National Defense:

Air Force and Interior Can Benefit from Additional Guidance When Deciding Whether to Lease or Purchase Equipment

GAO-12-281R: Published: Feb 7, 2012. Publicly Released: Feb 7, 2012.

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What GAO Found

Contracting officials from Air Force and Interior generally did not perform lease versus purchase analyses for selected contracts. Based on contract file reviews and discussions with contracting officials, we found that analyses were not performed and that contracting officials had not considered the alternative acquisition method for 24 of the 32 selected contracts. For the 8 contracts with lease versus purchase analyses, 5 were documented in the contract files and 3 were performed but were not documented, according to contracting officials. In most cases, contract files did not contain basic information to make lease or purchase decisions, such as the length of time the equipment would be used. Even files containing documentation of analyses generally did not address the full range of criteria specified in the FAR. For example, the analyses typically lacked a discussion of the financial and operating advantages of alternate approaches that would help contracting officials determine the appropriate acquisition method. Contracting officials noted that their decision to lease or purchase equipment often depends on the nature of the requirement, such as a short-term need for equipment, based on documents or other correspondence from the requester. Further, these officials generally stated that while they are familiar with the FAR guidance, they typically do not know how or when to perform the analyses and are not provided training on how to do so.

GSA officials said they are able to assist agencies in making lease versus purchase decisions, as discussed in the FAR, but could not identify any case when a federal agency had requested this assistance and do not have current information on whom agencies can contact at GSA. Air Force and Interior contracting officials stated they had not sought this assistance and more than half were unaware that GSA could provide such assistance. The two GSA offices listed in the FAR as the offices from which agencies can request assistance in making lease versus purchase decisions no longer exist.

Why GAO Did This Study

Federal agencies spend more than $200 billion per year, on average, to lease or purchase equipment, with purchases accounting for nearly all of this spending. With agencies facing new fiscal austerity challenges, it is increasingly important that every dollar is spent cost effectively. The Federal Acquisition Regulation (FAR) provides that when agencies are seeking to obtain equipment, they should consider whether it is more economical to lease equipment rather than purchase it as a component of acquisition planning. This is known as a lease versus purchase analysis.

Congress requested that we examine how this process is working. As agreed with your staff, we focused on one defense and one civilian agency, the Department of the Air Force (Air Force) and the Department of the Interior (Interior). We determined (1) the extent to which these agencies perform lease versus purchase analyses for equipment, and (2) the role the General Services Administration (GSA) plays in assisting agencies with making lease versus purchase decisions.

What GAO Recommends

We are recommending that both the Air Force and Interior develop and provide guidance and training to their contracting officials on performing lease versus purchase analyses and that GSA take steps to update the FAR to identify the offices agencies should contact for assistance in conducting these analyses.

For more information, contact William T. Woods at (202) 512-4841 or woodsw@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: In providing comments to this report, the Department of Defense and US Air Force concurred with this recommendation but have not yet completed actions necessary to implement it. However, in its letter to OMB and the Congress, the Department of Defense currently plans to have the Defense Procurement and Acquisition Policy Directorate (DPAP) review existing regulations to see if additional guidance is needed. The Air Force plans to re-emphasize the requirements of FAR subpart 7.4 and emphasize to the Air Force contracting work force to seek the availability of GSA assistance. DPAP also intends to coordinate with the Defense Acquisition University (DAU) to review DAU available training on lease vs. purchase determinations to determine if it needs improvement.

    Recommendation: To help ensure that Air Force and Interior contracting officials are performing lease versus purchase analyses to inform and make cost-effective decisions when obtaining equipment, the Secretary of the Air Force and Secretary of the Interior should develop and provide additional guidance and training on how to perform lease versus purchase analyses based on a case-by-case evaluation of the factors listed in the FAR.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Open

    Comments: In providing comments on this report, the Department of the Interior concurred with this recommendation but has not yet completed actions necessary to implement it. However, in its letter to OMB and the Congress, the Department of the Interior stated its intention to issue guidance on conducting lease vs. purchase analyses by the end of Fiscal Year 2012 (September 30, 2012). The Department also plans to develop training or identify training programs and assign training requirements on conducting lease vs. purchase analyses by the end of the first quarter of Fiscal Year 2013 (December 31, 2012).

    Recommendation: To help ensure that Air Force and Interior contracting officials are performing lease versus purchase analyses to inform and make cost-effective decisions when obtaining equipment, the Secretary of the Air Force and Secretary of the Interior should develop and provide additional guidance and training on how to perform lease versus purchase analyses based on a case-by-case evaluation of the factors listed in the FAR.

    Agency Affected: Department of the Interior

  3. Status: Open

    Comments: In providing comments on this report, the General Services Administration concurred with this recommendation, but has not yet completed actions necessary to implement it. In its comments to GAO, the General Services Administration (GSA) stated its intention to initiate a technical correction to update the Federal Acquisition Regulation (FAR) and update GSA's website with current contact information for the GSA offices that provide leasing and purchase support in accordance with FAR Subpart 7.4.

    Recommendation: The Administrator of General Services should take the necessary steps to have FAR subpart 7.4 updated to reflect GSA's current contact information so federal agencies and their contracting officers have accurate information to use in requesting GSA's assistance in making lease versus purchase decisions.

    Agency Affected: General Services Administration

 

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