Lease Refinancing:

Observations on GSA's Proposed Master Leasing and Army's Lease Refinancing Programs

T-AFMD-89-9: Published: Aug 2, 1989. Publicly Released: Aug 2, 1989.

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GAO discussed the General Services Administration's (GSA) proposed Master Installment Purchase System and a related Army program to refinance equipment leases. GAO found that: (1) budget constraints frequently preclude federal agencies from purchasing sufficient computer equipment to meet their needs within a single year; (2) federal procurement regulations provide that leases with purchase options are preferable, and that agencies should only lease computer equipment in the case of short-term need or the expectation of rapidly changing technology; (3) both the GSA and Army programs separate the purchase of leased equipment from acquisition financing, as GAO has previously recommended; (4) the GSA program would allow less costly lease financing than is currently available; (5) the Office of Management and Budget (OMB) has objected to the GSA program because it believes that a master lease agreement would allow agencies to purchase equipment without disclosing the total cost; (6) while OMB believes that the GSA program could violate the Antideficiency Act, GSA could design the program consistently with the act's requirements; (7) proposed legislation that would direct GSA to establish a pilot program to reduce lease financing costs, that program would not be compatible with the GSA-proposed program; and (8) the Army's master lease program covered more types of equipment than the GSA program, would not result in multiyear lease contracts, and would reduce the finance costs of existing leases.

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