Senator Tom Coburn's activity on the Subcommittee on Federal Financial Management, Government Information, and International Security

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How Does the Federal Government Lease Needed Space?


October 6, 2005


No one in the Federal government keeps an inventory of what we buy and at what price. Today, we discover that this data vacuum extends to our inventory of real federal property assets. Each year, five and a half billion dollars (GSA) goes to pay rent on Federally-used properties. We’re renting space for these facilities, while at the same time, we already have a vast portfolio of facilities that we’re trying to get rid of. GAO estimates that more than 30 federal agencies control about $328 billion in real property assets worldwide.





Major Findings:


• There is currently no inventory of the federal government’s leased space. The lack of data enables a lack of a strategic and intelligent approach to managing the government’s leased assets.
• As of September 2003, the federal government had spent over $5 billion in leasing costs in 2003 (CRS).
• Costly leasing arrangements have risen dramatically over the past decade due to scoring rules adopted in the Budget Enforcement Act of 1990.
• “Operating leases” are almost always more costly than purchase or construction: ? In 1995, GAO reported that GSA had entered into 55 operating leases for long-term needs that were estimated to cost $700 million more than construction.
•  In 1999, GAO reported that for nine major operating lease acquisitions GSA had proposed, construction would have been the least-cost option in eight cases and would have saved an estimated $126 million. A lease to purchase option would have saved an estimated $107 million.
• The Patent and Trademark Office (Northern VA) entered into an operating lease that was estimated to be $48 million more than construction and $38 million more than lease-purchase.
• Department of Transportation headquarters reduced the term of a 20 year lease to a 15 year lease so that it could meet the definition of an operating lease. GSA’s FY 1999 prospectus for constructing a new facility for this need showed the cost of construction was estimated to be $190 million less than an operating lease.
• SEC used the same approach by reducing the terms of their lease from a 20-year lease to a 14-year lease, in order to fit OMB’s criteria for “operating lease.”
• Agencies rely on these types of leases because they look cheaper on an agency’s annual appropriation and the nation’s annual budget.
• Scoring requirements in the Budget Enforcement Act of 1990 and OMB’s definition of “operating lease” perpetuate the problem.

Impact on Taxpayers:

• Billions of dollars in hidden costs in obligations for future generations.
• Promotes the idea that spending money the government does not have is an acceptable practice.

These Findings Demand a Response:

• Scoring conventions used by CBO, and their consequences for Appropriations, Budget Committees and OMB must change. Legislation may be required to direct budget scoring to account for the full amount of lease costs up front, rather than year-by-year.

Related Resources:

Panel 1 Testimony:



Panel 2 Testimony:



Panel 3 Testimony:






October 2005 Hearings




Senator Tom Coburn's activity on the Subcommittee on Federal Financial Management, Government Information, and International Security

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