AJC Watchdog: First Alert

Keeping watch on those who hold the public trust and money

Feds blowing millions on office rent, study finds

When it comes to renting office space, the federal government shells out money like amateurs, paying too much and needlessly going into debt to fund renovations, according to a new report by the U.S. Government Accountability Office.

An analysis of more than 700 leases found about half exceeded private sector rates by 10 percent or more. This despite a stated goal to meet or beat local market rent rates.

Since President Obama took office in 2009, the government's proportion of rental space to owned space has risen as the administration began simplifying the leasing process.

Such rented offices are costing us more, though, because of pickiness and a lack of competitive bargaining, according to the bluntly-titled report, “GSA Could Decrease Leasing Costs by Encouraging Competition and Reducing Unneeded Fees.”

You can read the full 44-page report by clicking here.

A single-page highlights sheet is here.

A federal branch office isn’t like a telemarketing outfit that can set up anywhere with a roof and phone jacks. Think security checkpoints and building surveillance. Agencies want ample parking, elevators and high ceilings.

The feds can also have specific ideas about where in a community their offices should go. As a result, fewer building owners are bidding to be Uncle Sam's landlords.

"In some cases, an agency’s requested geographic area may be so restricted that it does not include a single building that meets all the tenant’s requirements," the report said. "For example, for one lease we reviewed, a tenant agency was forced to twice widen the geographic areas it initially requested in order to find the space ultimately leased."

A cumbersome, lengthy leasing process – as long as six to eight years in some cases – also scares off potential bidders. And leasing costs often exceed General Services' initial estimates.

Then the federal agencies ask for improvements – such as added walls, electrical outlets, telephone lines or secure rooms – and finance the work through the building owners with interest rates of up to 9 percent. In the case of one 15-year lease, interest rates and fees had tacked on an extra $1.8 million. Nine leases examined had cost taxpayers a total of $15 million in interest.

That's a waste, according to GAO, considering that General Services administers a $3.6 billion Federal Buildings Fund, which could be dipped into to pay for those improvements up front.

GAO also recommends that agencies broaden their geographic targets and loosen building requirements to increase competition.

The report said more money could be saved if tenants were allowed to enter non-cancelable rental agreements. That's the one recommendation General Services disagrees with, saying it needs flexibility to back out of space that agencies aren't using.

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About the Author

Johnny Edwards is a member of the AJC’s investigative team, focusing on the private sector and state and federal regulation. He has worked at the newspaper since 2010.