Improved Analysis Needed To Evaluate DOD's Proposed Long-Term Leases of Capital Equipment

PLRD-83-84: Published: Jun 28, 1983. Publicly Released: Jul 5, 1983.

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Pursuant to a congressional request, GAO reviewed the practices and procedures which are followed by the government in its long-term leasing of capital equipment. GAO limited its review to those long-term leasing programs which the Navy and the Air Force have announced for noncombatant auxiliary cargo and tanker ships and trainer and Tanker Transport Bomber aircraft.

GAO found that, contrary to the conclusion of the services, purchasing the assets was less costly than leasing. This conclusion was due to assumptions regarding discount rates, residual value, and tax revenue from investors which were different than those used by the services in their analyses.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: Congress should enact permanent legislation which requires an agency to provide congressional committees with a lease versus purchase analysis that is based on prescribed criteria and considers total cost to the government.

  2. Status: Closed - Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: Congress should enact legislation which requires the agency to obtain congressional authorization before entering into long-term leasing programs financed with working capital funds.

 

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