High Rent, Low Rent

he years-long competition among federal agencies for coveted workspace in the new Ronald Reagan Building and International Trade Center in Washington is now drawing to a close, as employees occupy the massive structure and prepare for the official ribbon-cutting in late April. Some are grumbling about the small working areas they are allotted and about the paucity of window views, but none can dispute that they're in the most modern facility the government owns.

Other federal workers, far more numerous, are not so lucky, for they are stuck with an unsatisfactory status quo. Federal building officials have admitted that poor estimating of rent receipts, and a consequent shortfall in funds, will mean deferred maintenance and curtailment of renovation projects throughout the nation.

There's a certain irony in the two developments. On the one hand, the $738 million Reagan Building set a new record as the government's most expensive office project. On the other hand, the never-plush space occupied by many of the government's 1.6 million full-time workers may get a little seedier during the next year.

Cost overruns and delays in opening the Reagan Building have not contributed much to the latter trend, according to Public Buildings Service officials. Instead, it results from a shortfall in rental revenues collected by the PBS, a unit of the General Services Administration. Receipts will run some $718 million short of estimates for fiscal 1998, PBS says. As a consequence, spending by the service will be cut by 15 percent, in the hope of getting the Public Buildings Fund back into balance in 1999. Public Buildings Commissioner Robert A. Peck says there will be no scrimping on essential safety and security functions, but also no money for many badly needed construction and renovation projects.

Addressing the shortfall and improving the computerized real estate revenue and expenditure tracking system are among Peck's major challenges as he enters his third year as the federal government's chief landlord and building designer. Also high on the Public Buildings Service's agenda are:

• Implementing most of the 8,690 security improvements recommended by Attorney General Janet Reno's Vulnerability Assessment of Federal Facilities Committee in response to the 1995 bombing of the Alfred P. Murrah federal building in Oklahoma City.
• Completing expansion of the federal
  courthouse system.
• Proving to federal tenants that GSA can provide real estate leasing and building management services that are competitive with the private sector through its "Can't Beat GSA Leasing" and "Can't Beat GSA Space Alterations" initiatives.
• Wrapping up the Reagan Building project and moving ahead with other major Washington-area projects to consolidate and modernize agency offices.

Peck, an attorney and graduate of Harvard University's Graduate School of Design, earned his government stripes at the Office of Management and Budget, the National Endowment for the Arts and the Federal Communications Commission. He also served in the Carter White House before becoming counsel for the Senate Environment and Public Works Committee, overseeing the Public Buildings Service. Peck was chief of staff for the committee chairman, Sen. Daniel Patrick Moynihan, D-N.Y., who wrote the famous Kennedy administration "white paper" proposing that federal architecture "provide visual testimony to the dignity, enterprise, vigor and stability of the American government."

"I think Peck has done a remarkable job," says Rep. James A. Traficant Jr., D-Ohio, ranking minority member on the House Public Buildings and Economic Development Committee. Traficant, an iconoclast who often crosses swords with GSA, adds, "He's at least attempting to honestly deal with the issues, and he's offered reasonable testimony and the flexibility to try to work with the Congress to mitigate some of the problems."

Solving the Shortfall

A year has passed since the Federal Building Fund shortfall was revealed to Congress, but it remains PBS' chief problem. The subcommittee chairman, Rep. Jay C. Kim, R-Calif., said at a 1997 hearing, "This kind of mistake we should not tolerate."

Most years, the building fund has been roughly in balance. GSA attributes the current shortfall to three factors:

• Slimmed-down federal agencies are using less office space than expected, thus reducing rental income.
• GSA's budget planners failed to include in their projections building rent reductions in several cities, cuts that brought rents closer to market rates.
• Construction delays on several projects, including the Ronald Reagan Building, slowed rent receipts.

Peck promises the new system, which will allow PBS' real estate professionals in the 11 GSA regions to review rent projections in real time, will help bring accuracy of revenue projections back within a typical 3 percent margin of error. The current discrepancy amounts to 15 percent of the Federal Building Fund's fiscal 1998 budget request of $4.8 billion.

For now, PBS must manage its budget carefully, so that deferred maintenance work will not result in problems down the road. "First, we took out almost the entire capital program. That is the responsible thing to do," Peck says. "So there are no new construction projects funded in FY '98 and no major renovation projections, which is really unfortunate because that will have a future impact, obviously. We even cut back on some of our repair money."

Setting Priorities

GSA's actions are putting a vise on agencies like the Justice Department with immediate space needs. "It's a very difficult issue that we are facing throughout the department, but primarily in the Immigration Service, the FBI, DEA and U.S. Attorneys Office, where we are still expanding," says Benjamin F. Burrell, director of facilities and administrative services at Justice.

"In Sacramento, California, for example, there is a $3.2 million cost for an Immigration Service district sub-office. GSA was supposed to pick up $1.7 million of the cost, but in order for us to do the project, which we desperately need, we had to pay the whole thing," Burrell says.

"Now GSA says it is going to give us a rent credit, which is helpful. But when you are dealing with a zero-sum situation, which GSA is with its Federal Building Fund, if they can't pay for it out of their normal fund, how can they pay it out of their rent account? So somewhere along the line the agency is going to end up footing the bill for this GSA snafu."A more pressing concern for GSA is building security. After the bombing of the Alfred P. Murrah Federal Building in Oklahoma City, GSA obligated $233.8 million for security upgrades in federal buildings. One visible upgrade is an increase in Federal Protective Police, up from 409 five years ago to 637. GSA plans to hire an additional 87 uniformed officers in 1998. The number of privately contracted security guards increased to 4,923, up from 2,300 in 1995. Other prominent security measures include the installation of street-level barriers and protective window glass, and the reinforcement of building structures.

Peck says the ongoing measures involve a complicated process of balancing the democratic value of openness to the public with the need for safety. "There are ways of giving you security while they don't look like they are giving you security. Multilevel building plazas can, if designed right, keep a car or truck from driving in," he says."We think there are ways to protect against the sorts of terrorism incidents that we can reasonably anticipate in a way that doesn't require you to close off the building. . . . Sometimes it might cost a little more."

Federal Courtroom Boom

The Public Buildings Service could get the green light next fiscal year to complete its most capital-intensive activity in this period of federal downsizing-a $7.5 billion federal courthouse construction program-if Congress and the administration deem the Federal Building Fund shortfall solved.

Before being put on hold, work on 80 courthouses was under way or completed, and another 35 to 40 projects were included in PBS' five-year plan. The Judicial Conference of the United States is spearheading the project in response to an increased caseload, which last year included more than 50,000 cases filed with the 167 U.S. Appeals Court judges. The large caseload is attributed to a rising population and more bankruptcy, drug trafficking, tax enforcement, immigration and Social Security cases.

While Congress and the administration have been generally supportive of the court-house construction process, both have bridled about allegations of profligate spending on projects such as the federal courthouses at Boston Pier and at Foley Square in New York City.

GSA's inspector general determined that the agency passively allowed questionable change orders that increased the Foley Square project's $259 million budget by $120 million. Additions made at the behest of federal judges included expensive upgrades for carpets and private kitchenettes.

Courthouse construction standards were revised by the Judicial Conference of the United States in 1994 to guard against such excesses. "We are setting a budget, and are working very hard to keep to the budget," Peck says.

The Reinvention Process

Perhaps the biggest change in the way the PBS does business is the overhaul of its leasing process, part of an agency reinvention effort under the National Performance Review. The new process responds to complaints by federal tenants about GSA's turtle-like pace of 12 to 18 months for securing building leases. The hallmark of the initiative are two programs, "Can't Beat GSA Leasing" and "Can't Beat GSA Space Alterations," that allow tenants to select private-sector contracting arrangements provided by GSA if its own services fall short in quality and cost.

"Can't Beat GSA Leasing" kicked off in July 1996 with a promise of reduced paperwork, streamlined leasing policies and reduced leasing costs. Two of GSA's reinvention labs-Region 3 in Philadelphia and Region 10 in Seattle-have reduced the time for leasing new space from an average of more than a year to around five months.

Under the new competitive leasing arrangements, agencies have been hesitant to choose private brokers for leasing arrangements. Private brokers have handled acquisition of some smaller 2,500- to 5,000-square-foot buildings, according to an administration official who supports the experiment in devolving power away from GSA. "I like very much the [services] menu approach," Justice's Burrell says. "There are areas of GSA, especially in the field, where they have a wonderful customer service focus. There are other areas where they don't deliver quite as well . . . where I'd like to have GSA's contractors available to us."

For example, GSA's National Capital Region staff has been unable to process Justice's space acquisition requests concurrently. "While they have wonderfully expert people, they are so overwhelmed with the workload that they don't have the ability to do concurrent processing," Burrell says. "And that's where the government has to get to."

From the standpoint of federal employee unions, allowing agencies to contract out for building maintenance services under the guise of enhancing GSA's competitive posture is a dubious proposition. "We need to put the 'S' back into GSA," says Carl Yates, head of the GSA Council of the American Federation of Government Employees. "When you are talking about providing service and thrilling your customer, I don't think that can necessarily be provided by an outside vendor." Still, Yates praises Peck for bringing union employees into the process of developing the two competitive initiatives.

Rebuilding in Washington

In this era of government downsizing, the Public Buildings Service is trying to keep its vacancy rates as low as possible. That is a tricky business when agencies lose employees through attrition in dribs and drabs. But in Washington, agencies are eager to modernize offices that often were built haphazardly during construction booms. The demand for office space keeps the capital city in a state of perpetual rebuilding.

The Ronald Reagan Building and International Trade Center, in its final stage of construction, is the centerpiece of the long-unfinished Federal Triangle project. The 3 million square feet of space will house employees from the Environmental Protection Agency, Agency for International Development, Customs Service and Woodrow Wilson International Center for Scholars. The building's showcase will be the 500,000-square-foot International Trade Center, established to bring together federal agencies and private organizations to promote trade. A meeting of the World Trade Organization will help inaugurate the building in April.

The 7.7-acre Reagan building project is second only to the Pentagon in size. Developers hope the building's massive atrium will rival the new Washington National Airport and the renovated Union Station in drawing visitors. Among the amenities are 85 elevators, a 620-seat auditorium, a 950-seat food court, ballrooms and a rotunda with a balcony overlooking Pennsylvania Avenue. A key challenge for the buildings service will be to ensure that the Reagan building is fully leased, by enticing private tenants to supplement rent receipts. Rents for some business tenants are being reduced from $44 per square foot to $30 per square foot.

Another major project waiting in the wings is the Southeast Federal Center, a billion-dollar, 55-acre office complex planned along the Anacostia River in an industrial wasteland next to the Washington Navy Yard. Congress, however, has been reluctant to appropriate funds for the project, mostly because prospective federal tenants are put off by the undesirable location.

"The Southeast Federal Center is a terrific piece of waterfront property, which is the way a real estate person would look at it," Peck says. "People forget that 20 years ago the Inner Harbor in Baltimore was a pretty godforsaken area, and it didn't rejuvenate overnight. I think we need to show first that we have a solid plan that turns it into not just a federal enclave but a livelier kind of site." Frustrated by the lack of congressional action on the project, Peck says the buildings service might attempt a partnership with a private developer whereby "the private-sector people lease buildings to us."

Peck is interested in architectural issues and relishes the aesthetic elements of his job. Nonetheless, he says his chief challenge is the bottom line. "When the end of the day comes, people still have a basic question about us. You can measure what we do and people will say, 'Did the government get as good a deal as the private sector would have gotten?' " he says. "However you want to ask that question: Did we build the building in the same amount of time? Did we secure a lease in the same amount of time? Are we paying market rents or less for our buildings or are we above the market? Those are all fair questions, and unless we can answer them, we are going to have a tough time."

Ed Goldstein is a Washington freelance writer.