GSA Swap-Construct Exchanges

GAO Swap-Construct Report CoverIt’s a simple proposition: Build us a new building, even something as simple as a parking garage, and you can have the old one.

That old building might be an office tower, a courthouse, or some other large public structure. It might even be another parking garage. We say “might be” because, to judge by three current projects of the General Services Administration, the rules for what it calls “swap-construct exchanges” are just beginning to be formulated—and the agency has much work to do in improving the processes these exchanges entail.

Notes the Government Accountability Office in its recent report “Federal Real Property: GSA Should Better Target Its Use of Swap-Construct Exchanges,” there is an ever-increasing need to replace and modernize federal buildings of many kinds. Because of a tightening budget, among other considerations, the resources to do so are not always available. A swap-construct exchange is thus a vehicle by which agencies can transfer title to certain federal properties in return either for new buildings or “constructed assets” or, in some cases, for construction services in building new properties or renovating existing ones.

The GSA has conducted two swap-construct exchanges since 2000, one in San Antonio and one in Atlanta, using properties that were determined to be underutilized in exchange for much-needed new parking garages. The exchanges, according to their recipients, took longer than expected—three years and five years, respectively—to complete, which the GSA explains as the result of “lack of experience” with this novel arrangement. Admittedly, as the report notes, the decision-making process is elaborate, involving requests for proposals, solicitations, property appraisals, studies, reviews, and then—if all has gone well—the award of a contract “for a swap-construct exchange where the property recipient will provide constructed asset or perform prescribed construction services for the federal government in return for the title to one or more federal properties.”

Swap-Construct Profiles

Since 2012, the GSA has issued calls for proposals for six swap-construct exchanges. Three are now active, and three are no longer being pursued. The most ambitious is a projected exchange of the Federal Bureau of Investigation headquarters in Washington, DC, built in 1971. Even at some 2 million square feet, it is not large enough to house all headquarters staff, with the result that the FBI is seeking a new headquarters building with sufficient space for all. The GSA proposes to exchange federal buildings and land in exchange for this new headquarters, whose location is yet to be determined.

Another active project is also set in the District of Columbia, this one involving the exchange of property in the Federal Triangle South area, including two buildings housing the Federal Aviation Administration and one housing units of the GSA itself, for construction services. The third is in Colorado, entailing the exchange of undeveloped federal property in Lakewood for construction services at the Denver Federal Center.

Other swaps in Baltimore, Los Angeles, and Miami are on hold because of a perceived lack of market interest. The GAO observes that this may reflect a weakness of swap-construct in areas that have plentiful real estate alternatives to underutilized federal facilities, but the report also notes that the GSA’s expectations may not have been clearly stated in floating proposals for the exchanges, with no clear indication given of what would be expected in return for the transfer of those properties.

The two projects that have been completed were initiated by private companies and not by the GSA itself. The GAO report recommends that the GSA better identify its needs and expectations before a swap is proposed, that these details be made part of any request for information, and that the agency “develop criteria for determining when to solicit market interest in a swap-construct exchange.”

The GAO report notes that the GSA has ample statutory authority to exchange federal property, and that in 2005 it was specifically charged with exchanging federal property for construction services. Nearly ten years later, the GSA is just embarking on that swap-construct mission. Indeed, as the report notes, the agency is still preparing “guidance specific to exchanges for services,” suggesting that it may be some time before the report’s recommendations can be put into place. Stay tuned.