Modifying Purchase Treatment of Certain Bargain-Price Options

Floor Speech

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Mr. PAPPAS. Madam Speaker, I move to suspend the rules and pass the bill (H.R. 2220) to amend title 40, United States Code, to modify the treatment of certain bargain-price options to purchase at less than fair market value, and for other purposes.

The Clerk read the title of the bill.

The text of the bill is as follows: H.R. 2220

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. LIMITATION ON DISCOUNTED PURCHASE OPTIONS.

Section 585 of title 40, United States Code, is amended by adding at the end the following:

``(d) Any bargain-price option to purchase at less than fair market value contained in any lease agreement entered into on or after January 1, 2021, pursuant to this section may be exercised only to the extent specifically provided for in subsequent appropriation Acts or other Acts of Congress.''.

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Mr. PAPPAS. 2220.

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Mr. PAPPAS. Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, H.R. 2220, introduced by Representatives Guest, Webster, and Pence, requires the General Services Administration to secure congressional authorization before it can exercise a prenegotiated purchase option in an operating lease.

Currently, OMB rules stipulate that a lease cannot be scored as an operating lease if it contains a prenegotiated bargain-price purchase option. Operating leases allow agencies to budget their rent outlays annually, whereas capital leases require the agency to budget, upfront, the entire net present value of all rental obligations it will incur over the duration of the lease term. Unless GSA has full, upfront appropriations in hand, the agency must rely on operating leases that can be paid for year by year.

But preventing an operating lease from containing a prenegotiated bargain-price purchase option means that if GSA wants to acquire the building at the end of the lease, the agency must pay fair market value instead of being able to negotiate a sales price at the beginning of the lease. In essence, the Federal Government ends up paying for the building twice, once when it leases the building and once when it purchases the building at the end of the lease at the current market rate.

The scoring rules are designed to ensure that ownership risk stays with the lessor and that the lease isn't a mechanism by which the government finances its ownership of the property. But the effect is that the Federal Government is overpaying for buildings and not getting the benefit of equity that it has created for private-sector landlords.

It is time to give GSA the flexibility it needs to make savvy financial deals for the Federal Government.
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Mr. PAPPAS. Madam Speaker, I urge adoption of this legislation, and I yield back the balance of my time.

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