The General Services Administration has agreed to allow 11 companies to continue occupying office space in the headquarters building of the Interstate Commerce Commission at 12th Street and Constitution Avenue NW.
The decision comes despite a GSA legal opinion that the ICC violated federal regulations when it leased space to the firms in 1981. Under the rules, only the GSA can negotiate leases with private firms for space in that building.
The businesses in the ICC building across from the Mall all disseminate information on agency tariff rulings to private clients.
Since the Reagan administration took office, the GSA has been interested in subleasing unneeded space in buildings it leases, but in those it owns, such as the ICC's, it has preferred to rearrange agencies.
Generally it has sought retail tenants for shops on the ground floor, rather than professional firms that might be interested in an office close to a particular agency.
It has also sought to lease the space at market rents, not the below-market rates the ICC had been receiving for the past three years.
The ICC situation arose, indirectly, when the agency decided in 1980 to turn its spacious tariff library over to a private contractor. The reporting firms needed to be close to the library so they opened offices close to the contractor's at 15th and K streets NW.
But the following year, after the Reagan administration took office, the ICC canceled the library contract and turned the work back over to government employes. The reporting firms then asked the ICC if they could move into its headquarters for the first time.
"These service firms asked for space within the building and we felt that they deserved to be there," said Virgil L. Schultz, chief of the ICC's administrative section. "We see no conflict, no problems."
The ICC prepared contracts to lease the space at $10 a square foot -- the same rate that the ICC paid the GSA. When the GSA found out about the leases, it told the ICC it was going to terminate them.
But ICC managing director Martin E. Foley protested. The GSA eventually backed down and agreed to lease the space to the firms for about $24 per square foot.
"Put simply, we believe that these watching services are useful to the federal government," Foley said in a telephone interview. "If they were not in our building, we would feel obligated to duplicate the files and disseminate them to the public. That would be very costly."
In an internal report, GSA contracting officer Marian Laster said, "It seems unnecessary, undesirable and unwarranted to expend the tremendous resources that would be required to enable the ICC to maintain a tariff file which is reasonably accessible to the public. I believe it is in the best interest of the government to allow the services to remain as tenants in the ICC building."
Jerald D. Fox, a senior aide to acting GSA administrator Ray Kline, said he was "somewhat concerned" about the potential for conflicts of interest when private firms are granted leases without competitive bidding for space deep inside federal buildings. But Fox said yesterday that he hasn't had a chance to study the situation further.
One of the firms, Distribution Sciences Inc., decided the new rates were too high and moved out. The GSA plans to solicit bids for the 300 square feet the firm was using.