[Procurement of Equipment by GSA Under 40 U.S.C. 481(a)(3)]

The General Services Administration (GSA) requested a decision regarding the propriety of, and the funding treatment accorded to, a contract award to provide telephone equipment and related services to regional Federal offices. GAO was asked whether: (1) the procurement should be legally considered one for utility services, (2) the lease-purchase agreement should be financed as an installment purchase, (3) GSA should be required to obligate the total cost at the time of capitalization or annually as the services are provided and paid for, and (4) the obligations should be reported as normal operating costs or as capital investment costs. GAO concluded that: (1) the contract is to provide utility services, (2) the agreement should be financed on installments, (3) the costs should be obligated annually, and (4) the costs should be reported as capital investment.