SEPTEMBER 23, 1998


Good afternoon, Mr. Chairman, and Members of the Committee. My name is Bob Peck, and I am the Commissioner of the Public Buildings Service (PBS). I am pleased to appear before you today to report on our assistance to the Patent and Trademark Office (PTO) as they consolidate their complex of offices Northern Virginia. By competitively procuring a 20-year operating lease, we are providing up- to-date, efficient, and cost-effective office space that will support PTO's requirements. This is a project that makes good business sense and that is in the best interest of the government.

PTO now has offices in 18 different buildings. Many need alterations to meet fire, life-safety, and handicapped accessibility guidelines.

Given other priorities; for example, the courthouse construction program, there likely will be no funds available in the foreseeable future to build a facility for PTO. The Committee authorized a 20-year operating lease because its present value cost compares favorably with that of construction.

The Congressionally approved rent limit is roughly equivalent to rates that PTO is currently paying and is equivalent to current market rates in Northern Virginia.

If the project is delayed, extending existing leases with fundamental building improvements to match market comparables would cost an additional $6.4 million annually -- $32 million over the typical five-year lease extension.

The technical specifications for the project are not lavish. The specifications are not unique to the Government and they are comparable to other consolidated headquarters facilities.

Ongoing Congressional oversight, an audit by the Inspector General of the Department of Commerce, and a review by a contractor commissioned by the Secretary of Commerce - all support the conclusion that we should continue with this space consolidation project. The justification and the process for this procurement are valid. It is the right thing to do.


I would like to give you some background. The General Services Administration (GSA) and PTO have been working together since 1989 on plans to consolidate and update the PTO offices. On October 24, 1995, this Committee authorized an operating lease for a complex on a site in Northern Virginia. On November 16, 1995, the House Transportation and Infrastructure Committee also authorized this project.

The PTO has been located in leased facilities in the Crystal City area of Northern Virginia for more than 20 years. Incremental procurement of space over these 20 years has resulted in PTO currently occupying space under 33 separate lease agreements in 18 different buildings. Interaction and crossresearch among the various PTO patent technology groups is an integral part of the patent and trademark examining process. Because of this requirement, physical proximity is essential to efficient operations.

Alternatives Analysis

Many different alternatives were investigated prior to the proposal of an operating lease procurement in the prospectus submitted to the Congress on July 18, 1995. Since it is not clear that PTO's current space requirements will be needed over the long term (beyond 20 years), leasing was deemed to provide the needed flexibility in dealing with the impact of emerging technologies on PTO's operations and the amount of space required to house them. Also, options such as direct Federal construction, purchase, and lease-purchase would have required GSA to obtain full budget authority for the project prior to its inception. Competing demands on the Federal Buildings Fund made the attempt to fund any of these options unrealistic.

Typically in major metropolitan markets, Federal construction has a lower present value cost than leasing at market rates. However, at the rental rate specified in the approved prospectus, the present value cost of leasing compares favorably with that of direct Federal construction. This is because the rental rate was established in the prospectus to qualify the lease as an operating lease.

Evaluation methodology in the SFO.

The project specifications are comparable to those used for other recent Federal agency consolidations - IRS, New Carrollton;Health Care Financing Administration, Baltimore; NASA, Washington.

Construction standards included in the SFO do not require or specify lavish finishes or amenities. They are intended to provide space and services in the most cost-effective manner over the term of occupancy. For example, the SFO requires that lobbies "shall employ high-quality materials which are durable and easily maintained." This is just good building practice in a heavily trafficked public area. The per-square-foot interior build-out cost is comparable to other government projects with a base building in a "cold, dark shell" configuration.

On December 23, 1996, six (6) Phase One offers were submitted. After evaluating these offers in accordance with the Phase One evaluation criteria stated in the solicitation (qualifications of sites and development teams), four (4) offerors were invited to submit Phase Two offers. Phase Two proposals were received on October 27, 1997. GSA has been engaged in active evaluation of these proposals and discussions with offerors since this date. Three (3) sites remain under consideration. A fourth site was withdrawn from competition earlier this year.

GSA expects to request, by the end of this month, that the remaining offerors submit their best and final offers (BAFOs) in response to the solicitation. These BAFOs will be evaluated in accordance with the Phase Two evaluation criteria stated in the solicitation (proposed facility design, willingness and ability to mitigate environmental impacts, and qualifications of the interior architect and maintenance firm). Following this evaluation, GSA will identify for award the offeror whose proposal represents the greatest overall value to the Government, price and the above referenced evaluation factors considered. We expect to be in a position to identify the winning offeror prior to the end of this calendar year.

Procurement Review

This procurement and the procurement process itself have been extensively reviewed. An audit by the Inspector General of the Department of Commerce (Report No. IPE-9724, March 26, 1998) and a review by a contractor commissioned by the Secretary of Commerce support the conclusion that we should continue with this space consolidation effort.

There have also been questions about extending the existing leases, where such options are in place, versus leasing other space at market comparable rates. We contracted with Spaulding and Slye to prepare a market analysis. The analysis, which was completed on July 31, 1998, indicated that extending existing leases with fundamental building improvements to match market comparables would cost an additional $6,410,000 annually. The government would pay an additional $32,070,000 over the typical five-year extension term.


Mr. Chairman, I appreciate this opportunity to update this Committee on our progress and to assure you that we will continue to act in the best interest of the government in providing PTO the consolidated space that they require. I would be pleased to answer any questions the Committee may have.