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GSA: A Misguided Sacking?

What Happened in Vegas Overlooks What's Been Happening in DC
April 4, 2012
Bob Peck & Martha Johnson Both Now Out at the GSA.
Bob Peck & Martha Johnson Both Now Out at the GSA.
Of all the spending that could have brought down the heads of U.S. General Services Administration this week, the $800,000+ Las Vegas shindig seems like much to do about nothing, according to several brokers who spoke on the situation with CoStar News.

Martha Johnson, head of the General Services Administration resigned after firing two of her top deputies and placing four managers on administrative leave. The shakeout came following a report from the GSA Inspector General criticizing what it called "excessive and wasteful" spending on conference planning for the GSA's 2010 Western Regions Conference in Las Vegas.

Public Buildings Service chief Robert A. Peck, a fixture in the Washington area real estate community on his second stint running the department, was forced out, along with Johnson's top adviser, Stephen Leeds.

In addition, the GSA is reviewing potential further disciplinary action where warranted, implementing reforms to its accounting procedures, cancelling all future Western Regions Conferences, reducing travel budgets and exploring additional opportunities for recovering funds.

The metro Washington DC real estate industry took the news particularly hard.

"The action of the executive branch this week has caused several tragedies," said John P. Kyle, senior vice president of Cresa Washington DC. "First and foremost, Bob Peck, an outstanding public servant whom I have known and respected for many years, has been sacked, dishonored and disgraced. For virtually his entire career, Bob, a Green Beret, has worked in the public domain. Bob Peck - and probably his fired associates whom I don't know personally - deserved a better fate," opined Kyle.

"At GSA, Bob Peck had well begun implementing efficiencies by obtaining higher quality professional services, establishing better relationships with providers, reducing the occupied space per employee (including his own) and promoting an esprit de corps there," Kyle added.

According to Kyle, Peck did not initiate the conference. GSA had staged the conference for many years as an event intended to promote the social organization along the lines of a corporate retreat.

Dennis O. Kane, president and CEO of Kane Construction Inc. deadpanned: "Waste in the federal government? Shocking. Simply shocking..."

Turning more serious, Kane wondered if the personnel actions taken were really about $800,000.

"To think this is really anything other than election year politics would be a mistake," Kane said. "Covering their flank, so to speak, as we head towards November."

Kane's question about the amount involved really does beg the question.

Since Peck took over as Commissioner of Public Buildings for GSA in August 2009, the U.S. General Accounting Office has issued 29 reports identifying areas where the General Services Administration could have saved costs. Take just this one example from last summer: Report GAO-11-879T on Aug 4, 2011 Overreliance on Leasing Contributed to High-Risk Designation.

The report concluded, "Overreliance on costly leased space was one of several factors that contributed to GAO's designation of federal real property management as a government-wide high-risk issue."

"The federal government's real property portfolio includes more than 900,000 buildings and structures worth hundreds of billions of dollars. Many of these properties are leased from private-sector owners, often at total costs that would exceed what the government would pay for ownership," the report said.

"Although GSA's goal is to cover the administrative costs of private sector leases with fees it charges the tenant agencies, it has been unable to do so in recent years--losing more than $100 million in fiscal year 2009--raising concerns about the agency's management of its leased properties," the report said.

The GAO report noted that the Obama administration's proposed Civilian Property Realignment Act would reform federal real property management and disposal and that it was currently examining opportunities for consolidating federal operations and moving them from leased space to federally owned sites.

In the past two years, the GSA has set out to right some of the criticism by seeking to dispose of $450 million in properties. Just two weeks ago, the now-ousted PBS chairman Peck testified to the House Subcommittee on Economic Development, Public Buildings, and Emergency Management that it had achieved $300 million of that goal.

And even as the GSA has been criticized for the way it was handling leases, the administration turned to the GSA to right a $557 million lease fiasco the U.S. Securities & Exchange Commission signed for at a newly renovated office building at 400 Seventh St. SW in Washington, DC, known as Constitution Center.

The SEC OIG investigation found that: "the circumstances surrounding the SEC's entering into a lease contract with David Nassif Associates ("DNA") for 900,000 square feet of space at the Constitution Center facility in July 2010 represents another in a long history of missteps and misguided leasing decisions made by the SEC since it was granted independent leasing authority by Congress in 1990."

As it turned out, the SEC didn't need that much space because of growing budget uncertainties and had to find other tenants to take the majority of the space. To right its excessive spending the SEC turned to the GSA.

SEC Chair Mary Schapiro apologized to a Congressional House panel and agreed to relinquish authority for SEC leasing to GSA, saying, "The SEC now recognizes the benefits of having the General Services Administration manage its future leasing, [which] is not our core mission."

As one DC real estate executive told CoStar: "Note how SEC staff involved with $550 million Constitution Center lease are still drawing salaries - none have been fired and SEC is back leasing data center space as a "service" contract. Let the GSA stay in a Las Vegas Strip suite; instead why doesn't the administration focus on tens of millions in SEC waste."

That may just be where this all heads as election year politics heat up.

"It is outrageous that this agency [GSA], which costs the taxpayers billions because it's sitting on its assets, would spend nearly a million dollars on a Vegas junket," said U.S. Rep. John L. Mica (R-FL), Chairman of the Transportation and Infrastructure Committee. "This agency may have been hoping that everything that happened in Vegas would stay in Vegas."

But it is the tip of the iceberg, Mica said. His committee plans to hold a hearing later this month on the Las Vegas conference and "other administrative costs."

Keep up weekly on national news, trends and property leads with the Watch List Newsletter, a weekly pdf that includes other news and leads not found on the CoStar Group web news pages. Sign up for the Watch List E-Mail Alert. A new issue is published late each Wednesday.
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