GSA breaks ground with new leasing contracts
- By Brad Bass, John Moore
- May 18, 1997
In a move they are calling a "substantial expansion of the multiple-award schedules program " General Services Administration officials this month awarded contracts to three companies to rent ADP equipment to agencies and are evaluating leasing proposals from about 20 other companies.
The new kind of contracts are a first for GSA. In the past leasing contracts were strictly lease-to-own so they required agencies to expend capital funds. In these new operational-leasing pacts agencies return the equipment at the end of the contract which means contracts can be covered with more flexible operations and maintenance funds.
William Gormley assistant commissioner for acquisition at GSA's Federal Supply Service said last week that the new contracts will benefit all agencies facing shrinking budgets by giving them access to the contracts will benefit all agencies facing shrinking budgets by giving them access to the latest technology at an affordable price.
"We know our customers have several million dollars in the queue waiting for leasing to be offered " Gormley said. "I personally think this will add significant value to the schedules program."
GSA so far has awarded three operational-leasing contracts which are vehicles that allow agencies to rent equipment with no intention of owning it. Electronic Data Systems Corp. last week won an operational-leasing contract for equipment on its 70 B/C schedule. GSA also awarded leasing contracts to Severn Companies Inc. and AT&T Capital Corp. to lease equipment under the 70 D schedule for used equipment.
"This is a great way for agencies to match their cash flow with their outlays " said Bradley Willcockson vice president of business development at Severn. "That's the beauty of this for government customers."
Early this month Severn won a leasing deal for its used midrange and mainframe machines and it is negotiating with GSA to offer the same services for its new equipment on the company's contracts on schedules A and B/C.
Stephanie Ambrose account operations manager for EDS' GSA schedule program said the company is offering one- to three-year leases. The program applies to all EDS schedule products but agencies must order at least $50 000 worth of equipment. In addition the company will offer leasing terms for the products of companies it teams with under the GSA schedule.
Ambrose said leasing offers agencies the advantage of "not tying up a lot of capital on the front end." Because agencies can avoid paying for equipment up front they can upgrade entire organizations immediately rather than proceeding in stages. "People are looking to upgrade everybody at once rather than phasing the technology in " she said.
Douglas Jackson vice president of government markets at AT&T Systems Leasing a business unit of AT&T Capital said his company will lease used high-end hardware from IBM Corp. and Amdahl Corp. He said leasing deals will be much less risky to agencies than buying equipment outright.
"If agencies buy the equipment and the technology changes government agencies have no way to effectively dispose of the equipment " Jackson said. "By doing the lease they are paying only for the market value of the equipment from the time they obtain it to the time they dispose of it."
But the entire information technology industry has not yet wholeheartedly embraced GSA's leasing program.
Olga Grkavac vice president of the Systems Integration Division at the Information Technology Association of America said her group has not yet taken a position on the issue but members remain concerned about agencies' ability to terminate their deals without penalty.
"Commercial finance companies do not want to finance leasing arrangements with government agencies because of termination-for-convenience regulations " Grkavac said. "This is not a commercial practice."
Gormley said the termination-for-convenience language will help agencies that do not have multiple-year funding get out of leasing deals if their resources dry up. He said he believes such instances will be rare and he added that agencies and vendors can negotiate their own termination deals when blanket purchasing agreements are discussed.
Larry Allen executive director of the Coalition for Government Procurement said the government's use of yearly appropriations makes some his members queasy about delving into leasing contracts.
"If you set up a lease in the commercial market you need a guaranteed term of time " Allen said. "The federal government can't sign up to that same guarantee because agencies are not authorized to obligate funds after the fiscal year."
He said some coalition members believe the rapid pace of IT advances will make it difficult for them to recoup their investment after agencies are through with their equipment.