What does the Cancellation of the FBI Headquarters Project Mean for Government Real Estate?

Background

Since 2013, GSA has sought to exchange the dilapidated Hoover building on Pennsylvania avenue for a new state-of-the-art FBI headquarters in the Washington, DC region. On July 29, 2014, the government selected sites in Maryland and Virginia as the finalists. The two competing jurisdictions expected the project to be the largest development in decades, and the owners of the competing sites, located in Greenbelt, MD, Landover, MD, and Springfield, VA, spent millions of dollars in pre-development costs.
 
GSA originally contemplated an exchange to finance the project, yet Congress failed to appropriate the full amount necessary to close the gap between the value of the Hoover Building and the cost of the new headquarters. GSA confirmed that the project would end days before Acting Administrator Tim Horne was set to testify earlier this week in front of Congress. In his testimony, Horne confirmed that GSA did not move forward with the project because of challenges with structure of the exchange and the lack of funding from Congress. Horne indicated that GSA remained interested in a consolidated FBI headquarters, but did not articulate a plan for moving forward.

Reactions from Congress

Several Members of Congress from the Washington Metropolitan region expressed their outrage at the decision to cancel the procurement. A joint statement issued by Maryland Senators Benjamin Cardin (D-MD), Chris Van Hollen (D-MD), and Reps. Steny Hoyer (D-MD) and Anthony G. Brown (D-MD) strongly opposed the cancellation of the project, stating: “It is unfathomable that the Trump administration would fail to move forward on a secure headquarters for the FBI workforce that serves on the front lines of our nation’s law enforcement and counterterrorism efforts.”
 
Rep. Gerry Connolly (D-VA) expressed his concern with how the project cancelation would impact GSA’s customer relationships moving forward: “I think GSA’s got a lot of ground to cover in restoring its own credibility with the private sector. For a complicated, turnkey operation such as this I think serious developers are going to really be reluctant to participate, because look at what happened here; a number of private sector entities and local jurisdictions put billions of dollars into the redevelopment and planning, responding to bids, responding to specs, changing the terms of reference. Millions of dollars and all of that’s not been sedated, and I couldn’t blame anyone in the private sector for looking askance at future GSA bids.”

In addition, a bipartisan group of Senators, including Senators John Barrasso (R-WY), Tom Carper (D-DE), and Benjamin Cardin (D-MD), with oversight over federal property, expressed the need to look into the Trump Administration’s rationale to abandon the exchange project after so many years. The Senators also cited national security concerns with the FBI continuing to work in a headquarters and satellite offices that lack updated and necessary security features.
 
On the other hand, Congressman Lou Barletta (R-PA), Chairman of the House Subcommittee on Economic Development, Public Buildings, and Emergency Management, which has jurisdiction over federal property in the US House, welcomed the project cancellation as an opportunity for the government to pursue a ground-lease leaseback without a swap for the Hoover site. Chairman Barletta believes that such a creative solution potentially would enable GSA to lease federal land to a developer who can build to suit the FBI’s needs, and then lease the building back to the government.

Next Steps

While the exact next steps for the FBI headquarters remain unknown, the need for a new home for the FBI is clear. GSA is required to determine the “highest and best use” for property, which most likely is the use that will produce the highest monetary value, promote maximum value, or serve a public purpose. The high value of Washington real estate, coupled with the estimated over $1 billion price tag to renovate and modernize the Hoover building, indicates GSA is still likely to pursue a new home for the FBI. But such a disposal is almost certainly now years away.