THE REVIEW WAS CONDUCTED AT GSA OFFICES IN WASHINGTON, D.C., ATLANTA, AND SAN FRANCISCO. ALTERATIONS INVOLVED CONVERTING EXISTING SPACE FOR SPECIAL NEEDS OR ALTERING OFFICE SPACE BY INSTALLING PARTITIONS, LIGHTING, HEATING AND COOLING SYSTEMS, OR TELEPHONES. GSA FREQUENTLY AUTHORIZED OWNERS OF LEASED BUILDINGS TO PROVIDE ALTERATIONS RATHER THAN PROCURING ALTERATIONS THROUGH COMPETITIVE BIDDING. WHEN NEGOTIATING CONTRACTS, GSA OFFICES OFTEN DID NOT PREPARE INDEPENDENT COST ESTIMATES AS AN EVALUATION TOOL. IN ADDITION, MAKING A SINGLE DEPARTMENT RESPONSIBLE FOR PREPARING ESTIMATES, NEGOTIATING CONTRACTS, APPROVING PAYMENTS, AND INSPECTING WORK, WAS NOT GOOD INTERNAL CONTROL. GSA COMPLETED MAJOR ALTERATIONS TO BUILDINGS WITHOUT ATTEMPTING TO RENEGOTIATE THE LEASE PERIOD OR RENT, AND CONSEQUENTLY ITS BARGAINING POSITION WHEN NEGOTIATING RENEWALS WAS WEAKENED. SUBSTANTIAL ALTERATIONS WERE MADE TO LEASED BUILDINGS WITHOUT CONSIDERING THE ECONOMIC FEASIBILITY OF ALTERNATIVES SUCH AS BUYING OR CONSTRUCTING A NEW FACILITY. GSA ALSO PAID RENT ON UNOCCUPIED BUILDINGS BEING ALTERED FOR PERIODS UP TO 2 YEARS. THE AGENCY'S FILES DO NOT CONTAIN THE REQUIRED DOCUMENTATION FOR MANY ALTERATION INSPECTIONS IT CLAIMED TO HAVE PERFORMED. MOST OF THE DEFICIENCIES NOTED IN THE COMPTROLLER'S REPORT SHOULD BE CORRECTED BY REVISED POLICIES AND DIRECTIVES ISSUED BY THE GSA ADMINISTRATOR IN JUNE 1978. CONGRESS SHOULD AMEND THE ECONOMY ACT OF 1932 TO ELIMATE THE PROVISION WHICH LIMITS ALTERATIONS TO LEASED BUILDINGS TO 25 PERCENT OF THE FIRST YEAR'S RENT AND SHOULD ENACT LEGISLATION REQUIRING CONGRESSIONAL AUTHORIZATION FOR ALTERATIONS OVER $500,000. A CASE HISTORY OF A BUILDING ALTERATION IN ROCKVILLE, MD., AND A SCHEDULE OF ALTERATIONS DONE TO SELECTED GSA-LEASED BUILDINGS FROM 1975 TO 1978 ARE INCLUDED IN THE APPENDIXES. (MJM)