Federal property deemed 'high-risk' due to overreliance on leasing

Wednesday - 8/10/2011, 10:10am EDT

David Wise, director of physical infrastructure issues, GAO

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By Jack Moore
Federal News Radio

Federal real property was recently slapped with a "high-risk" label by the Government Accountability Office. The watchdog agency said the government's overreliance on often costly leased space was a leading factor in the designation.

GAO scrutinized the government's real property, tallying up 900,000 buildings and structures worth hundreds of billions of dollars. But many of the buildings and other structures are leased from private-sector owners — often at costs that, when totalled up, exceed what the government would pay to actually own the spaces.

David Wise, GAO's director of physical infrastructure issues, joined the Federal Drive with details on the report and why so many agencies opt to lease space when, over time, it's cheaper to own.

As it turns out, some budget rules may make it less appealing for agencies to own space.

In the absence of more detailed guidance from OMB, agencies often enter into leases, because they only have to account for one year's lease in their budgets, Wise said, "making it appear cheaper (than owning) in any one year, but over the long haul, inevitably costing more in many cases."

The issue lies in the Budget Enforcement Act of 1990, which requires the full cost of a project to be accounted for and visible in a budget to prevent a changeover in Congress — and changed budgetary priorities — from resulting in half-finished projects, Wise said.

Sometimes, it makes sense to lease, Wise said, citing the aftermath of Hurricane Katrina. Then, the General Services Administration relocated thousands of employees throughout the area to leased spaces.

But that's the exception, Wise suggested. "Most of the time, it's shown that ownership over the long haul, would be more cost-effective."

The latest GAO report, which the agency presented to Congress, isn't the first time GAO has alerted OMB of the issue, although Wise said OMB is "moving in the right direction."

Lawmakers are concerned as well, he said.

"They're very keen on looking for ways to try to save money, as we all are in this period of ... budget challenges," he added. "And they're looking for many ways in order to try to most effectively manage the federal property portfolio. And this would be one of them."

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