The Six Biggest Inaccuracies in the July 10 Bloomberg Businessweek Article Regarding the CFPB’s Building RenovationsPosted by Staff on July 15, 2014
Inaccuracy #1: “When the U.S. Consumer Financial Protection Bureau opened in 2011, the best available government office space large enough to accommodate its thousand-plus employees was a run-down concrete building on G Street near the White House that once housed the now-defunct Office of Thrift Supervision.”
It therefore appears that the CFPB conducted no due diligence before selecting 1700 G Street, so it could not possibly know whether the facility was the “best available.”
Additionally, in 2010, the Securities and Exchange Commission (SEC) had leased approximately 900,000 square feet of office space in Washington, DC at 400 Seventh Street, SW, known as Constitution Center, and, as was widely reported, soon found that it had overcommitted itself by roughly 600,000 square feet (See, e.g., https://www.sec.gov/foia/docs/oig-553.pdf). The SEC and the building owner then solicited other government agencies to sublease the newly-renovated, Class A space. Several agencies ultimately moved into the building, including the Office of the Comptroller of the Currency (OCC) and the Federal Housing Finance Agency (FHFA). Prior to February 18, 2011, the date when Elizabeth Warren announced the selection of 1700 G Street as the CFPB’s headquarters (see http://www.consumerfinance.gov/newsroom/treasury-department-announces-permanent-headquarters-of-consumer-financial-protection-bureau/), approximately 350,000 contiguous square feet was apparently still available for rent at the Constitution Center site. This amount exceeds the 312,000 rentable square feet the CFPB ultimately rented in 1700 G Street, and thus would appear to be “large enough” for the agency’s needs. Two CFPB employees toured the Constitution Center facility, but for reasons unknown, CFPB leadership agreed to rent the 1700 G Street location “as-is” (which Director Cordray has described as “a white elephant” and “a dump”) rather than pursue available space in Constitution Center. On March 21, 2014, the Committee sought documents from the OCC, SEC and CFPB that might shed light on this decision. The SEC and OCC have produced all requested records in full, whereas the CFPB has not replied or provided records at all.
So on what basis and with what support does Bloomberg Businessweek make the claim that the building on G Street was the “best available” real estate option for the CFPB?
Inaccuracy #2: “The U.S. General Services Administration is managing the project.”
“CFPB has overall responsibility and approval authority for all aspects of the renovation project, including determining requirements associated with the renovation needs, project scope, schedule and budget. Subject to the provisions of this MOU, all bridging design considerations decision-making authority (including aesthetic and artistic), shall be vested with the CFPB.”
Under normal circumstances, the GSA manages facility renovation and construction projects for federal real estate in its inventory, but in the case of the CFPB renovation, neither the CFPB nor the GSA own the building that the CFPB has decided to renovate. The 1700 G Street building is owned by the OCC. Additionally, the renovation is structured as a design-build bridging project, meaning that CFPB retains full control over the design, engineering, scope and the cost of the renovation. The CFPB hired Skidmore, Owings & Merrill as its architecture/engineering design firm, and it is this firm that has prepared the bridging design documents for the project. The CFPB controls the project, not the GSA. The GSA’s role is to procure and manage a contractor to perform the demolition and construction in accordance with the CFPB’s designs.
In a pre-proposal conference for potential construction contractors held by the GSA on March 21, 2014, Tyrone Anderson, the GSA’s project executive, said that the CFPB renovation project is “unique for us” because “we don’t own the building, and we don’t control design.” Additionally, several construction tasks fall outside the scope of the GSA’s contract with the CPFB, and thus will not be undertaken by the contractor procured by the GSA. For instance, the CFPB plans to replace the building’s data and telecommunications system and furniture, fixtures & equipment (FF&E), but these projects will be handled by the CFPB through separate procurements, not the GSA.
Inaccuracy #3: “The GOP members say their calculations show the renovation will cost $215.8 million.”
“Based on the CFPB’s assessed requirements as of June 5, 2014, we currently estimate all-in costs to total approximately $215.8 million.”
Inaccuracy #4: “The [Inspector General’s] report said the renovation covers 512,000 sq.ft.”
Her statement is supported by the bridging design documents created by Skidmore, Owings & Merrill, which show proposed floor plans for every level in the building except the two garage levels, and by the presentation slides the GSA provided to potential contractors, which also show renovation plans for every floor of the building except the two underground parking garage levels.
Additionally, the OCC has confirmed in letters sent to its ground-level retail tenants that the building’s retail space will not be renovated by the CFPB. Using square foot figures appearing in documents provided by the CFPB pursuant to Committee document requests, the actual total square footage being renovated by the CFPB appears to be 365,199 square feet, which is significantly less than the GSA’s gross figure, but tracks closely with the initial estimate of 350,000 square feet from the CFPB’s CFO.
Inaccuracy #5: “The Republican figures inflate the total price by tacking on $70.7 million for costs such as hiring movers and renting temporary offices to use during the construction.”
The Committee calculated the renovation cost per square foot by dividing the total renovation costs estimated by the Inspector General – $215.8 million – by the estimated square footage actually being renovated – 365,199 square feet. This figure amounts to approximately $590/square foot.
Inaccuracy #6: “Republicans have cast the project as a misuse of public dollars in a time of tight budgets…But the Federal Reserve is self-financed, largely with income on securities such as government bonds, so the amount Congress needs to set aside for the office redo is precisely zero.”
Bottom Line From the Inspector General’s Report: “A Sound Business Case Is Not Available to Support” the CFPB’s Renovation
The Financial Services Committee will continue to investigate why CFPB leadership decided to commit the Bureau to a quarter billion dollars in long-term lease payments without performing any due diligence, and why it has decided to spend an additional $215.8 million to renovate a building it doesn’t own, an amount that is more than $70 million higher than the building’s appraised value.
The Inspector General points out all this money is being spent by the CFPB even though it “was unable to locate any documentation of the decision to fully renovate the building” and even though it failed to comply with its procedures for obtaining internal approval for the renovation. Therefore, “a sound business case is not available to support the funding of the renovation,” the Inspector General reports.
The CFPB’s building renovation is not a wise use of public funds, and this lavish spending does nothing to support the CFPB’s core mission of protecting consumers.