Belly of the Beast
GSA Monopoly Lards Office Relocations

by Frank N. Wilner

Frank N. Wilner is chief of staff to Vice Chairman Gus A. Owen, Surface Transportation Board.

 

Few industries are as competitive and innovative as real estate, unless, of course, government interferes.

Imposition of rent control is not the only manner in which government destroys market dynamics. By prohibiting federal agencies from managing their own office relocations, the General Services Administration limits choices, discourages innovation, and drives up costs.

In the days when almost all government office space was federally owned, the GSA acted in the more benign role of property manager, replacing light bulbs, unstopping toilets, emptying trash, and sweeping floors.

Today, the federal government is a substantial lessee of privately owned office space and the GSA has been promoted beyond its abilities to the rank of property broker. Congress should have privatized the task. the GSA is a frightfully expensive middleman that adds no value to the relocation task. In fact, the GSA carries out its responsibilities in duplicate by hiring private-sector consultants who, in turn, hire private-sector architects and contractors. The competence of these players often isn’t tested in the marketplace because government is often their sole employer.

Consider how an efficient private-sector firm relocates. It hires a real estate broker specializing in knowledge of available office space. An architect is hired. Once new space requirements are determined, a lease is negotiated. Then a contractor is retained to engage subcontractors and ensure all improvements are made on time and within budget. The incompetent are quickly weeded out because landlords and lenders won’t tolerate their presence.

Although the GSA would have Congress believe that it is a regular Ebenezer Scrooge when it comes to performing its functions, the facts tell another story. They also explain why this grossly inefficient agency jealously guards its protected status from private-sector competition. Indeed, if the GSA were a private-sector firm, it would have been put out of business long ago by landlords and bankers.

When a government agency relocates, the GSA invokes its monopoly to serve as the broker. After laying waste to price competition among landlords, the GSA then lards each additional step of the office relocation process.

To avoid responsibility and accountability, GSA contracting officers engage outside consultants to advise them on the hiring of architects and contractors. In the private sector, these would be hired directly by the landlord, who has a selfish interest in keeping costs low and quality high.

As distrust is a common thread running through government procedure the GSA then hires additional firms to audit the work being performed by the consultants, architects, and contractors that the GSA engaged. Taxpayers also support an inspector general who performs yet another audit.

By not injecting competition into the process, Congress not only encourages this costly duplication, but further inflates the price of relocation. The Davis-Bacon Act virtually disfranchises non-union firms from bidding on government contracts for new construction.

"Federal office relocations and property management should be performed by private contractors," says Surface Transportation Board Vice Chairman Gus A. Owen who has spent most of his professional life as a property developer and builder. His wife is a member of the California Builders’ Hall of Fame.

"Costs are inflated not only by the GSA’s hiring of multiple firms to check each other’s work," "but by endless committee meetings involving it and agency employees–lengthy meetings where no action is taken and nobody is held accountable. Cost overruns and delay characterize the the GSA process, but because the costs are buried within the budgets of the GSA and/or the relocating agency, Congress is unaware of the problem."

Owen suggests empowering individual agencies to accomplish their own relocation with assistance from private-sector firms. The GSA’s inefficiency, says Owen, adds at least $5 per square foot to the cost of federal office space. If Congress were to eliminate the GSA monopoly and permit private sector involvement, he says, "the streamlining would offer taxpayers massive savings by eliminating unnecessary the GSA contracting officers and the duplication of effort they build into the process."

 


Regulation is published four times a year by the Cato Institute. Editorial and business offices are located at 1000 Massachusetts Avenue, N.W., Washington, D.C., 20001. For subscription information, please write to Circulation Department, Cato Institute, same address, or call (202) 842-0200. Send email inquiries to subscriptions@cato.org, or subscribe online via the World Wide Web at: http://www.cato.org/pubs/regulation/reg-ordr.html

| Regulation | Home | Publications |