than the 5.5 percent rate. Further, the district officials stated that as a means of controlling costs, they expect to place greater reliance on the "performance of work" clause in architect-engineering contracts for the design of postal facilities and provide less technical review of the design than furnished past projects in military construction.

Slippage in fiscal year 1971 postal

building program

A Department monthly summary report as of May 28, 1971, shows that its fiscal year 1971 major postal facilities construction program consists of 36 active projects and that the Department has been unable to meet many of its target objectives. For example, the Department planned to start construction on 33 projects by May 28, 1971; however, only 4 projects were under construction by that date. The information available to us did not show all reasons contributing to delays; however, information on recent critical developments which have affected the schedules for nine postal projects showed that the reasons stated for changing the schedules were generally of a nature which required resolution by the Department and involved such matters as need for further economic analysis and changes in operational concepts.

As of May 28, 1971, 20 of the 36 fiscal year 1971 projects and two fiscal year 1972 projects had been transferred to the Corps for services. Corps officials at two of the three design offices informed us that all fiscal year 1971 projects for which they had anticipated to perform services had not been received. Corps officials also advised us that the construction periods assigned to the projects received were optimistic.

Many of the fiscal year 1971 projects have estimated construction periods of 12 months. In this regard, the Jacksonville District of the Corps made an evaluation concerning the 12-month construction period required for the Jacksonville postal facility estimated to cost $7 million and concluded that if construction was completed in 12 months it would cost an additional $2.6 million. The district recommended a construction period of 18 months. At the time of our review, an agreement concerning the construction time for the Jacksonville facility had not been reached. Similar situations have also developed on the Fort Lauderdale, Florida, and Roanoke, Virginia, postal projects.

Corps construction time on comparable projects

One of the reasons the Department approached the Corps to undertake the major construction program was the belief the Corps could deliver the completed projects on schedule. In order to obtain some insight as to the Corps performance in completing projects in a timely manner, we obtained from the Corps' Washington office a list of projects the Corps had constructed during the past five years that are comparable, in type, magnitude and complexity, to those it will construct for the Department, in accordance with the March 11, 1971, agreements. From this list we reviewed 12 projects and found overruns in construction time ranging from 30 days to 542 days, averaging 227 days. The overruns were due primarily to design changes and work stoppages caused by strikes and inclement weather.

COMPARISON OF LAND ACQUISITION AND LEASE

CONSTRUCTION PROCEDURES

In the Chairman's letter dated June 2, 1971, it was requested that we compare the land acquisition procedures used by the Department, GSA, and the Corps and the lease construction procedures used by GSA and the Department. The following comparison of procedures pertain to those procedures in effect before July 1, 1971.

COMPARISON OF LAND ACQUISITION PROCEDURES

GSA and the Corps acquire land, primarily for Government-owned new construction projects, whereas the Department acquired land primarily for lease-construction projects. The GSA and Corps land acquisition procedures which were similar in many respects differed from the Department's procedures.

GSA and the Corps, generally, acquire land by negotiated direct purchase and occasionally by donation or exchange, and as a last resort by condemnation. The Department generally obtained control of a site in one of the following ways, in order of preference: (1) assignable site option--$1 consideration, (2) letter of intention, (3) assignable site option--reasonable fee, (4) assignable ground lease, (5) direct purchase, and (6) condemnation. The assignable site optionreasonable fee and assignable ground lease methods were seldom used, and the letter of intention method was restricted solely to acquiring control of land in a federally financed urban renewal project.

To determine the value of properties to be acquired, GSA primarily used estimates prepared by contract fee appraisers; the Corps used estimates prepared by its staff or contract fee appraisers in the ratio of 60 to 40 percent, respectively; and the Department primarily used estimates prepared by its real estate officers. GSA and the Corps required appraisers to use the following three generally accepted methods to estimate fair market value: (1) the comparative method--comparing the land to be acquired to the price of land of a comparable nature which was recently sold, (2) the cost method--determining the price that a parcel of land will command on the open market, assuming it to be vacant, plus the present depreciated cost to reproduce the improvements on the land, and (3) the income method--determining the market value of incomeproducing property by determining the net income which the property will produce for the owner.

The Department required that its real estate officers use the comparative method and give consideration to such factors as the date of sale, location, size, shape, topography, and subsoil conditions. When land values were estimated by contract fee appraisers, the Department required that all three methods be used.

GSA's regulations provide that the negotiated site cost (purchase price) cannot exceed 110 percent of the appraised fair market value, subject to considerations such as the costs and risk of litigation, the value of improvements to be removed by the owner, and the value of any rent-free occupancy. The Corps' regulations provide that the total cost cannot exceed 115 percent of the appraised value. The Department's

instructions provided only the limits within which a price is acceptable. For purchase options, the Department regulations provided that the price negotiated for the land, plus the option fee, should approximate fair market value as determined by contract appraisers or a property estimate prepared by the Department's real estate officers. The regulations also provided that the site cost generally should be in the range of from 10 to 20 percent of the total estimated project cost (land and building) and should rarely exceed 25 percent. the direct purchase of land, the price was negotiated within the limitations of funds appropriated for that purpose.

For

Both GSA and Corps regulations provide for outleasing (interim occupancy) to the owner or tenant. In some instances, both agencies allow rent-free occupancy by the owner or tenant as (1) a means of inducing the owner to sell and (2) from a public relations standpoint. GSA considered the value of any rent-free occupancy in determining whether and by how much the purchase price will exceed the appraised fair market value. The Corps considered the value of rent-free occupancy to be offset by the tenant's protection and maintenance of the land and improvements. The Department's regulations, primarily oriented to the purchase option method of acquiring land, did not contain any outleasing instructions.