Cost and Budgetary Impact of the General Services Administration's Purchase Contract Program

The House of Representatives has considered legislation to restore the purchase contract authority to the General Services Administration (GSA). To assist in consideration of this legislation, GAO compared contract purchasing with direct Federal construction and with leasing as ways to finance the acquisition of space for Federal departments and agencies. The Federal Buildings Fund uses collections for rents charged to agencies for managing and acquiring GSA real property. The Fund has not been able to generate sufficient revenue to finance both operating and capital requirements, so only a minimal amount has been available for construction. Since money for construction was limited, GSA has relied on leasing as the only practicable means of obtaining needed space. From fiscal year 1966 through fiscal year 1979, there has been no appreciable increase in Government-owned space while leased space has more than doubled. A GAO analysis of Federal Buildings Fund receipts under direct Federal construction, contract purchasing, and leasing found that during the early years of building life, only leasing provided a positive cash flow for the Federal Buildings Fund. Beyond the early years, direct Federal construction provided the largest cumulative cash flow for the Fund. Over the entire building lifetime, purchase contracting provided a larger cash flow than leasing. GAO felt that if Congress wanted to grant GSA a financing alternative to direct Federal construction, it should limit financing authority to direct loans from either the Treasury or the Federal Financing Bank in order to preclude management problems. Also, local real estate taxes were a substantial drain on Fund resources. Relief could be provided through appropriations separate from the Fund expressly for real estate taxes or through additional appropriations to the fund to cover tax payments.