July 05, 2016

Rep. Carson's opening statement at hearing on: “Independent Leasing Authorities: Increasing Oversight and Reducing Costs of Space Leased by Federal Agencies”

Statement of
The Honorable Andrè Carson
Ranking Member, Subcommittee on Economic Development, Public Buildings and Emergency Management
House Transportation and Infrastructure Committee

“Independent Leasing Authorities: Increasing Oversight and Reducing Costs of Space Leased by Federal Agencies”

July 6, 2016


Good morning.


Welcome to today’s hearing about the use of independent leasing authority.   On behalf of the Subcommittee, Chairman Barletta and I requested two reports from the Government Accountability Office (GAO) on the use of independent leasing authority by Federal agencies and the use of purchase options in leasing.  


This hearing highlights some of the findings from both of these reports.  I am especially interested in the assessment of how the General Services Administration (GSA) manages the civilian real estate inventory and its ability to advise other parts of the Federal government on leasing commercial office space and warehouse space. 


In 1949 President Harry Truman signed a law that created the modern-day GSA and consolidated several disparate Federal agencies into one agency tasked with providing workplaces for federal employees and administering supplies.  Since GSA was created, it has grown into a real estate giant that leases over 8,000 property assets, totaling 191 million rentable square-feet with annual cost of $5.6 billion dollars. 


However, in January 2003, GAO designated federal real property management as a high risk area, due in part, to the government’s over-reliance on costly leasing.  The Federal government’s real estate portfolio was in need of oversight and corrective action.  To that end the Office of Management and Budget issued memoranda in 2012, 2013, and 2015 requiring federal agencies to freeze and reduce their space footprint.  This Administration’s sustained effort, coupled with the efforts of this subcommittee, have resulted in millions of square feet of underutilized and unneeded property being shed from the federal real estate inventory. These efforts have saved money and allowed precious resources to be better used to achieve agency missions.


While there has been progress in right-sizing the federal real estate inventory, last February the leadership of this Committee wrote to GAO asking them to study how agencies with their own leasing authority independent of GSA are exercising that authority.  As detailed earlier by the Chairman, many of these agencies were not subject to the ‘Freeze the Footprint’ or ‘Reduce the Footprint’ directives from OMB.  Though this group of agencies tended to get lease rates that were similar to GSA, many of them often acquired more space than GSA would typically allow.  Additionally, GAO has indicated that some of the agencies that have independent leasing authority don’t necessarily have the legal authority to sign a long term operating lease.  Many of the agencies that GAO examined are doing a good job, but there is room for improvement and the opportunity to find additional savings in future lease agreements.


In addition to our request for GAO to study independent leasing authority, we also asked GSA to study the use of purchase options in lease agreements.  Purchase options allow GSA to purchase a building at various points in a lease agreement. 


However, GSA’s decision to lease or use a purchase option to obtain a building is often influenced by budget scorekeeping which determines how much money GSA must obligate when it enters into a lease.  This has led to decisions that cost a relatively small amount of money upfront but ultimately cost more in the long term.  I hope to hear more today from GAO about how this impacts GSA’s ability to manage the federal real estate inventory in a cost efficient way.


Today’s testimony and dialogue should serve as guideposts to how agencies exercise their independent leasing authority going forward and how more effective use of purchase options can lower the cost of housing federal agencies further.  I look forward to moving this discussion forward.