air conditioning
systems.
     The airflow problem was raised   again in a June 1976
GSA task force report. This report    pointed out that air
movement in the Philadelphia center   was a serious problem
and that air movement was better in   the out-of-system area
than in the in-system areas.

     As late as September 1976 GSA's Buildings Management
was still experiencing inadequate air flow in the Philadelphia
center. Although the insystem contractor tested the system
and stated that it met the performance requirements, GSA's
test indicated that the airflow did not meet the performance
criteria. A GSA September 1976 fact sheet states that the
architect recommended that GSA hire an independent company
to test the system. However, GSA's construction management
could not find a qualified company to make the tests. The
systems contract performance specification for conditioned
air specifically states the timing and methodology test
requirements. The fact sheet concludes by stating that
this problem seems to be unresolvable and building
occupants continue to make complaints.

     Also, an August 1976, report by GSA's Office of Building
Management took exception to a June 30, 1976, GSA news
release which stated that the buildings systems concept
significantly reduces maintenance, operation, and altera-
tion cost over the life of a building. The report stated
that Buildings Management continued to have problems with
the centers in Philadelphia and Richmond. After citing
the problems experienced at these buildings, particularly
with the high energy cost, malfunctioning of certain in-
system elements, and maintenance performance and prices,
the following statement was made:

    "Unfortunately, our experience in these buildings
    is at variance with the GSA News Release dated
    June 30, 1976, (copy attached), which announces
    the award of the contract for the new SSA



                             41
     Building in Baltimore.  The News Release states,
     in part, that 'this approach significantly reduces
     maintenance, operation, and alteration cost over
     the life of the building'".

DECLINING PARTICIPATION IN
THE BUILDING SYSTEMS METHOD

     One of GSA's goals in trying the building systems method
was to stimulate use of the method both within the Government
and in private industry.  Response to solicitations for
technical proposals for two subsequent systems projects,
however, were disappointing.

     GSA received only three technical proposals for the
systems portion of the SSA headquarters expansion project
in Baltimore.  They were from the contractor for the L. :1ng
systems for the program centers, an unsuccessful offeroL
for that project, and a joint venture including CM for the
centers. For a Federal Office building systems project in
Norfolk, GSA received only two technical proposals, again
including the same contractor for the centers project, as
well as a joint venture consisting of firms that bid on
the centers contract.

     According to EAE, the building systems concept did
not spread to the private sector for the following reasons.

     -- The process remains an innovative and new idea.

     -- Industry's cost to develop a technical proposal
        and the owner's cost for its evaluation currently
        precludes using the approach on most private
        projects.
     -- Many potential users are awaiting proof of
        user-acceptance of the system.

     Although GSA informed the Congress that it would reduce
the overall period for design and construction with each
succeeding building systems project, its experience with
the Baltimore SSA expansion project does not yet bear that
out. Twenty-seven months elapsed from request for technical
proposals to award of the building systems, compared to
16 months for the centers project. it seems apparent,
therefore, that GSA will substantially overrun its scheduled
4 years for completion of the Baltimore project.



                              42
     The Public Buildings Service Commissioner expressed the
following concern about the time required to select building
systems contractors.

      "The use of Building Systems in the design and
     construction of both the Social Security Admin-
      istration's Program Centers and the Administrative
     Headquarters Expansion projects required an extended
     period of time for the development of Technical
     Proposals and for the evaluation of the proposals
     received. This requirement resulted in a discon-
     tinuity in the preparation of the Out-of-System
     design and retarded the start of construction.
     On these initial projects this condition was
     essential because of the time required by
     potential system offerors to evaluate the per-
     formance specification to determine what role
     ti;;ev had in the development of a Building System;
     and to organize consortia and develop Technical
     Proposals for Building Systems. In addition,
     although the Building Systems developed would
     be transferable to future projects, the proposals
     where, requested within the context of specific
     p;'ojects and their preparation, were based on the
     preliminary design of the projects."

     To overcome these problems GSA announced in July 1975
a program to qualify building syscems independent of
specific projects. The program envisions a continuing
qualification of building systems packages to enable
offerors to prequalify for bidding on future projects.
GSA plans to request technical proposals at least annually
to permit maximum competition on future building systems
projects. The annual solicitation will admit new offerors,
give already qualified offerors an opportunity to submit
improvements, and allow GSA to refine its requirements.

     According to GSA, the technical proposals received by
it for the Norfolk Federal Office Building will become the
first qualified proposals under the prequalification
program.
SUMMARY OBSERVATIONS

     GSA was justified in experimenting with the innovative
building systems concept for the program centers project
as a possible way to reduce acquisition csts and increase
building operation and maintenance efficiency.


                             43
     After GSA awarded contracts and construction began for
the follow-on building systems projects, it encountered many
operating and maintenance problems at the Philadelphia and
Richmond centers.  These were due primarily to systems
design problems and conflicting operating and maintenance
responsibilities peculiar to the building systems method.
One might conclude that GSA should have postponed any new
systems projects until it had enough operating and mainten-
ance experience on the initial projects to assess their
problems and assure effective solutions.

     The declining competition for the building systems
contracts on the follow-on projects is a serious problem,
limiting the number of technical proposals and price
proposals to choose from. Unless more firms become serious
participants in the concept, it is unlikely that GSA can do
much Lu improve it on future applications.




                             44
                         CHAPTER 4

            AGENCY COMMENTS AND OUR EVALUATION

     GSA commented on a draft of our report in a June 29,
1977, letter. It generally agreed with out findirgs and
conclusions, and advised us that some of the shortcomings
we noted on the pilot project have been corrected and steps
are being taken to correct others. GSA also said that,
following completion of the projects now in construction
using the building systems concept, it proposes to
thoroughly evaluate the advantages and disadvantages of the
systems approach for building acquisition.
     Some of GSA's comments deemed pertinent appear in the
body of the report, while all of them are listed in appendix
II.  Certain comments that we believe require clarification
are discussed below.

      GSA stated that the 1-year project delay was due
primarily to a key project activity--congressional author-
ization for the project prospectus--on which approval
action was not completed until February 1973. GSA added that
this key activity had a controlling effect on its ability to
obtain financing with which to complete design and construc-
tion.
     We found that the program centers were initially pro-
posed as direct Federal construction. In January 1972 the
Office of Management and Budget, in apportioning part of
about $18 million the Congress had approved for sites and
expenses, stated that funding for the balance of the pro-
ject was to be obtained under the then pending purchase
contract legislation. The President approved the purchase
contract program in June 1972. Because GSA was uncertain
whether this method of procurement required a congressionally
approved prospectus, one was not submitted to the Congress
until October 20, 1972.
     We believe that much of the delay GSA attributed to
the congressional prospectus authorization process was
actually the result of both the Office of Management and
Budget's funding direction and GSA's indecision on the need
for a prospectus. As we state in the report and GSA
confirms, had congressional approval action on the
prospectus been completed sooner, other technical aspects
of the building systems approach would have, to some degree,
delayed completion of the buildings.


                              45
       In commenting on the project's cost overrun, GSA referred
 to our discussion on page 31 concerning the action
                                                      taken to
 increase the estimated construction cost of the building
 systems work from $24.5 million tc $28 million.    It pointed
 out that under the convc tional method of construction,
                                                           AE
 would be responsible for Jesigning the entire building
                                                          in
 addition to design development costs.   GSA argued that under
 the building systems concept, the system contractor
                                                       accomp-
 lishes design development; therefore, the increased
                                                       estimated
 cost ($3.5 million) of the system<- work cannot be
                                                     considered
 solely as a construction cost.

     We agree that some of the $3.5 million may relate to
design costs that AE would normally incur under conventional
building procedures.   Of this, however, the records indicate
that most, if not all   was due to the special requirements
envisioned by EAE as resulting from the building aystems
portion of the contract.   CM's estimate of $24.5 million
for the project was based on construction costs using
                                                        con-
ventiondl methods.   Executive AE increased this amount by
$3.5 million to provide for the special design costs,
                                                        test
and prototype costs, and the general development cost
                                                       of
the new building system.   No mention was made by EAE of
the AE's design development cost.

      GSA, in commenting on our finding that the claimed
energy savings could not be verified, stated that the
                                                       pro-
curemei;t occurred prior to the increased emphasis on
                                                      energy
conservation.   Accordingly, the building system was not de-
signed to today's level of energy conservation.   On the other
hand, EAE stated that emphasis on energy use in life-cycle
costing required energy-efficient designs even before
                                                       the
energy crisis occurred.   EAE further stated that his calcula-
tions showed that the building systems design was
                                                   25 percent
more energy efficient than a conventionally designed
                                                      system.
We found that this statement could not be verified
                                                    by GSA
and that its operating experience with the buildings
them to be relatively high users of energy.           shows


     GSA also commented on a possible energy reduction of
100,000 Btus per square foot per year in both the Phila-
delphia and Richmond centers.  Such a reduction would still
leave the two centers higher energy users than GSA's
                                                     average
buildings.

     GSA also stated that the mechanical maintenance costs
                                                            for
the Philadelphia center have been reduced from $.85
                                                     per square
foot to $.64 per square foot.  The reduction is commendable,
but the cost per square foot still appears high when
                                                      compared
with GSA's normal cost.



                              46
APPENDIX I                                                                                                    APPENDIX I

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                                     mINSYe~n                                  WADHINGlTON,. D.C.   R0o10




                                                                                         February 16, 1975
            Honorable Elmer B. Stasts
            Comptroller General
            General Accountirng Office
            Washington, D.C.

            Dear Mr. Staats:

                 is prospectus pending before this Subcommittee proposes con-
            struction of new Social Security Administration facilities in
                                                                           the
           Baltimore, Maryland metropolitan area at a cost of                                        3161,00,000.
            These are intended to provide space for expansion and consolidation
            of existing headquarters operations there.

                Social Security administration and General Services Administration
           advocate construction by an unconventional method designated
                                                                        building
           systems concept, citing anticipated economic and technical advantages.
           Three similar SSA buildings were previously authorized as pilot
                                                                           pro-
           jects, to demonstrate experimental features of such concept, but
           these are incomplete and progress has not sufficiently advanced
                                                                            to
           justify commitment on this basis.

                GSA advir s that consolidation of two or more projects under a
           single contract is essential, to reduce costs through large volume
           purchasing, and also effect more efficient coordination ot technical
           expertise. The magnitude of such contracts necessitates Joint-venture
           package bidding by consortiums comprising industrial, construction,
           and design liaisons, which could tend to minimize opportunities
                                                                           for
           competitive bidding in some instances. The significance of this,
                                                                             and
           the fact that design. construction, and supply firms throughout
                                                                           the
           country are experiencing economic problems, generates doubt regarding
           the propriety of encouraging or participating in such practice.

                 In fulfilling its assigned .versSht responsibilities, the Sub-
           com.mittee desires to explore all facets of the building systems
                                                                            con-
           cept, as applied to date tn referenced construction now underway,
           and ascertain whether continued implementation on other projects
                                                                             should
           be considered.




                                                                         47
APPENDIX   I                                              APPENDIX   I


                                 -2-


     Proceeding accordingly, I request that an intensive review
be initiated, and a comprehensive report submitted ~:t the earliest
practicable time, supplemented by interim verbal reports ns appropriatc.
This effort should focus upon all details relevant to contract matters,
from solicitation throtgh award, with particulr emphesis given to
aspects which could be construed as inhibitin 6 competitinn in any
manner, including selection of principals and mandatory large-scale
prczurement of materiel. Your observations regarding the degree of
direct control that GSA now exercises over the projects are requested,
considering their delegation of mo.jor responsibility by contract to
the Executive Architect Engineer nnd Construction Maniger. Any
comments reflecting either superiority of the system:s method over
conventional construction, or adverse conditions encountered dlring
actual application of the concept, will also be appreciated.

                                   Sincerely,




                                   Robert Morgan, Ch lrmfin
                                   Subcommittee on
                                   RBuildings and Groundr




                                  48
APPENDIX   II                                                                  APPENDIX   II

                                 UNITED STATEb OF AMERICA
                        GENERAL SERVICES ADMINISTRATION
                                     WASHING0ON.   DC   2d045



      June 29, 1977


     Honorable Elmer B. Staats
     Ccmptroller General of the United States
     General Accounting Office
     Washington, DC 20548

     Dear Mr. Staats:

     Thank you for the copies of your draft report to the Subcommittee on
     Buildings and Grounds on the General Services Administration's use of
     the Building Systems Concept in the construction of Federal Buildings,
     dated April 1977. We appreciate the opportunity to review the draft
     report and enclose our couments.

     The building systems concept is new to GSA as well as to the entire
     construction industry. Consequently, the concept is not universally
     understood. Some of the building systems shortcomings cited in your
     eummary observations have been corrected and we are taking steps to
     correct others.

     Following the completion of the Social Security Administration
     Headquarters Expansion Project, Baltimore, Maryland, and the Norfolk
     Federal Building and Parking Facility, both of which are currently
     under construction, we propose to make a thorough evaluation of the
     advantages and disadvantages of the systems approach for building ac-
     quisition. We will evaluate zach of the six completed buildings in
     terms of quality, completion time-frame, cost, operation and mainte-
     nance factors, industry participation and degree of acceptance by the
     private sector of the systems procurement approach, life-cycle costs
     and energy conservation factors.

     We will be glad to supplement the enclosed comments with any additional
     data you may wish.

     Sincerely,




     'iez-.     0olomon
        Administrator

     Enclosure




                        Keep Freedom in rour F'tlure With U.S. Savings Bonds




                                                 49
APPENDIX   II                                                  APPENDIX II


                            GSA COMMENTS ON
              GAO DRAFT REPORI ON GSA USE OF THE BUILDING
        SYSTEMS CONCEPT IN TIE CONSTRUCTION OF FEDERAL BUILDINGS


 The following comments are offered in response to findings and observations
 contained in the draft report entitled, "Use of Building Systems Concept
 in the Construction of Federal Buildings", dated April 1977, prepared by
 the staff of the General Accounting Office.

                               CHAPTER II

 EXPRESSED INTEREST OF THE SUBCOMMITTEE IN GSA'S CONTRACTING PROCEDURES
 CONTROLS

 We concur in the staff observation that GSA generally complied with Federal
 procurement regulations in contracting for the principals' services on the
 Program Centers, obtained competition for the building systems contract,
 and had adequate controls over the contractors' obligations regarding costs
 and project schedules. The principal problems observed by the GAO staff
 were:

 1. Two firms had a possible advantage over other firms in the selection
    process for regional A/E's.

 COMMENT: It is acknowledged that the Regional Public Advisory Panels on
 Architecture did recommend as highly qualified five (5) A/E firms for the
 Philadelphia Program Center, one of which had previously served on the
 advisory panel which had screened firms being considered for selection as
 the project Executive Architect-Engineer; and also recommended as highly
 qualified six (6) A/E firms for the Richmond Program Center, one of which
 had a principal who had served on the full regional advisory panel. The
 report accurately states that in the latter instance, the selection memoran-
 dum did point out that the principal in question did not attend the meeting
 in which the decision was made as to the firms judged highly qualified.

Although the two (2) firms were subsequently selected and awarded design
contracts for the Philadelphia and Richmond projects, there is no evidence
that their membership on regional advisory panels gave them any advantage
over other firms being considered for selection. Recognizing, however, that
such actions might possibly raise questions concerning the objectivity of
GSA's A/E selection procedures, in November 1975, we modified the procedures
to provide that members accepting service on the regional panels shall agree
that their firms and their subsidiary or parent firms will not be eligible
for GSA awards of any kind for the period of their appointment as panel
members.
APPENDIX II                                                    APPENDIX    II




 2.   Exclusion of interest costs from the analysis of life-cycle costs---
      The study team members conclude that generally, life-cycle costing
      should have included all costs of ownership over the life span of the
      building, which GSA has determined to be 40 years for Federal Office
      Buildings. For the Social Security Administration Program Centers,
      life-cycle costs factors considered in the bid proposals for the build-
      ing systems included only HVAC operation, alteration costs and lighting
      costs. Omitted as factors were financing costs (i.e. interest cost for
      the total systems costs discounted over 40 years to yield the present
      value of such costs) as well as total building operation costs.

 COMMENT: At the time the Executive Architect-Engineer was developing the
 basis of award formulae, interest rates were fluctuating and the members of
 the Technical Proposal Evaluation team made a management decision that a
 representative interest rate could not be objectively selected. Also, since
 the first cost of the proposed systems bids were expected to be extremely
 close, it was felt that the cost of money would not affect the bids. This
 latter assumption -rJved to be erroneous since the first cost of the systems
 bids were not substantially the same. The 2.5 million difference, when dis-
 counted over 40 years would have had an effect on the bids.

 However, the coat of money was included as a life-cycle cost factor in the
 basis of award formula for the Social Security Adminis- tion Headquarters
 Expansion Project, Baltimore, Maryland, and the Federal Building and Parking
 Facility, Norfolk, Virginia, both of which are Building Systems projects.
 In addition, the award formulas have included the anticipated accelerated
 appreciation in the cost of energy over the general rate of inflation.
 Since no objective method has been found to accurately determine the mainte-
 nance costs and related costs for equipment replacement during the expected
 lifetime of the buildings, past the nine yea. contract requirement, we con-
 sider the inclusion of only the bid price for the in-system equipment to be
 a reasonable life-cycle cost factor alternative.

 3.   Complication of contract awards and a.ministration by including a 9-year
      maintenance requirement in the building systems contract -- As noted in
      the draft report the maintenance option required the building systems
      contractor to modify, repair and repla-e elements or components of the
      system as necessary to meet the performance requirements of the contract
      and to clean certain components.

 COMMENT: It is suggested that this section (pp. 25 and 26) be expanded to
 show that the Technical Proposal Evaluation team determined the objections
 cited by the unsuccessful system bidder to the inclusion of maintenance
 option as a basis of award to be without merit. It was GSA's contention
 that the 9-year maintenance provision provided a further guarantee (beyond
 the physical, prototype, and field testing) that the building systems would
 meet required performance standards and placed the responsibility for reli-
 able system component maintenance, repair and replacement on the system con-
 tractor. On the two follow-up building systems projects, the provisions of
 janitorial and custodial housekeeping function have been eliminated from the
 maintenance contracts.




                                      51
APPENDIX     II                                                     APPENDIX II

3

4.   GAO concludes that GSA obtainea competition, but competition was some-
     what restricted because no single firm had the capability and consortium
     of firms had to be formed, interpreting the specifications and preparing
     technical proposals was extremely complex and very costly, and only
     three of nine firms submitting technical proposals were able to qualify
     to bid on the contract.

COMMENT: We concur in the audit team's finding that no single firm had the
technical, professional and management expertise to accomplish the building
systems work. Of the 640 firms and individuals receiving copies of the re-
quests for technical proposals, most of them expressed Interest only for
specific segments of the building systems. Hence, it was necessary to en-
ccrage the formation of a consortium of firms to accomplish the entire
system work. The cost of preparing technical proposals, estimates of which
ranged from $100,000 to $500,000, can also be considered an Inhibiting fac-
tor which limited the number of participating firms.

5.   Poor control over the building systems contractor's compliance with
     performance specifications -- For the reasons set forth on pp. 30 - 36,
     the GAO study team concludes that GSA and SSA do not have full assurance
     that the performance specifications were met by systems contractors.

COMM}ENT: In view of the fact that over 500 separate calculations, produc-
tion, prototype and field test were performed on the in-system portions of
the buildings, the Project Manager, the Executive Architect-Engineer and
the Construction Manager do believe that the performance specifications were
met by the systems contractor. However, as a result of the audit team's
in-depth analysis, we have made a further review of the project documenta-
tion in an attempt to account for and clarify some of the apparent test
deficiencies noted in the draft report. Our findings are:

     a.   The referenced construction contracts (p. 31) which were awarded and
          completed or under way for the Philadelphia and Richmond Centers
          prior to approval of the system prototype test results were out-of-
          system construction contracts and thus were not affected by in-
          system prototype test results. The Project Manager had indicated
          that at the time the prototype test results were approved no in-
          system components which would have been affected by the test results
          had been installed in the buildings.

     b.   If any prototype elements of the building system had failed to meet
          performance specifications, they would have had to he redesigned and
          installed elements pulled out and all costs associated therewith
          borne by the systems contractor.

     c.   It has been confirmed that all structural steel calculations were
          certified by an engineer of the steel supplier in lieu of an
           independent tester/observer. We have verified that Requirement
          3c - la on page F-37 of the Performance Specifications did not re-
          <,i!ire these (-:l'tlations to be made or certified by an independent
             t er1ubs;
               e.      :vt:-.




                                         RX
APPENDIX    II                                                  APPENDIX II

4

    d.   Although the Construction Manager did illustrate the importance of
         the testing results by citing an incident of threaded studs which
         fell off one of the buildings (the Richmond Center), a review of this
         problem disclosed that only four (4) of the several hundred studs re-
         quired to support the precast exterior wall on the Richmond project
         fell off the building. The general consensus is that they were dis-
         lodged in the course of placing a section of the precast wall. Upon
         replacement, no further problems were encountered in the erection of
         the exterior wall.

    e. The project team decision to perform a portion ,f the field tests in
       only one building did apply only to the tests oi system components
       which were identical in each building (p. 33). there building systems
       components were different in the three buildings (largely in the HVAC
       sub-system) separate tests were performed in al' three buildings.

    f.   The performance specifications which provided that field tests were
         to be used for Requirement ld - 7 - Control Deflections and for
         Requirement ld - 12 -- Provide Protection Against Damage -- were
         determined to be in error. These tests were made by calculations in
         lieu of field testing, and our review indicates that the calculations
         as submitted by the system contractor were approved by the Government.

    g. As noted in the draft report (p. 34) the Richmond buildinC did fail
       to pass the HVAC field tests identified as Requirement 2a - 3 --
       Control Dry Bulb Temperature, and Requirement 2e - ld -- Conform to
       Codes and Standards. The test results on the dry bulb temperature
       control were rejected since it indicated one unusually low tempera-
       ture. Subsequently, this was determined to be due to a typographical
       error on the test report which was corrected, resubmitted by the
       contractor and approved by the Government. Certification of the
       Codes and Standards conformance tests were resubmitted and also ap-
       proved by the Government.

    h.   We have verified that the five (5) test results listed on p. 34 and
         reported as not being submitted for the Richmond Project were sub-
         mitted on March 26, 1976, and approved by the Government.

    i. On review, we have found that the test for control f surface color
       stability (p. 34) was not waived on the Program Certers project.
       Rather, it was determined that the specification requirement was
       excessive and the criterion was reduced to a level consistent with
       prevailing industry standards.

                              CHAPTER III

 OBSERVATIONS AND COMMENTS ON USE OF BUILDING SYSTEMS CONCEPT

 The audit team concludes that GSA did not fully attain the goals it set for
 construction of the SSA Program Center project through the building systems




                                     53
APPENDIX     II                                                    APPENDIX      II




method. Generally, the Centers were not completed on schedule; planned
total construction costs were exceeded; life-cycle cost objectives were not
met; claimed energy savings could not be verified; serious and costly oper-
ation and maintenance problems have occurred; and the building systems con-
cept has not spread. Each of these findings and conclusions are discussed
in the order presented.

Project Schedule Over-run. We concur in the audit team's findings that the
SSA Program Centers project was not completed on schedule. The Richmond
and Philadelphia buildings were completed in approximately 4 years instead
of 3, and the Chicago building experienced a delay of approximately 2 years.
On analysis, however, we find that the one year delay on the Richmond and
Philadelphia buildings was primarily due to one key critical path project
process activity -- Congressional authorization of the project prospectus,
on which approval action was not completed until February 1973. This key
activity had a controlling ripple effect on GSA's ability to obtain pur-
chase contract financing with which to complete the out-of-system design,
award a systems contract, proceed with the acquisition of the selected
sites, and award phased out-of-system construction contracts.

Hence, in this instance, we find that the use of building systems, even
though the schedule for preparation and submission of technical proposals
was extended from four (4) months to almost a year because of the uncer-
tainty of site conditions and the need to amend and clarify the Performance
Specifications, was not a controlling factor contributing to the one-year
delay in the completion of the two buildings.

 The key factors contributing to the two-year delay in the completion of the
 Chicago project was the aforementioned prospectus action and the slope
 failure and foundation damage during the project construction phase.

It must be admitted, however, that had Congressional approval action on the
project prospectus been completed sooner, then the system offerors' techni-
cal proposal preparation, evaluation and qualification process actions would
have contributed to some degree of delay in the completion of the buildings.
As noted in the draft audit report it was necessary to make numerous amend-
ments to the Performance Specifications for the seven sub-system elements,
many of which resulted from feedback information furnished by potential
systems offerors. By contrast, under GSA's current prototype building
systems qualification program, the time frame for award of a systems con-
tract for the Norfolk building systems project was completed in six (6)
months.

We believe that the project schedule sli. page time on the three buildings
would have been greater but for the Project Manager's decision to reduce the
plannea 25 weeks allocated for evaluation of technical proposals to only 12
weeks. Thoutwh this action may have limited the final competition because
two ohilhr oiferors might have qualified if given additional time to modify
 t   oir Ltchnical proposals,   it expedited the award of the systems contract




                                        54
APPENDIX     II                                                  APPENDIX II


6

and permitted the successful bidder to initiate design of the system compo-
nents. We have since been advised that at least one of the two offerors was
not interested in doing any further work on his proposal regardless of the
amount of time available to make corrections to the technical proposal.

2.   Project Cost Overrun. The audit-team estimated the total project cost
     overrun to be $4.4 million ($114.9 million as compared to the prospectus
     estimate of $110.5 million).

COMMENT: We believe that the initial building system project, in terms of
total cost, compares favorably with conventional public buildings projects.
About $3 million of the total project cost overrun was ne, essary to remedy
the foundation problem experienced on the Chicago building. The balance has
been set aside as a contingency reserve to settle possible additional con-
tractor's claims. We consider it significant that the building system con-
tract was relatively free of change orders resulting from design deficiencies.
This can be attributed to the fact that the system contractor was responsible
for the design of the building system, as well as its manufacture, installa-
tion and maintenance.

The audit team has made reference (p. 40) to the action taken by the Con-
struction Manager in increasing the estimated construction cost of the build-
ing systems work by $3.5 million (from $24.5 million to $28 million). From
this they concluded (p. 42) that the Federal Government expected to pay about
$3.5 million more for the building systems portion of the project by using
the performance specifications rather than by using prescriptive specifica-
tions under the conventional method of construction. We believe that the
following factors should be considered in this matter. Under the conven-
tional method of construction, the Architect-Engineer would be responsible
for the design of the entire building including the structure, HVAC, electri-
cal distribution, finished floor and ceiling, luminaires and space dividers,
estimated to cost approximately $28 million, in addition to his design
development costs. Under the building system concept, the design development
is accomplished by the system contractor, hence the revised estimated total
cost of the systems work cannot be considered solely as a construction cost
item.

3.   Life-cycle cost objectives were not met and claimed energy savings could
     not be verified.

COMMENT: The building system procurement was the first time GSA has ever
considered estimated energy consumption as one of the factors in the award
of a construction contract. This procurement occurred prior to the in-
creased emphasis on energy conservation. Accordingly, the building system
was designed to provide a level of performance based on the comfort of the
building's occupants and not energy conservation as practiced today.

The audit team reports, and we agree, that it is impossible to take certain
energy conservation measures in the system buildings that have been taken in




                                      55
APPENDIX II                                                     APPENDIX II




other Federal buildings. On the other hand, some of our energy conservation
measures can be implemented by modifying the building systems' contract re-
quirements to revised levels of performance. Some changes have already been
made and additional changes are contemplated. Specifically, in the
Philadelphia building, switching of the lighting from the building's central
control panel in lieu of individual panels on each floor has been provided
and similar changes are planned for the Richmond and Chicago buildings. In
addition, it is planned that the lighting levels will be reduced in all three
buildings through the removal of at least one fluorescent lamp from each
lighting fixture. (As described above, the performance of the building
system was based on the comfort of the building's occupants and not the con-
servation of energy. Accordingly, the required lighting level was 100 foot-
candles. Removal of one lamp from each fixture will reduce the level to
approximately 70 footcandles which is more consistent with the lighting level
required in order to conserve energy). The foregoing measures should reduce
the raw source energy consumption of the Philadelphia and the Richmond build-
ings by approximately 100,000 BTU/sq. ft./yr., or to approximately 460,000
and 320,000 BTU/sq. ft./yr., respectively. In addition, the possibility of
modifying the in-system and out-of-system mechanical systems in the Program
Centers to function in greater harmony is also being considered. Any such
changes should further reduce the energy consumption of the buildings.

The HVAC subsystem performance is based on three operating parameters. Two
of these, dry bulb temperature and relative humidity, are easily measured
with high accuracy and are usually the only ones specified in a performance
contract such as the leased building in Birmingham, Alabama. The third
requirement of air motion is difficult to measure at the low levels specified
(20-50 feet per minute). This is the first time that we are aware that a
minimum air motion has ever been specified in building construction. Because
of the system procurement, GSA is able to obtain this (and all other) per-
formance requirements over the 9-year life of the system maintenance option,
whereas in conventional construction all guarantee requirements are satis-
fied 1 year after building acceptance. GSA is continuing to develop a meth-
odology whereby this aspect of performance can be accurately and repetitively
measured.

4.   Serious and costly operation and maintenance problems have occurred.

COMMENT: Since the completion of the audit study, the mechanical mainte-
nance costs for the Philadelphia Program Center have been reduced from $0.85
psf to $0.64 psf. This was accomplished by reducing some of the man hour
requirements for staffing the out-of-systems central control panel and obtain-
ing competitive bids on the out-of-systems maintenance requirements in lieu
 'f negotiating with the systems contractor. Additional savings were real-
ized for the cleaning maintenance using these procedures.
APPENDIX II                                                    APPENDIX II


8

The building system maintenance option is a nine-year warranty which we
consider to be advantageous over the conventional one-year warranty guaran-
tee. For example, if a piece of equipment requires major repairs or re-
placement, the cost is borne by the systems contractor in lieu of the
Government.

5.   The building systems concept has not spread.

COMMENT: We have found that the initial three building systems projects did
not stimulate widespread industry commitment to the total system concept.
On the other hand, selected sub-systems such as HVAC, finished ceiling,
luminaires, and space dividers, all of which are commonly referred to as
Integrated Ceiling and Sound Background System has gained widespread accept-
ance in the private sector. Therefore it can be concluded that the con-
tinued use of the building systems concept, modified to correct noted de-
ficiencies, may generate greater industry interest as was initially
envisioned.




        GAO Note:

             Page references in this appendix refer to the
             draft report and do not necessarily agree with
             the page numbers in the final report.




                                       57
 APPENDIX III                                         APPENDIX III


                           PRINCIPAL OFFICIALS

                RESPONSIBLE FOR ADMINISTERING ACTIVITIES

                       DISCUSSED IN THIS REPORT


                                           Tenure of office
                                          From           To
ADMINISTRATOR OF GENERAL
  SERVICES:
    Joel W. Solomon                    May     1977     Present
    Robert T. Griffin (acting)         Feb.    1977     Apr.  1977
    Jack Eckerd                        Nov.    1975     Feb.  1977
    Arthur F. Sampson                  June    1973     Oct.  1975
    Arthur F. Sampson (acting)         June    1972     June  1973
    Rod Kreger (acting)                Jan.    1972     June  1972
    Robert L. Kunzig                   Mar.    1969     Jan.  1972
COMMISSIONER, PUBLIC BUILDINGS
  SERVICE:
    James Shea                         June    1977     Present
    Tom L. Peyton (acting)             May     1977     June  1977
    Nicholas A. Panuzio                Sept.   1975     Apr.  1977
    Walter Meisen (acting)             Oct.    1974     Sept. 1975
    Larry F. Roush                     Aug.    1973     Oct.  1974
    Larry F. Roush (acting)            Jan.    1973     Aug.  1973
    John F. Galuardi (acting)          July    1972     Jan.  1973
    Arthur F. Sampson                  Mar.    1970     June  1972




( 94 ( )O

                                58