GSA - FY'98 Leasing Program and General GSA Leasing Policy

PUBLIC BUILDINGS SERVICE
GENERAL SERVICES ADMINISTRATION
BEFORE THE
SUBCOMMITTEE ON PUBLIC BUILDINGS AND ECONOMIC DEVELOPMENT
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
UNITED STATES HOUSE OF REPRESENTATIVES

OCTOBER 8, 1997

MR. CHAIRMAN, MR. TRAFICANT AND MEMBERS OF THE SUBCOMMITTEE, I AM PLEASED TO APPEAR BEFORE YOU TODAY TO DISCUSS THE GENERAL SERVICES ADMINISTRATION'S (GSA) LEASING PROGRAM. I LAST APPEARED BEFORE THIS SUBCOMMITTEE TO DISCUSS OUR LEASING PROGRAM IN JULY OF 1996 WHEN WE ANNOUNCED OUR "CAN'T BEAT GSA LEASING" PROGRAM. I SAID THAT WE WERE GOING TO POSITION THE LEASING PROGRAM OF THE PUBLIC BUILDINGS SERVICE SO THAT OUR CUSTOMERS WOULD CHOOSE US TO PROVIDE LEASING SERVICES BECAUSE WE WERE RESPONSIVE TO THEIR NEEDS FOR TIMELY AND COST-EFFECTIVE DELIVERY OF PRIVATELY OWNED SPACE AND NOT BECAUSE SOME GOVERNMENT REGULATIONS SAID THEY HAD TO.

I AM PLEASED TO REPORT TO YOU THAT OUR REFORM EFFORTS ARE BEARING FRUIT. THE GSA LEASING PROGRAM IS NOW MORE COMPATIBLE WITH PRIVATE SECTOR LEASING PRACTICES AND IS PROVIDING MUCH MORE TIMELY AND EFFICIENT LEASING SERVICES TO ITS FEDERAL AGENCY CUSTOMERS. THIS IS IN LARGE MEASURE DUE TO THE SUCCESSFUL REINVENTION OF THE LEASING PROGRAM BY THE PUBLIC BUILDINGS SERVICE'S LEASING PROGRAM EMPLOYEES THEMSELVES, IN NUMEROUS BUSINESS INNOVATIONS ADOPTED AND PROMOTED THROUGH OUR "CAN'T BEAT GSA LEASING" PROGRAM.

SINCE THE IMPLEMENTATION OF THIS PROGRAM A LITTLE MORE THAN A YEAR AGO THE CYCLE TIME FOR THE AWARD OF LEASES APPEARS TO HAVE BEEN GREATLY REDUCED, REGARDLESS OF THE SIZE AND COMPLEXITY OF THE LEASE. PRELIMINARY RESULTS INDICATE THAT LEASES OF ALL SIZES HAVE HAD AWARD CYCLE-TIME REDUCED BY MORE THAN 50%.

UNDER "CAN'T BEAT GSA LEASING" WE PARTNER WITH OUR CUSTOMERS. STANDARD FORMS HAVE BEEN ELIMINATED FROM THE PROCESS IN ORDER TO TAILOR PROJECTS TO THE SPECIFIC NEEDS OF INDIVIDUAL CLIENTS. CUSTOMERS ARE BEING PROVIDED THE OPPORTUNITY TO DEFINE THEIR PROJECT EXPECTATIONS UP FRONT AND TO STAY INVOLVED IN THE PROCESS FROM BEGINNING TO END. WE NOW USE THE INTERNET TO SHARE INFORMATION WITH THE REAL ESTATE MARKET. WEB BROWSERS CAN NOW MAKE REQUESTS FOR INFORMATION ON SPECIFIC PROCUREMENTS AND FIND SOLICITATIONS, CONTRACT CLAUSES, ETC. ON THE INTERNET.

IN JULY OF 1996 1 SAID THAT WHEN AGENCIES HAD THE CHOICE TO STAY WITH US OR TAKE THEIR LEASING BUSINESS ELSEWHERE THAT I BELIEVED GSA WOULD MAINTAIN ITS SHARE OF THE FEDERAL REAL ESTATE MARKET. I AM PLEASED TO SAY THAT THIS IS WHAT HAS HAPPENED.

IN THE PAST YEAR TWELVE AGENCIES HAVE OPTED TO EXERCISE THE LEASING DELEGATION FOR 14 ACTIONS TOTALING 220,000 SQUARE FEET OF LOST BUSINESS FOR GSA. HOWEVER THERE HAVE BEEN 17 INSTANCES WHERE AGENCIES WITH THEIR OWN STATUTORY LEASING AUTHORITY HAVE COME TO GSA AS THEIR PROVIDER OF CHOICE. THESE CASES REPRESENT AN INCREASE IN BUSINESS OF APPROXIMATELY 450,000 SQUARE FEET. GIVEN THAT GSA PROCURES AN AVERAGE OF 900 LEASES EVERY YEAR, THESE FIGURES REPRESENT ONLY A VERY SMALL PERCENTAGE OF GSA'S TOTAL VOLUME OF LEASING. IT WOULD APPEAR THAT UNDER THE "CAN'T BEAT GSA LEASING" PROGRAM THERE HAS BEEN A HIGH LEVEL OF CUSTOMER RETENTION.

IN JULY OF 1996 I ALSO TOLD THIS SUBCOMMITTEE THAT GSA COULD NOT MEET OUR CUSTOMERS NEEDS IN A TIMELY AND EFFECTIVE MANNER WITHOUT EMBARKING ON A NEW PUBLIC/PRIVATE PARTNERSHIP IN WHICH GSA WOULD HAVE ITS RESOURCES SUPPLEMENTED BY THE PRIVATE SECTOR. TO THIS END WE INSTITUTED A COMPETITIVE PROCUREMENT AND HAVE SIGNED A NATIONAL REAL ESTATE SERVICES CONTRACT WHICH PROVIDES US WITH THE ENHANCED CAPACITY TO DELIVER A BROAD RANGE OF REAL ESTATE SERVICES QUICKLY AND WITH UP-TO-THE-MINUTE MARKET KNOWLEDGE.

FOR SERVICE DELIVERY PURPOSES WE DIVIDED THE U.S. INTO FOUR GEOGRAPHIC AREAS AND AWARDED TWO CONTRACTS PER ZONE TO PRIVATE SECTOR FIRMS. THE CROWN PARTNERSHIP, INC. AND SPAULDING AND SLYE, L.P. HAVE BEEN AWARDED CONTRACTS IN THE EAST ZONE. AMELANG MANAGEMENT CORPORATION WAS AWARDED A CONTRACT IN THE SOUTH ZONE, EQUIS CORPORATION WAS AWARDED CONTRACTS IN THE SOUTH, CENTRAL, AND WEST ZONES, AND PM REALTY GROUP WAS AWARDED CONTRACTS IN THE CENTRAL AND WEST ZONES. THESE CONTRACTS ARE FOR AN INITIAL TERM OF THREE YEARS, WITH TWO 1-YEAR RENEWABLE OPTIONS. I KNOW THAT GSA WILL BENEFIT FROM THE ACCESS TO PRIVATE SECTOR TECHNOLOGY, MARKET INTELLIGENCE, AND BUSINESS PRACTICES WHICH THESE PARTNERSHIPS WITH THE PRIVATE SECTOR PROVIDE. THE CONTRACTORS ARE CURRENTLY UNDERGOING TRAINING IN FEDERAL PROCUREMENT LAWS AND PRACTICES.

MOST RECENTLY WE HAVE REACHED AGREEMENT WITH OMB ON A NEW PRICING POLICY FOR LEASES. A PILOT PROGRAM FOR THIS NEW PRICING POLICY WILL GO INTO EFFECT IN FY 1998 FOR NEW LEASES. THE ADMINISTRATOR OF GSA WILL ISSUE A FORMAL DEVIATION FROM THE EXISTING FPMR TO ACCOMPLISH THIS CHANGE. WE HAVE ISSUED A DRAFT DESK GUIDE TO OUR REGIONS OUTLINING THE NEW PRICING POLICY AND HAVE WRITTEN TO OUR CUSTOMER AGENCIES INFORMING THEM OF THE CHANGES THEY CAN EXPECT TO SEE IN THE BILLING PROCESS.

THE NEW BILLING SYSTEM IS MORE FLEXIBLE AND DYNAMIC THAN OUR OLD BILLING METHOD, AND HAS MORE OF A PRIVATE SECTOR ORIENTATION. WE HAVE REDUCED THE NUMBER OF SPACE CLASSIFICATIONS FROM 16 TO 4: GENERAL PURPOSE, WAREHOUSE, PARKING, AND UNIQUE. EACH TRANSACTION BETWEEN GSA AND AN AGENCY WILL STAND ALONE AND BE PRICED INDEPENDENTLY OF OTHER TRANSACTIONS IN THE SAME BUILDING OR WITH THE SAME AGENCY. MOST IMPORTANT, THE PRICING SYSTEM IS BASED ON A "MARKET PASS-THROUGH" OF THE GSA LEASE RENT WE PAY TO THE PRIVATE SECTOR LESSOR, PLUS AN ITEMIZATION OF OTHER SERVICES PROVIDED AND A BENCHMARKED GSA FEE. OUR CUSTOMER AGENCIES WILL SEE THE COST OF THEIR LEASES IN SUFFICIENT TIME FOR INCLUSION IN THEIR BUDGET REQUESTS TO OMB, AND WILL BE ABLE TO CLEARLY IDENTIFY THE COMPONENTS OF THEIR RENTAL PAYMENTS TO GSA.

IT IS OUR GOAL TO BEGIN TO USE A NEW PRICING POLICY FOR GOVERNMENT-OWNED SPACE WHEN THE OCCUPANCY BEGINS IN FY 1999 OR LATER, AND TO CONVERT ALL EXISTING ASSIGNMENTS TO THE NEW PRICING SYSTEM IN FY 2000.

THIS CONCLUDES MY TESTIMONY MR. CHAIRMAN, AND I WOULD BE HAPPY TO ANSWER ANY QUESTIONS WHICH THE SUBCOMMITTEE MAY WISH TO ADDRESS AT THIS TIME.

Last Reviewed 9/30/2008

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