Issued: October 1, 1996
Owner: Director of Sponsored Programs
LEASE VERSUS PURCHASE POLICY
This policy describes how departments should determine whether to lease or purchase an item they may need.
2.0 Policy [Top]
Page 63002 of Office of Management and Budget (OMB) Circular A-110 states that "Where appropriate, an analysis of lease and purchase alternatives should be made to determine which would be the most economical and practical PROCUREMENT for the Federal Government."
In procuring equipment for federally funded sponsored projects, the Principal Investigator and/or departmental business personnel should perform an analysis regarding cost effectiveness of leasing vs. purchasing. In general, the purchase of capital equipment should be the most cost effective for the University and the federal government. However, there may be instances that the required items are only available on a lease and/or lease/purchase basis and this method of procurement must be used.
The lease or rental rate should be based on the consideration of:
- Rental cost of comparable property, if any,
- Market Conditions in the area,
- The type, life expectancy, condition, and value of the property to be leased,
- Alternatives available, and
- Other provisions of the agreement.
Documentation of this analysis must be maintained by the department for potential audit purposes.
For vendor-financed leases, The Office of General Counsel and the Budget Office review and approve all lease agreements. Leases greater than $5,000 but less than $10,000 are also approved by the Office of Financial Analysis. Leases greater than $10,000 but less than $500,000 also require approval by the State Treasurer's Office. Leases greater than $500,000 require approval by the State Treasury Board.
Equipment may also be leased with State treasury Board financing (a.k.a. the master agreement lease). No software, delivery, installation charges or maintenance agreements can be leased under this program. Leases may be for up to seven (7) years except for computer equipment, which is limited to four years due to its quick obsolescence.
For assistance regarding this policy, please contact your research administrator and/or the Office of Sponsored Programs.
3.0 Definitions [Top]
4.0 References [Top]
5.0 Approvals and Revisions [Top]