Government Space Leasing

Pursuant to a congressional request, GAO investigated the General Services Administration's (GSA): (1) procedures for leasing part of the John F. Kennedy Federal Building in Boston to a private business in 1983; and (2) legal authority for leasing to a private business which competes with another private business in the immediate neighborhood.

GAO found that: (1) the GSA Office of the Inspector General (OIG) initiated an investigation of the lease when the owner of a competing business alleged that GSA was guilty of criminal misconduct in leasing the space; (2) OIG determined that there was no evidence of wrongdoing and that GSA leased the space in accordance with established procedures; (3) subsequent investigations by the Commissioner of the Public Buildings Service, the Federal Bureau of Investigation, OIG, the OIG, and the GSA General Counsel found no evidence of wrongdoing; (4) the competing business owner then brought a civil suit against GSA in 1987, challenging the bidding process GSA used to award the lease and the lease's legitimacy; and (5) in January 1988, the U.S. District Court dismissed all complaints except one and allowed the plaintiff 60 days to file an amended complaint regarding his allegation that GSA leased the space at $6,000 annually, below its fair market rental rate of $6,600. GAO also found that: (1) the lease ensured that the government would receive 10 percent of the business's gross sales, with a annual minimum of $6,000; (2) as of August 1988, the plaintiff had not further pursued his claims; (3) GSA supplemented its policy guidance on commercial leasing of government-owned space to take into consideration potential effects on local businesses and ensure that all businesses had an equal opportunity to compete for federal space; and (4) GSA had the legal authority to lease the space for commercial activities similar to those existing in the vicinity.