GENERAL SERVICES ADMINISTRATION Washington, DC 20405 PBS 4065.1 December 7, 2017

GSA ORDER SUBJECT: Amended Procedural Guidance for PBS Exchanges of Real Property 1. Purpose. a. Create new procedural guidance that combines Commissioner Peck’s 1997 Exchange Guidance and the 2014 Procedural Guidance on Section 412 Exchanges for In-Kind Consideration into one comprehensive, single-source policy and procedures document that supersedes and replaces all prior exchange guidance.

b. Incorporate recommendations from the Inspector General’s February 2017 audit into this new procedural guidance to improve the PBS exchange process and maximize its resources.

2. Background. This amended guidance outlines the process for identifying eligible exchange properties; evaluating, analyzing and approving the proposed exchange; and planning, reporting and mitigating risk to realize the best financial outcome for disposal of the property. 3. Scope and applicability. This internal directive applies to all PBS real property exchanges. 4. Responsibilities. The Office of Portfolio Management and Customer Engagement manages the real property exchange process, and its roles and responsibilities are identified and detailed in the directive. 5. Signature. /S/____________________________ DANIEL W. MATHEWS Commissioner Public Buildings Service

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PBS 4065.1 - Amended Procedural Guidance for PBS Exchanges of Real Property

November 2017

Table of Contents

Page

History of PBS Exchange Guidance ………………………………………….. 1 Goals of the Exchange Program …………………………………….……….. 2 Identifying GSA Properties for Exchange …………………………………... 2 Acceptable Forms of Consideration for the Exchange …………............. 3 Additional Exchange Issues to Consider …………………………………… 4 Central Office Support and Assistance ……………………………………… 4 Evaluating the Proposed Exchange …………………………………………. 5 Administrator’s Approval ……………………………………………………… 6 The Implementation Process …………………………………………………. 6 Internal Communications ……………………………………………………… 9 Managing the Exchange Transaction Post-Closing ………………………. 9 Identifying and Mitigating the Risks …………………………………………. 9 The Exchange Agreement..…………………………………………………….. 11 Appendix A: Roles and Responsibilities …………………………………… 12 Appendix B: Preparing the Exchange Business Case Analysis............. 16 Net Present Value Analysis……………………………………. 17 Risk Analysis……………………………………………............. 18 Findings and Determinations………………………………….. 18 Fact Sheet…………………………………………………………. 19

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Amended Procedural Guidance for PBS Exchanges of Real Property

History of PBS Exchange Guidance

● In 1997, the Commissioner of Public Buildings Robert Peck issued a Memorandum to the Assistant Regional Administrators for the Public Buildings Service (“PBS”) setting forth guidance for real property exchanges of non-excess property as authorized under the Public Buildings Act of 1959 (i.e., 40 U.S.C. §§ 602, 604 and 605, now codified at 40 U.S.C. §§ 3304(a), 3304(b) and 3305(a), respectively) and subsection 210(a)(12) of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. § 490, now codified at 40 U.S.C. § 581(c)(1))(the “1949 Act”). The Memorandum did not cover exchanges for the disposal of surplus real property1 under subsection 203(c) of the 1949 Act (40 U.S.C. § 484(c), now codified at 40 U.S.C. § 543).

● In 2014, PBS issued separate guidance for the exchange of real property for in-kind

consideration as authorized by section 412 of the GSA General Provisions, Consolidated Appropriations Act, 2005, Public Law 108-447, 118 Stat. 2809, 3259 (Dec. 8, 2004) (Section 412).

● In 2017, GSA’s Office of Inspector General reviewed the PBS Section 412 exchange

procedures for in-kind consideration and recommended the following changes:

▪ Quantify risk in the initial analytical process and update those calculations throughout the life of the project;

▪ Accurately estimate the funding amounts, the sources and the potential funding shortages to the proposed exchange transaction, as well as the use of cash equalization payments, if any; and

▪ Increase transparency in the quarterly exchange reports to the appropriations committees of the House of Representatives and the Senate with the revised risk and cost data, if any, through project completion.

● This Amended Procedural Guidance will:

o Combine the 1997 and 2014 exchange procedures into one integrated exchange

guidance document to provide consistency for all exchange transactions and

o Supersede and replace all prior exchange guidance.

1 The term “surplus real property” means property no longer needed by the Federal Government that may be made available to state and local governments, regional agencies, nonprofit organizations, or the general public

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Goals of the Exchange Program

● Expand the options available to GSA for management of its real property portfolio; ● Help customer agencies improve space utilization in furtherance of the goal of reducing

the Federal footprint; and ● Maximize use of the Federally owned inventory, particularly legacy buildings, consistent

with Federal location policy and sustainability goals under Executive Orders 13006 and 13514, and seek ways to reduce the Federal Government’s reliance on privately owned leased space to meet long-term customer agency housing needs.

Identifying GSA Properties for Exchange

a. Eligible Properties: Eligible properties include land and buildings that are under the jurisdiction, custody and control of GSA and are not “excess,”2 as that term is defined in 40 U.S.C. § 102(3). ● Although this Amended Procedural Guidance specifically addresses the exchange of

non-excess real property, PBS can perform an exchange of excess real property, as long as certain conditions are met.

● For excess real property, the Office of Real Property Utilization and Disposal (“PI”) will advise the Office of Portfolio Management and Customer Engagement (“PT”) when property under GSA’s jurisdiction, custody and control that is determined to be excess is eligible for an exchange, and will assist the Region in evaluating possible exchange options.

b. Qualifying Exchange Candidates:

● Exchanges should maximize the value of the asset to the Federal Government and be considered as part of the asset management strategy. When analyzing properties to be exchanged:

o Consider whether exchanging the asset would result in meeting customer agency needs by receiving consideration that would enhance other assets within the PBS portfolio.

o Demonstrate by comprehensive financial analysis (see Appendix B – Preparing the Business Case Analysis (“BCA”)) that exchanging the property is in the best interest of the Federal Government, taking into consideration the operating and maintenance expenses associated with operating the property as-is, or exchanging it or removing it from the portfolio through the disposal process.

o Preference must be given to the option that minimizes the cost and risk exposure to the Federal Government for assets that are vacant or underutilized and can be disposed in the event the exchange does not occur.

2 The term “excess property” means property under the control of a Federal agency that the head of the agency determines is not required to meet the agency’s needs or responsibilities.

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● High value assets in desirable locations that will generate considerable market interest

in an exchange transaction are better candidates. ● Exchanges should not increase GSA’s reliance on leasing, unless it is cost-

advantageous for the Federal Government, by exchanging assets needed for Federal use and are consistent with Federal location policies and sustainability goals.

● Properties with high reuse potential as a whole or assets that could be improved by subdividing or parceling into sections for exchange.

● Properties that GSA can continue to occupy as a space tenant after exchange and redevelopment.

Acceptable Forms of Consideration3 for the Exchange Acceptable forms of consideration for an exchange transaction include:

a. Land or buildings equal in value and suitable for GSA’s use; b. Design and construction services for the alteration, repair or improvement of property under

GSA’s jurisdiction, custody and control - preferably in the area or Region where the property to be exchanged is located. These services could include architectural and engineering, infrastructure (e.g., mechanical, electrical, plumbing, structural, or civil), landscaping, or security;

c. The construction of a new, energy efficient replacement building or the acquisition of an existing building that meets the Federal Government’s specifications before or after renovation;4

d. Other consideration specific to a particular transaction, such as furniture, fixtures and equipment, information technology, move and relocation services, or swing space for displaced occupants; or

e. A cash equalization payment, in addition to one or more of the other acceptable forms of consideration described above.

The consideration being received should further the Goals of the Exchange Program, as described earlier in this Guidance. 3 Consideration is defined as the thing or things of value being offered in exchange for GSA’s property. 4 It should be noted that the construction or acquisition of a new building may be accomplished more appropriately under 40 U.S.C. §§ 581 or 3304, and the Office of General Counsel (OGC) can assist the Region in making that determination.

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Additional Exchange Issues to Consider

a. Planning: Selecting an appropriate project for an exchange of equal value or an in-kind consideration exchange can be quite complex, as planning a renovation project can require years of preparation and considerable effort. As a part of the selection process, the solicitation, as described later in this Guidance, must include the time frame that the agency will require for the completion of the required exchange or construction services.

b. Additional Funding: As the scope of work that will constitute in-kind consideration to be received by the Federal Government is planned and executed, GSA may require additional funds to complete the transaction. The availability of additional funding may impact the selection of the property or services and this contingency must be addressed in the BCA and the Exchange Agreement with the offeror.

c. Timing: The timing for the selection, completion and commissioning of the required services will be a major factor in the Selected Exchange Offeror (“SEO”) selection process and should be addressed in the preliminary BCA, the Request for Information (“RFI”), if applicable, and ultimately the solicitation. These processes are described later in this Guidance.

d. Risk: In exchanges for construction services, the SEO must complete the improvements to the property that will remain in the PBS portfolio before receiving the Federal Government’s property as consideration. This risk will affect the SEO’s offered exchange value for the Federal Government’s property and must be quantified in the BCA5.

Central Office Support and Assistance

a. Project approval: The Region must notify PT of its plans to pursue an exchange for real property of equal value or for in-kind consideration, and PT will assign a National Project Manager (“NPM”) to assist the Region in preparing the BCA and other supporting documentation to obtain project approval.

b. Project funding: All requests for funding, including site acquisition, tenant relocation, asset

due-diligence6, and other financial obligations, such as change orders, must be coordinated through the NPM to determine the appropriate budget activity and to obtain necessary approvals.

c. Additional services: Additional transactional support is available from PI, on a reimbursable

basis, for asset due diligence information. PI also is available to perform Targeted Asset Reviews to help identify assets that the Region may want to consider for an exchange.

5 This risk may be mitigated somewhat by permitting the SEO early access to the Federal Government’s property to conduct studies and perform improvements that do not affect its occupants. 6 Due diligence is the general term that is used for the collection of property data and information (e.g., risk adjusted exchange value, title report, survey, environmental studies, soil compaction reports, architectural, mechanical, electrical, and engineering studies, historic documentation, flood reports, and other pertinent investigations, as necessary) that will be used by GSA and the offeror (or public body) to evaluate the feasibility of the proposed exchange transaction.

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Evaluating the Proposed Exchange The Region must prepare a BCA to assess the feasibility of the proposed exchange. The NPM will assist the Region with this requirement. At a minimum, the preliminary BCA must evaluate the standard investment options for the property (i.e., retention, disposal or exchange) and address why it has selected exchange as the most appropriate alternative. In preparing the BCA, the Region should assume that both internal and external stakeholders will become involved in the process. All aspects of the proposed exchange should be considered, evaluated and described as part of the Region’s due diligence, including:

● The property attributes, such as condition, location and marketability for exchange purposes;

● The property’s risk adjusted exchange value7, compared to values under other appropriate scenarios;

● Unsolicited public or private sector interest in acquiring the property, if any; ● If vacant land, the availability of municipal services (e.g., water, sewer and fire and

police protection); ● Direct and indirect costs of agency and contractor personnel assigned to the project,

including construction management services; ● Any additional costs needed to execute the transaction and the resultant impact on the

property’s exchange value (e.g., environmental studies and remediation expenses, site inspections, surveys, engineering studies, soil compaction reports, and section 106 mitigation);

● A description of benefits of the transaction, both tangible and intangible (e.g., reducing the tenant footprint, energy savings or a description of any cost avoidance resulting from the exchange);

● A financial analysis comparing the value of the property to be exchanged and the value of the services or property, or both, to be received; and

● Overview of proposed transaction structure. If this is unclear, it signals that an RFI could be beneficial to clarify the proposed transaction.

Before doing extensive work on a potential exchange transaction, the Region may issue an RFI, if doing so would be beneficial, to detail the subject property’s attributes and the types of transaction structures GSA would consider for the property. The RFI should be used if GSA is unsure whether there is interest from non-Federal entities in the subject property or if GSA would like feedback on proposed transaction structures, but the RFI is not required. Upon completion of the draft RFI (if applicable), the Region must transmit it to PT for review and approval by PT, PI and OGC prior to its issuance.

7As described in greater detail in the guidance on preparing the BCA set forth in Appendix B.

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Administrator’s Approval Upon completion of its analysis, the Region must submit the Fact Sheet and the BCA, each of which is described in greater detail in Appendix B, to PT to coordinate review of the proposed exchange with PI, the PBS Commissioner, OGC, and the Administrator. The Administrator’s approval package must include a memorandum from the PBS Regional Commissioner to the PBS Deputy Commissioner and the PBS Commissioner and from the PBS Commissioner to the Administrator requesting approval to proceed with the proposed exchange. As part of the approval package, the Region must request a delegation from the Administrator to the PBS Commissioner and the PBS Deputy Commissioner and from the PBS Deputy Commissioner to the PBS Regional Commissioner, with a further request that the authority may be re-delegated to the individual who will serve as the approving official for the purpose of selecting the SEO. Upon approval by the Administrator, the Region may start the Implementation Process, as described below. The Implementation Process

a. Estimating the Expenses: The Region should prepare a detailed estimate of the costs and expenses it will incur to obtain the information necessary for the exchange, including the title report, survey, appraisal, a soil compaction study, construction management services, project management expenses, and any other necessary due diligence activities. The estimate also should include, at a minimum, the American Society for Testing Materials International E1527-05 Phase I Environmental Site Assessment, as such standard may be revised from time to time.8 Further environmental studies may be necessary, if the Phase I assessment indicates that there are significant issues with the property.

b. Preparing the Solicitation9:

(1) The Region must establish a team that is comprised of, at a minimum, a project manager, a Contracting Officer with an unlimited warrant, a representative from the regional PT office, a valuation expert, a subject matter expert in architecture, engineering and construction, a representative from PI, an attorney from the Office of Regional Counsel, and the Regional Historic Preservation Officer (for exchanges involving historic buildings).

8 It is anticipated that the environmental remediation actually will be performed by the SEO as a part of its construction services and the value of GSA’s property will be adjusted accordingly. 9 Existing authorities also enable GSA to negotiate directly with interested parties, rather than conducting a competitive solicitation. In such an instance, a solicitation is not necessary, but a BCA must be prepared to justify exchange as the most appropriate alternative for the property, and the Administrator must provide approval before negotiations with the interested party may commence.

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(2) While the Federal Acquisition Regulation (FAR) does not apply, the Contracting Officer is still responsible for all actions necessary to comply with the terms of the solicitation and the Exchange Agreement and to safeguard the interests of the United States in its contractual relationships, as set forth in greater detail in FAR subpart 1.6 and the General Services Administration Acquisition Manual subpart 501.6. Depending on the delegation of authority from the Administrator and the PBS Deputy Commissioner described in the preceding section on the Administrator’s Approval, the Contracting Officer may, or may not, serve as the approving official for the exchange transaction.

(3) The Region must coordinate the preparation of the solicitation with the NPM. The package may include a Request for Qualifications (“RFQ”), a Request for Proposals (“RFP”), an Invitation for Bids (“IFB”), an RFI, or any combination of the foregoing. Any proposed RFQ, RFP, IFB, or RFI must have concurrence from the Office of Regional Counsel.

(4) The solicitation must advise potential offerors what real property or construction services GSA is seeking in exchange for the subject property and provide sufficient detail, including sequencing, timing and other provisions, to allow offerors to make informed decisions about a potential exchange. Each type of service must include a scope of work that is sufficiently detailed to enable prospective offerors to understand and evaluate the services sought by GSA, and balance the value of the real property being offered against the services sought. The detailed scope of work also enables GSA to prepare an Independent Government Estimate of the anticipated cost of these services.

(5) If the Region proposes to attach a draft of the Exchange Agreement to its solicitation, the draft must be approved by the Administrator prior to inclusion. Any proposed Exchange Agreement must have concurrence from the Office of Regional Counsel.

(6) The NPM will be responsible for coordinating approval of the issuance package with PT, PI and the Office of Design and Construction, as well as the PBS Commissioner, OGC, the Office of Congressional and Intergovernmental Affairs, and the Administrator.

c. Evaluate Offers: The approval authority must use a technical evaluation panel to evaluate the offers. The Contracting Officer is responsible for developing the technical evaluation plan and selecting the individuals to participate on the panel. The Contracting Officer must develop evaluation factors and significant subfactors, if appropriate, such as past performance, compliance with solicitation requirements, technical excellence, management capability, personnel qualifications, and prior experience, and their relative importance, based upon the particulars of the project, in addition to the cash equivalent value being offered. The approving official (if different from the Contracting Officer) must approve the technical evaluation plan and the individuals selected to serve on the evaluation panel. The technical evaluation panel will evaluate the offers and determine which one provides the best overall value to the Federal Government based upon the risk adjusted exchange value of the proposed property or construction services offered as consideration, as

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discussed in greater detail in Appendix B, and the other evaluation factors set forth in the solicitation.

(1) Best Overall Value. For purposes of an exchange for services, the term “best overall

value” means the offer that, in the Federal Government’s estimation, yields the greatest expected overall benefit when considered against the evaluation criteria. The panel must provide a written recommendation to the approving official that identifies the SEO. The approving official will then select the preferred SEO for purposes of entering into negotiations to finalize the exchange transaction.

(2) Property Exchange Value. To confirm that GSA will receive commensurate value as

part of the exchange, GSA will determine the risk adjusted exchange value in the context of the proposed transaction as of the time the parties enter into the Exchange Agreement. The value estimate must reflect the risks identified and outlined in the BCA.

Further, GSA will prepare an Independent Government Estimate of the proposed services offered as consideration. GSA will not enter into the exchange transaction unless the value of services received is equal to or greater than the risk adjusted exchange value of the property to be exchanged. Should the value of the services offered as consideration exceed the risk adjusted exchange value of the property proposed for exchange, GSA may include a cash equalization component to equalize values.10

(3) Before awarding or executing an Exchange Agreement, PT will determine if the value of the proposed exchange is sufficient, as compared to earlier estimates and as compared to values expected under alternative scenarios, to warrant proceeding.

d. Negotiate the Exchange Transaction. In most instances, an appropriately warranted regional Contracting Officer will take the lead to finalize the Exchange Agreement with the SEO, working in conjunction with assigned legal counsel. As noted below, prior to executing the Exchange Agreement, the PBS Commissioner and the Administrator must be briefed or otherwise notified. The Region should provide regular updates to PT and the PBS Commissioner’s office on the status of the negotiations. After negotiations are complete, the Contracting Officer will sign the Exchange Agreement.

e. Environmental and Historic Preservation Requirements. The Region must satisfy all

applicable environmental and historic preservation requirements before completing the conveyance.

10 Any cash equalization component to be paid by GSA is subject to the availability of funds and the current prospectus threshold in the fiscal year that the payment will be made. GSA should carefully consider the possibility of including a cash equalization component as part of the project planning and implementation processes.

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Internal Communications As the project progresses, PT will assist the Region with coordinating and leading briefings for the PBS Commissioner and the GSA Administrator at project milestones and as otherwise requested by senior management. The briefing milestones are, at a minimum,:

● Prior to issuing an RFI or solicitation; ● Prior to selecting the SEO; and ● Prior to signing the final negotiated Exchange Agreement.

Managing the Exchange Transaction Post-Closing The Region is responsible for overseeing implementation of the Exchange Agreement, including acceptance of the services to be delivered under the agreement. Global Project Management should be used to oversee and monitor the completion of the required work, and a qualified project manager should be engaged, as necessary, to assist with that process. If determined to be in the best interest of the Federal Government, construction management services also may be procured to verify that the construction services are being delivered as specified in the Exchange Agreement. Title to the Federally owned property cannot be conveyed to the SEO until the required services, as detailed in the Exchange Agreement, are completed and accepted by GSA. The SEO may submit a request for “early access”11 to GSA’s property to start making improvements before title is conveyed, which could lessen the SEO’s market timing risk and improve GSA’s transaction exchange value. Approval for that pre-settlement access is not guaranteed and will be evaluated on a case-by-case basis.

Identifying and Mitigating Risks

Transactions of this complexity have major risks that can have a significant impact on the exchange. The following table outlines potential risks of any exchange transaction, the possible impact on the transaction and suggested ways to mitigate the risks.

Risks

Impact

Mitigation

Failure to factor fully into the exchange planning process potential risks to the SEO

● Overvalues the attributes of the exchange transaction and prolongs GSA’s disposal of the property

● Quantify SEO’s risk in the BCA and include in the 20-year cash flow analysis

● Draft an RFP and obtain potential

offeror comments before issuing

11 Early access allows the SEO to commence work on the Federal property before it completes the new improvements required for GSA. The Region should consider including a performance bond requirement in the Exchange Agreement to offset the risks involved in any early access request.

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Failure to plan for and report fully the funding needs for all aspects of the exchange

● Underfunded direct and

indirect costs, including cost for PBS and contractor personnel assigned to the project

● Congressional antipathy

for the exchange program

● Funding shortfalls lead to delays or failed projects

● Develop estimates for all project costs (including supplemental costs to plan, manage and complete the exchange) in the planning stage and discuss in the BCA

● Identify all current and future

funding requirements (e.g., change orders) and possible funding sources for these costs and expenses

● Identify alternative funding sources and establish go/no-go criteria in the planning process

Funding budget shortfalls

● Unable to complete the project

● Project delays while securing additional (uncertain) funding

● Require SEOs to include a contingency (e.g., 5 to 15%) in their project budget to fund change orders

● Use funds from the appropriate building operations account, where applicable12

● Use cash equalization payments

to cover shortfalls, but only if these funds are further appropriated by Congress

Changes in the development schedule or scope of work

● The variety of unknowns and the potential for major changes reduces offeror interest in doing exchanges with GSA

● Consider and quantify all development risks and benefits when preparing the BCA

● Finalize the program of

requirements and have the design and specifications package prepared before the exchange opportunity is advertised

12 PBS’s “Guidance on Proper Building Operations Funding towards Capital Projects” permits funding from GSA’s Building Operations account to be used for project planning costs, such as building engineering reports, environmental studies, historic preservation studies, market surveys, appraisals, and site studies. The funding requirement must be calculated and quantified as part of GSA’s annual budget submission to Congress and updated in its quarterly project reports to the congressional appropriations committees.

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Risks to SEO due to outside influences - market risk, financing risk and construction risk (i.e., materials and labor)

● Uncertainties and the potential for delays reduce offeror interest in participating

● Allow early access to building to facilitate early occupancy

● Include performance incentives

and penalties on both sides for delays

● Do phased payments for stand-

alone work that has value for GSA (e.g., demolition)

SEO defaults

● Legal proceedings delay project execution and SEO may be unable to complete the project as planned

● Incorporate GSA’s right to assume control of the project in the Exchange Agreement

● The Region should develop a

project completion contingency plan, including a performance bond requirement, in the Exchange Agreement

The Exchange Agreement A draft of the proposed Exchange Agreement must be provided to the NPM for review by PT, PI and OGC before it is released to the public and approval to enter into an exchange transaction must be obtained from the Administrator before entering into negotiations over the Exchange Agreement with the SEO. The Exchange Agreement must address conditions that could lead to a cancellation of the proposed transaction, such as unforeseen environmental remediation, a material change in the exchange properties' condition that might occur before the exchange is consummated, a change in the status of the properties as historic properties or districts or as a result of local laws or requirements, or disapproval of the proposed transaction by Congress.

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Appendix A. Roles and Responsibilities

Entity

Roles & Responsibilities

Region

● The Regional Portfolio Director and the PBS Regional Commissioner must approve the proposed exchange before it is referred to PT for further evaluation.

● Identifies Federally owned properties in its inventory that may be suitable for an exchange.

● Performs asset due diligence to evaluate the potential of using the non-excess asset for an exchange.

● Prepares and issues the RFI to determine private sector interest in the project (if needed).

● Prepares the BCA to determine the feasibility of using the asset for an exchange.

● Prepares the solicitation package and identifies the SEO.

● Prepares the Fact Sheet and communication plan associated with the proposed exchange transaction.

● Prepares, negotiates and executes the Exchange

Agreement.

● Performs all project management tasks necessary to complete the exchange transaction. In addition to oversight responsibilities, the Project Manager must apprise the NPM, on a quarterly basis, regarding changes to:

➢ The property’s risk adjusted exchange value

from updates to the project’s risk profile and

➢ The updated costs to manage and complete the exchange project.

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The Office of Portfolio Management and

Customer Engagement (PT)

● Provides an NPM to assist the Region with its proposed exchange project.

● Prepares transmittal letters and presents the proposed exchange to the PBS Commissioner and the Administrator.

● Notifies the Office of Congressional and Intergovernmental Affairs (OCIA) and the Office of Communications and Marketing, and assists with stakeholder communications.

● Monitors the Region’s completion of the exchange project and provides progress reports to appropriate officials.

● Helps the Regions prepare funding application

documents and oversees the project funding process.

● The Center for Site Acquisition and Relocation within PT can assist the Region with the following services:

➢ Evaluation of due diligence information ➢ RFI development (if needed) ➢ Solicitation development ➢ Market engagement ➢ Negotiation ➢ Development of the Exchange Agreement.

● Includes the exchange project in the quarterly Takings

and Exchanges report, when appropriate, and in accordance with annual appropriations act requirements.

● Approves the RFI (if applicable).

The Office of Real Property Utilization and

Disposal (PI)

● On an as-needed and reimbursable basis, supports the regional PT office with desired transaction assistance, including: Targeted Asset Reviews Evaluation of available due diligence (realty

and environmental) RFI development (if applicable) Solicitation development Stakeholder outreach (such as congressional

oversight committees, local government officials, other community groups, state environmental regulatory agencies, and State Historic Preservation Offices, in coordination with the Federal Preservation Officer, the

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Regional Historic Preservation Officer and other PBS program officials, as applicable)

Assistance with applicable environmental and historic preservation statutory and regulatory requirements

Market engagement Negotiation Appraisal review Development of conveyance documents.

● Executes a Memorandum of Understanding (MOU)

with the Region to confirm which contract services PI will provide to the Region on a reimbursable basis.

● Approves the RFI (if applicable).

The Office of Design and Construction (ODC)

● Reviews RFIs and BCAs for historic assets.

● Oversees section 106 compliance, as needed.

● Assists with stakeholder outreach to State Historic Preservation Offices.

The Office of General Counsel (OGC)

● Reviews and concurs on the RFI (if needed), solicitation package, MOUs, letters of intent, Exchange Agreement, deed, and closing documents before execution.

PBS Commissioner

● Approves the BCA, the solicitation package and the proposed Exchange Agreement before they are forwarded to the Administrator for final approval.

● Discusses the exchange transaction with approving officials and other interested external stakeholders, as necessary.

GSA Administrator

● Approves the BCA, the solicitation package and the proposed Exchange Agreement.

● Is apprised of stakeholder inquiries and intercedes, as

necessary, on GSA’s behalf.

● Notifies the following congressional committees of the proposed exchange:

➢ House Committee on Oversight and Government

Reform ➢ House Committee on Transportation and

Infrastructure ➢ House Committee on Appropriations, Financial

Services and General Government Subcommittee

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Office of Congressional and Intergovernmental

Affairs (OCIA)

➢ Senate Committee on Homeland Security and Governmental Affairs

➢ Senate Committee on Environment and Public Works

➢ Senate Committee on Appropriations, Financial Services and General Government Subcommittee.

● Briefs congressional committee staffers about the

proposed exchange transaction and provides additional information, as requested, for review.

● Notifies congressional committees prior to issuance of the RFI (if applicable) and solicitation package.

● Responds to questions about the proposed transaction.

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Appendix B. Preparing the Business Case Analysis

The Business Case Analysis (BCA) examines the feasibility of doing an exchange transaction. In accordance with Office of Management and Budget Circular No. A-94 Revised, “Memorandum For Heads of Executive Departments and Establishments – Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs” (October 29, 1992) (“OMB Circular No. A-94 Revised”), the BCA reviews the attributes (i.e., current and potential rental income) and detriments (i.e., operating and capital expenses) of the selected property, its highest and best use, its potential for exchange, and the risk adjusted exchange value13 for the property or construction services that GSA could receive in exchange for the Federal Government’s real property. The determination of the risk adjusted exchange value must be coordinated through PT’s Real Property Valuation Division. All aspects of the proposed exchange should be considered and evaluated before preparing a BCA, including:

● The condition of the Federal Government property, its location and its highest and best use;

● Any use restrictions or stipulations on future use or development of the property that

may be imposed on the exchange property;

● The property’s suitability for exchange;

● An estimate of the risk adjusted exchange value, taking into account, among other factors,:

o The additional tenant relocation or construction time because of a partially occupied Federal property,

o An interest rate risk adjustment if the exchange transaction takes a prolonged time to complete,

o Zoning and regulatory risk - relating to unknown entitlements for future potential uses and density, and

o The market timing risk - uncertainties related to market acceptance and price in future years;

● Expressed interest in acquiring the Federal Government’s property, including interest by state and local governments, and any congressional and community concerns (especially local opposition, if any);

● The environmental site assessment results, soil compaction, structural, mechanical, cultural, archeological, and NEPA considerations, and historic preservation concerns;

13 GSA will use a risk adjusted exchange value when negotiating the exchange transaction.

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● If vacant land, the availability of public services (e.g., water, sewer and fire and

police protection);

● Local market conditions - current and anticipated;

● The economic and non-economic benefits of exchanging the property;

● The reason for using an exchange versus other investment or disposal methods;

● The construction management services, if any, that will be required by GSA in connection with the exchange and the availability of funding from the Building Operations account;

● How change orders will be funded and under what circumstances GSA, the

occupant agency or the SEO will be responsible for the funding;

● Legal concerns (e.g., conveyance of title, performance bond, default, and mitigation of risks);

● A net present value analysis of doing an exchange for the non-excess property.

When doing the calculations, it should be assumed that GSA will obtain minimum capital reinvestment funding for the property and will have three financial scenarios to consider for the asset: operate as-is, disposal or exchange; and

● Informed estimates of costs for GSA staff time related to the various scenarios.

Net Present Value Analysis As described in guidance in OMB Circular No. A-94 Revised:

Net present value is computed by assigning monetary values to benefits and costs, discounting future benefits and costs using an appropriate discount rate, and subtracting the sum total of discounted costs from the sum total of discounted benefits. Discounting benefits and costs transforms gains and losses occurring in different time periods to a common unit of measurement. Programs with positive net present value increase social resources and are generally preferred. Programs with negative net present value should generally be avoided.14

The net present value (NPV) analysis should consider a minimum 20-year time horizon with a reversion of the asset in the 21st year for the following cash flow scenarios: operate “as-is” and exchange for an asset of equal value or for in-kind consideration. The disposal scenario should 14 OMB Circular A-94 Revised, section 5, subsection a.

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not exceed a three-year time period, unless there are significant environmental conditions that must be remediated. Risk Analysis All development costs estimates should be determined in the planning stage, including the direct and indirect labor cost for GSA and the contract personnel assigned to the project. Since exchanges are not authorized in the budget process, they typically do not receive line-item funding for planning and oversight costs and it is essential that the Region identify all funding sources (e.g., customer agency reimbursable work authorizations,supplemental appropriations or the applicable Building Operations account) to cover such expenses. The Region’s inability to estimate correctly and procure additional funding to complete the project could impede completion of the exchange transaction.

Findings and Determination A Findings and Determination (F&D) should be provided at the end of the NPV analysis to summarize the facts presented in the BCA and provide a logical argument for pursuing an exchange transaction. The F&D reviews the alternative capital investment and disposal options that were considered by the Region, justifies why an exchange is the only acceptable alternative and establishes a timeline for completing the project. It should reference the specific statutory exchange authority being used and fully explain why the exchange is in the best interest of the Federal Government, all factors considered. It also should contain a clear statement as to the purpose of the exchange. The F&D also should contain a short summary of the items described below.

● Issues. Any pertinent issues should be addressed, including any known or potential

environmental issues, use restrictions, local community or political interest or opposition, and the property's status as a historic property.

● Prospectus. If applicable, a statement that the exchange is integral to completing a fully

authorized, fully funded prospectus project. This statement should include the dates that the prospectus was approved by congressional committee resolutions. Site exchanges are not contingent upon prospectus approval by Congress. Any contingencies on obtaining funding for the site or construction should be included in the Exchange Agreement.

● Entities. If known, a description of the parties involved in the exchange.

● Property or Construction Services Description. A brief narrative of the properties or

construction services involved.

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● Estimate of Valuation. This should include the values of the properties involved in the exchange and include an explanation of the basis for the valuation (e.g., whether the valuation is based on the risk adjusted exchange value, value in use or some other basis).

● Cost estimates. This should be a complete list of all costs to the Federal Government to

consummate the exchange.

● Benefits. A full description of benefits, both tangible and intangible to each party, including a description of any cost avoidance resulting from the exchange.

Fact Sheet The Fact Sheet is an executive summary of the proposed exchange transaction and will accompany all transmittal letters to approving officials within the agency. It restates the salient points of the BCA and F&D, justifies why GSA is pursuing an exchange in lieu of other alternatives, stipulates what consideration GSA will accept for the exchanged Federal Government property, and reviews the economic and non-economic factors of the exchange transaction, including:

● A full legal description of the properties covered by the Exchange Agreement, as well as a brief narrative description of the properties and a short summary of their current and historical uses. This also should include the properties' street addresses and locations;

● The expressions of interest received from prospective offerors during the RFI process;

● The potential to minimize Federal Government expenditures while enhancing the efficiency and environmental conditions of the Federal workplace;

● The need to expedite the exchange transaction to satisfy customer agency requirements; and

● The risks involved with the exchange transaction, including any potential funding issues, and mitigation strategies that the Region will employ to address those concerns.