The support costs associated with this type of program can be very significant at certain posts. We found that the prevalent private sector process for providing housing and furniture includes contracting with a relocation company or other service provider to identify available housing from which the employees can make a choice, giving an allowance to the employee to pay for rent, and using a contractor to ship employees’ household effects to furnish the residence. Another option the British government uses is acquiring furniture overseas. Our analysis at two posts indicates that using a relocation company could result in potential savings of several hundred thousand dollars annually. Furthermore, most property preparation and related maintenance expenses were typically handled by landlords for leases signed either by individuals or by the corporation. Housing Allowances

Greater use of housing allowances is another private sector practice that could substantially reduce State’s overseas in-house support requirements and maintenance costs, and give employees a choice in selecting their residences. We believe that the private sector practices we identified could help mitigate some of the problems that employees of State and other government agencies have with the LQA program and encourage State to expand it as a cost-effective option to government leasing at certain posts. They acknowledged that State and the Department of Defense have not (1) examined all costs involved in overseas housing or attempted to determine if an increase in the coverage of LQA rates would be advantageous or disadvantageous to the government as a whole or (2) determined if State should ensure its government lease ceilings are consistent with LQA rates to control costs and ensure equity among all civilian government employees at overseas posts. If these factors are considered, the expanded use of employees’ household effects may be an efficient and cost-effective alternative to State’s practice of buying, storing, and managing large inventories of residential furniture supplemented by making additional shipments of employee-owned furniture. It also has not conducted valid, systematic analysis of its furniture program and its costs. We believe that State could save money and provide quality services to its employees and those of other agencies by adopting the practices we identified in the private sector. The data provided by the U.S. mission in Brussels and the U.S. embassy in London showed that the posts’ internal compensation-related housing support costs for short-term leases were higher than the estimated costs of services available from relocation companies. For example, it is premature to assume that outsourcing would not reduce costs associated with State’s market analysis programs, management of housing profiles, and housing board operations. Our analysis of the furniture program and State’s own data demonstrate that local procurement could save substantial amounts of money and reduce delivery time at a number of posts. Therefore, the additional shipping costs incurred in shipping employees’ household effects would likely be minimal, resulting in little or no need for a government-furniture program at some locations. As noted in the report, one indicator is the large numbers of American and foreign national personnel directly involved in managing and supporting posts’ residential housing and furniture programs. 3. 4. 5. As stated in our report, we reviewed whether any private sector practices offer the potential to reduce costs and provide quality services overseas to State. 6. 7. Analyses must first be based on State’s actual shipping data, which we found to show that employees often ship the same weight of household effects whether a post is furnished or unfurnished. 8. 9. 10. 11. 12.
Why GAO Did This Study

GAO reviewed the practices of the private sector and other foreign governments to determine whether those practices offer the potential to reduce overseas housing costs and provide quality services for Department of State and other agencies.

What GAO Found

GAO noted that: (1) its examination of practices in the private sector suggests that several options may exist to reduce State's overseas residential housing and furniture costs, including: (a) using relocation companies and similar service providers to search for housing and negotiate leases to reduce in-house support costs, and shift some property preparation and related maintenance expenses to landlords; (b) providing employees with housing allowances to select their own homes rather than managing and maintaining a housing pool of government leases and preassigning residences; and (c) shipping employees' household effects and/or acquiring furniture overseas as an option to operating an extensive government-buying and inventory program; (2) GAO's analysis of State's processes shows that State has not based its current approach to providing overseas residential housing and furniture on a comparative cost analysis; (3) based on GAO's analysis of selected posts, State could potentially reduce its costs by adopting some or all of these practices; (4) GAO's analysis of practices in Brussels and London showed that State's internal housing support costs are several hundred thousand dollars greater than the costs that would be incurred if homefinding services were outsourced to a relocation company; (5) such practices are potentially applicable for a large number of annual relocations that State and other agencies conduct; (6) expanding housing allowance programs consistent with practices of the private sector could also result in recurring savings, primarily by minimizing in-house support requirements; (7) private-sector practices indicate that two options should be considered for reducing costs associated with residential furniture; (8) State could ship employees' household effects as its primary means of furnishing residences; (9) actual shipping data show that State often ships nearly the same amount of employees' household effects to posts offering government furniture as it does to its unfurnished posts; (10) thus, an expansion in the number of unfurnished posts could occur with relatively minor increases in shipping costs for household effects and avoid the often significant procurement, storage, and handling costs associated with the government furniture program; (11) the second option is to give overseas posts the alternative of acquiring furniture on the local market; and (12) cost savings would potentially result from lower furniture prices and reduced shipping, inland transportation, and inventory costs.