A bipartisan group of senators and representatives is demonstrating that small changes in obscure and complicated government rules can mount up to billions of dollars saved for taxpayers.
They are doing it with an as-yet-unnamed bill to enable federal officials to buy needed buildings at bargain-basement prices instead of more costly long-term leases based on high-end fair-market values.
The proposal is co-sponsored in the Senate by Sens. James Lankford (R-Okla.) and Gary Peters (D-Mich.) and in the House by Reps. Mark Meadows (R-N.C.) and Greg Pence (R-Ind.).
The bill allows the General Services Administration (GSA)—the federal “house-keeping” agency that purchases or rents, maintains, and manages the federal government’s thousands of buildings—to “leverage its bargaining power upfront, saving billions of dollars, and reducing government waste” by negotiating favorable end-of-lease purchasing prices, according to a joint statement by the co-sponsors.
At present, when GSA signs a lease with an option to buy at the end of the term, government accountants have to “score” the transaction against congressional appropriations by assuming the purchase price would be at the high end of fair-market values.
That’s a problem because GSA often lacks sufficient funds approved by Congress to cover projected high-end costs, so agency officials rarely seek purchase options in leases. Taxpayers end up funding a proliferation of long-term leases without the prospect of acquiring the space at lower overall costs as a result.
The bill just introduced changes in the government’s scoring process to restore incentives for GSA to seek leases that include purchase options at much lower prices than projected high-end values.
A Government Accountability Office (GAO) analysis in 2016 confirmed the scarcity of lower-cost lease and purchase deals for government space and the potential savings to be had from doing more of them.
“GSA rarely includes purchase options in leases, especially discounted purchase options, but has realized financial benefits in some instances from their use,” the analysis stated.
“Of the approximately 18,600 leases GSA entered into from 1992 to 2014, GAO identified 17 that included a purchase option. These leases were generally for relatively large spaces (exceeding 100,000 square feet) with annual rents greater than $1 million,” GAO stated in the analysis.
The analysis stated that GSA saved $80 million by exercising the buy option on just three of the 17 leases.
“Unfortunately, the government’s current approach to managing federal property forces many agencies to enter into wasteful, long-term leasing agreements, when owning the property would be more cost-effective in the long run,” Peters said in the statement.
“Our common sense, bipartisan legislation would help to save billions of taxpayer dollars by reducing long-term leasing costs and allow agencies more flexibility to acquire property at a bargain price,” Peters said.
“Sensible legislation like this has the potential to save over $5 billion in taxpayer dollars by bringing fair market practices to federal real estate,” Pence said in the statement.
Lankford and Meadows also pointed to the cost savings made possible under the proposal.
“We should allow flexibility and innovation to save valuable taxpayer dollars instead of forcing agencies to lease when ownership at times would be more cost-effective,” said Lankford.
Meadows also lauded the proposal, saying that “forcing agencies to lease property when ownership would be more cost-effective is a counter-intuitive policy that blatantly wastes money from hard-working taxpayers.”
The GSA currently owns and leases 377 million square feet in more than 9,600 facilities across the country. The inventory includes 8,100 leases and more than 1,500 buildings that are owned by the government.
The agency also oversees the purchase of billions of dollars’ worth of maintenance and office supplies, telecommunications and digital equipment, and furniture used by federal employees.
The agency was for many years plagued by waste and fraud scandals that culminated during President Jimmy Carter’s administration with passage of the Inspectors General Act of 1978.
Meadows and Pence have also introduced legislation in the House—the Public Private Partnerships for Prosperity Act of 2019—to authorize the GSA to launch a program providing for 5 to 10 demonstration projects involving public-private partnerships to acquire buildings for government use.
“If we are serious about transforming how we approach federal real estate, it is critical for us to do things differently and put more common-sense options on the table,” Pence said in September, when he and Meadows introduced the proposal.
Contact Mark Tapscott at email@example.com