	Prior GSA and FBI Assessments Showed That FBI Headquarters Facilities Did Not Fully Support the FBI’s Long-Term Requirements

In November 2011, we reported that over the previous decade, the FBI  and GSA conducted a number of studies to assess the Hoover Building  and its other headquarters facilities’ strategic and mission needs. According to these assessments, the FBI’s headquarters facilities did not  fully support the FBI’s long-term security, space, and building condition  requirements. Since our report, the assessment of the Hoover Building  has not materially changed. In  our report, we noted that the dispersion of staff in annexes created  security challenges, particularly for at least nine annexes that were  located in multitenant buildings, where some space was leased by the  FBI and other space was leased by nonfederal tenants. Space: In 2011, we reported that FBI and GSA studies showed that  much of the Hoover building’s approximately 2.4 million gross square  feet of space is unusable, and the remaining usable space is not  designed to meet the needs of today’s FBI. For example, in its fiscal year 2017 prospectus for the  proposed FBI headquarters consolidation project, GSA noted that the  Hoover Building was designed at a time when FBI operated  differently, and it cannot be redeveloped to provide the necessary  space to consolidate the FBI Headquarters components or to meet  the agency’s current and projected operational requirements. Building condition: In our 2011 report, we noted that the condition of  the Hoover Building was deteriorating, and GSA assessments had  identified significant recapitalization needs. In 2014, in response to our  recommendation, GSA evaluated its strategy for the Hoover Building  and determined it needed to complete some repairs to ensure safety  and maintain tenancy in the building. In addition, because swap exchanges require developers or  other property recipients to complete the agreed-upon GSA construction  projects prior to the transfer of the title to the current property GSA is  exchanging, federal agencies can continue to occupy the property during  the construction process for the new project, eliminating the need for  agencies to lease or acquire other space to occupy during the  construction process. GSA has limited experience in successfully completing swap exchange  transactions and has cancelled several recently proposed swap  exchanges. Furthermore, GSA has  faced a number of obstacles in its use of this authority. In addition, from 2012 to 2015, GSA pursued a larger  swap exchange potentially involving up to 5 federal properties located in  the Federal Triangle South area of Washington, D.C., to finance  construction at GSA headquarters and other federal properties. After the discontinuation of the Federal Triangle swap exchange project,  we reported in 2016 that GSA officials noted they planned to improve the  swap exchange process, including the property appraisal process,  outreach to stakeholders to identify potential project risks for future  projects, and to the extent possible, mitigate such risks. However, we also  reported that several factors may continue to limit the applicability of the  agency’s approach. Specifically, the viability of swap exchanges may be  affected by specific market factors, such as the availability of alternative  properties. For  example, in reviewing the proposed Federal Triangle project, we found in  2016 that the proposals from two of the investment firms valued the two  federal buildings involved in the proposed swap substantially less than  GSA’s appraised property value. In 2014, we recommended that GSA develop  criteria for determining when to solicit market interest in a swap  exchange. GSA agreed with the recommendation and has since updated  its guidance to include these criteria. Various Alternative Funding Mechanisms for Federal Property Exist

Our prior work has identified a number of alternative approaches to  funding real property projects. In March 2014, we reported that upfront  funding is the best way to ensure recognition of commitments made in  budgeting decisions and to maintain fiscal controls. However, obtaining  upfront funding for large acquisitions such as the Hoover Building  replacement can be challenging. Congress has provided some agencies  with specific authorities to use alternative funding mechanisms for the  acquisition, renovation, or disposal of federal real property without full,  upfront funding. In 2014, we reported that projects with alternative funding mechanisms  present multiple forms of risk that are shared between the agency and  any partner or stakeholder. Such alternatives may  include changing existing or introducing new account structures to fund  real property projects.
Why GAO Did This Study

GSA, which manages federal real property on behalf of other federal agencies, faces challenges in funding new construction projects due to budget constraints—including obtaining upfront funding—among other reasons. One type of transaction, called a swap exchange, enables GSA to apply the value of federal property to finance construction without relying on appropriated funds. Under such an exchange, GSA transfers the title of the unneeded property to a private investor after receiving the agreed upon construction services at another location. GSA proposed a swap exchange procurement for construction of a new FBI headquarters building in exchange for the Hoover Building and appropriations to compensate for the difference in value between the Hoover Building and the new building. GSA cancelled this procurement in July 2017 due to lack of funding.
This statement addresses (1) GSA's and FBI's assessments of the Hoover Building, (2) GSA efforts to implement swap exchanges, and (3) alternative approaches to funding real property projects. It is based on GAO's body of reports on real property from 2011 to 2017, and selected updates from GSA.

What GAO Found

In November 2011, GAO reported that, according to General Services Administration (GSA) and Federal Bureau of Investigation (FBI) assessments, the FBI's headquarters building (Hoover Building) and its accompanying facilities in Washington, D.C., did not fully support the FBI's long-term security, space, and building condition requirements. Since GAO's report, the assessments have not materially changed, for example:
Security: GAO's prior work noted that the dispersion of staff in annexes creates security challenges, including where some space was leased by the FBI and other space was leased by nonfederal tenants. Earlier this year, GAO reported the FBI is leasing space in D.C. from foreign owners.
Space : In 2011, GAO reported that FBI and GSA studies showed that much of the Hoover Building is unusable. GSA noted in its fiscal year 2017 project prospectus for the FBI headquarters consolidation that the Hoover Building cannot be redeveloped to meet the FBI's current needs.
Building Condition: In GAO's 2011 report, GAO noted that the condition of the Hoover Building was deteriorating, and GSA assessments identified significant recapitalization needs. Since GAO's report and in response to GAO's recommendation, GSA has evaluated its approach to maintaining the building and completed some repairs to ensure safety.
GSA has limited experience in successfully completing swap exchange transactions and chose not to pursue several proposed swap exchanges, most recently the planned swap exchange for the Hoover Building. GSA has developed criteria for determining when to solicit market interest in a swap exchange, in response to recommendations in GAO's 2014 report. In addition, GSA officials told GAO that they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential risks associated with future projects, and to the extent possible, mitigate such risks. Nevertheless, several factors may continue to limit use of swap exchanges, including market factors, such as the availability of alternative properties and an investor's approach for valuing properties. For example, in reviewing a proposed swap exchange in Washington, D.C., GAO found in a 2016 report that the proposals from two firms valued the two federal buildings involved in the proposed swap substantially less than GSA's appraised property value.
In a 2014 report, GAO identified a number of alternative approaches to funding real property projects. Congress has provided some agencies with specific authorities to use alternative funding mechanisms—including the use of private sector funds or land swaps—for the acquisition, renovation, or disposal of federal real property without full, upfront funding, though GAO has previously reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and maintain fiscal controls. GAO has reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder. In addition, alternative budgetary structures could be established, such as changing existing or introducing new account structures to fund real property projects.

What GAO Recommends

GAO has made recommendations in the past to GSA on various real property issues, including to develop additional guidance for swap exchanges and to evaluate its approach to maintaining the Hoover Building. GSA agreed with these two recommendations and addressed them.