Swap-construct exchanges  can involve swapping property and constructed assets or construction  services that are of equal value or can include cash to compensate for a  difference in value between the federal property and the asset or services  to be received by the government. However, these officials noted their lack  of experience with swap-construct exchanges at the time. After reviewing responses to these six proposals,  GSA is actively pursuing three, including: (1) a potential exchange of  undeveloped federal land in Denver with the City of Lakewood for  construction services at the Denver Federal Center; (2) a potential  exchange of the existing FBI headquarters building for a new FBI  headquarters building; and (3) a potential exchange of two federal  buildings in the Federal Triangle South area of Washington, D.C., for  construction services to accommodate federal workers elsewhere in the  city. For example, 4 of 9 respondents expressed  concerns about the lack of detail regarding what GSA would expect in  return for the federal property and 4 of 9 respondents expressed  concerns about the amount of investment needed in the federal  properties to make the exchange profitable for the property’s recipient. 5). Swap-Construct Can Help Address GSA’s Needs, but Level of Detail in GSA’s Solicitations and Market Interest May Affect Future Use

		Swap-Construct Can Help Facilitate New Construction and Developer Access to Federal Properties, but at Potentially Greater Cost to Some Stakeholders Than the Traditional Disposal Approach

GSA officials told us that swap-construct exchanges can help GSA  facilitate construction projects given a growing need to modernize and  replace federal properties, shrinking federal budgets, and challenges  getting funding appropriated from the FBF. GSA Does Not Always Clearly Identify Its Needs in Its Solicitations for Market Interest in Swap- Construct Exchanges

Swap-construct exchanges require developers to make potentially large  investments in federal construction projects prior to receiving title to  federal property used in the exchanges. While GSA has guidance for determining if it should continue to pursue  an exchange that has already been proposed, it does not have criteria to  help determine when the agency should solicit interest in a swap- construct exchange. Both OMB and GAO guidance emphasize the importance of  using criteria to make capital-planning decisions. The  agency’s intent may be to provide greater details at later stages of the  proposal process, but this approach may limit the ability of respondents to  provide meaningful input and lead to missed swap-construct opportunities  for GSA. Recommendations

In order to identify potentially successful swap-construct exchanges  during GSA’s review of its federal real property portfolio and reduce  uncertainty for those responding to GSA’s solicitations for possible swap- construct exchanges, we recommend that the Administrator of GSA take  the following two actions:  1.  include, to the extent possible, details on what GSA is seeking in  exchange for federal property in its solicitations, including requests for  information, for potential swap-construct exchanges and  2.  develop criteria for determining when to solicit market interest in a  swap-construct exchange. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine (1) GSA’s experiences with completed  swap-construct exchanges; (2) the status of GSA’s proposed swap- construct exchanges; and (3) the potential benefits of swap-construct  exchanges and the factors that can influence their future use. To identify the potential benefits of swap-construct exchanges and factors  that can influence GSA’s future use these exchanges, we evaluated  GSA’s approach to identifying potentially successful swap-construct  exchanges to propose against the OMB Capital Programming Guide and  the GAO Executive Guide on Leading Practices in Capital Decision- Making, and interviewed GSA officials; nonfederal participants in  completed swap-construct exchanges (HEBSPC and Emory University  Hospital Midtown); stakeholders in federal property acquisition and  disposal processes (the National Capital Planning Commission and the  National Law Center for Homelessness and Poverty, respectively); and  nongovernmental organizations familiar with GSA’s swap-construct  exchanges (the National Council for Public-Private Partnerships and the  Urban Land Institute).
Why GAO Did This Study

To help address challenges in federal real-property management, including the growing need to replace and modernize federal buildings, GSA has proposed expanding its use of swap-construct exchanges. GSA has proposed this approach for some potentially large projects, including replacing the FBI's headquarters.
GAO was asked to review issues related to these exchanges. This report addresses: (1) GSA's experience with completed swap-construct exchanges; (2) the status of GSA's proposed swap-construct exchanges; and (3) the potential benefits of these exchanges and factors that can influence their future use. GAO reviewed documents, including GSA's solicitations for swap-construct exchanges, appraisals of completed exchanges, and OMB and GAO guidance. GAO conducted site visits to the completed swap-construct sites and three proposed swap-construct sites, selected based on location, number of responses to GSA's solicitation, and stage in the swap-construct process, and interviewed GSA officials and nonfederal participants in the exchanges.

What GAO Found

Since 2000, the General Services Administration (GSA) has completed two “swap-construct” exchanges—transactions in which the agency exchanges title to federal property for constructed assets or construction services, such as renovation work—in response to private sector interest in specific federal properties. In both completed exchanges, GSA used the value of federal properties it determined were underutilized to acquire new parking garages. The recipients of the federal properties told us that the exchanges took longer than expected (about 3 years for one of the exchanges and 5 years for the other). In response, GSA noted its lack of experience with swap-construct exchanges at the time.
Since 2012, GSA has proposed six swap-construct exchanges. After reviewing responses to its solicitations, GSA is actively pursuing three, including a potential exchange of the existing Federal Bureau of Investigation's (FBI) headquarters for construction of a new FBI headquarters building. Respondents to the three solicitations that GSA is not actively pursuing noted concerns, including the amount of investment needed in the federal properties and the lack of detail regarding GSA's construction needs in an exchange. Swap-construct can result in an exchange of equally valued assets or services or can result in the government or a property recipient paying for a difference in value.
The swap-construct approach can help GSA address the challenges of disposing of unneeded property and modernizing or replacing federal buildings, but various factors could affect future use of the approach. For example, swap-construct can require developers to spend large sums on GSA's construction needs before receiving title to the federal property used in the exchanges. GSA's solicitations have not always specified these construction needs. Consequently, developers may be unable to provide meaningful input, and GSA could miss swap-construct opportunities. Further, the viability of swap-construct exchanges may be affected by specific market factors, such as the availability of alternative properties. However, GSA lacks criteria to help determine if the agency should solicit interest in a swap-construct exchange. As a result, GSA could miss opportunities to use swap-construct or select properties and construction projects better suited to traditional disposal and funding processes. Office of Management and Budget (OMB) and GAO guidance emphasize the importance of criteria in making capital-planning decisions and providing clarity on construction needs.

What GAO Recommends

GAO recommends that GSA (1) include, to the extent possible, details on what GSA is seeking in exchange for federal property in these solicitations and (2) develop criteria for determining when to solicit market interest in swap-construct exchanges. GSA agreed with GAO's recommendations.