Best Practices in Leasing Schedule 36

1
Best Practices in LeasingSchedule 36
Gary Haag, Ryan Mathews, Shannon
StanfordIntegrated Workplace Acquisition Center
June 9, 2009
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Table of Contents

• Overview
• Office of Management and Budget (OMB) Guidelines
• Lease Types and Examples
• Time Periods and Funding
• Continuance of a Lease
• Monthly Payments
• Add-on Items
• Maintenance and Installation

• Termination of Lease
• Uninterrupted Use
• Title
• Loss or Damage
• State and Local Taxes
• Dos Donts
• The Lease Document

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Overview

• Schedule 36 Solicitation, Refresh 14
• Leasing Terms
• Responsibilities of each party
• Intent of the Lease

4
Office of Management and Budget (OMB) Guidelines

• Customer Agency Requirements
• FAR 7.4 Equipment Lease or Purchase
• Anti-Deficiency Act
• OMB Circular A11 Preparation and Submission of
  Budget Estimates
• OMB Circular A34 Instructions on Budget
  Execution

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Lease Types and Examples for Copiers and Equipment

• Lease-to-Ownership Plan (LTOP), Special Item
  Number (SIN) 51-58 (Capital Lease)
• Sales for Fiscal Year (FY) 2008 48,318,942
• Operating Lease Plan for Copiers, SIN 51-58a
• Sales for FY 2008 36,467,442
• Operating Lease Plan for all other products under
  Schedule 36, SIN 51-58b
• Sales for FY 2008 70,573
• Lease Alternative
• Rental

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Lease-to-Ownership Plan (LTOP), Special Item
Number (SIN) 51-58 (Capital Lease)

• Title
• Includes Installation and Training
• Does not include Maintenance and consumable
  supplies
• SIN 51-57 Maintenance Service Agreements
  (Copier)
• SIN 51-100 (supplies)
• Payment of LTOP Calculation
• Principal, Interest, Term

7
Operating Lease Plan for Copiers, SIN 51-58a

• Residual Value
• Payment of Operating Lease Calculation
• Principal, Interest, Term

8
Time Periods and Funding

• Varies per contractor
• Minimum 24 months or 2 years
• Maximum 60 months or 5 years
• Annual
• All leases end on September 30th
• Multi-year

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Continuance of Lease

• Lease with Annual Funding automatically
  terminates at end of Government Fiscal year
• Written notification to contractor thirty (30)
  calendar days prior to the lease expiration
• Intent to renew lease

10
Monthly Payments

• Variables
• Principal Negotiated purchase price
• Term Length of lease
• Lease Factor Interest rate applied to the
  principal
• Negotiated
• Residual Value
• Payment chart never changes
• Operating Lease
• Principal of Operating Lease Principal
  Residual Value
• LTOP Calculation

11
LTOP Calculation

• Calculating the Monthly Payment for LTOP using
  Microsoft Excel

12
Add-on Items

• Modification of existing leased equipment
• Mutually agreed upon by the ordering agency and
  the Contractor
• Payment of modification
• Full price upon acceptance
• Coterminous with the original lease term
• (Coterminous is defined as the addition of
  equipment and it shall terminate with the
  original/base equipment lease.)
• Modification calculations for LTOP and Operating
  Lease

13
Lease Modification Calculations (add-ons)

• Calculating the Modification Cost using Microsoft
  Excel

14
Maintenance and Installation

• SIN 51-57 Maintenance Service Agreements
  (Copier)
• SIN 51-100 (supplies)
• Separate Line Item
• Maintenance and supplies are subject to the
  Economic Price Adjustment (EPA) clause
• Maintenance coverage charges

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Termination of Lease

• When the customer can cancel their lease (without
  early termination ceiling charge)
• No longer have a bona-fide need
• Documentation
• Non-appropriation
• When the customer can cancel their lease (will
  incur an early termination ceiling charge)
• Termination Ceiling Rate

16
Termination Ceiling Charge Calculation

• Calculating the Termination Ceiling Charge using
  Microsoft Excel

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Uninterrupted Use

• Equipment will remain with customer until the
  expiration or early termination of lease
• Contractors continued obligation to the
  government regardless of
• Assignment
• Sale
• Bankruptcy
• Other transfer of the leased equipment

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Title

• Equipment remains property of the Contractor
• For LTOP
• Title transfers from Contractor to Customer after
  final payment

19
Loss or Damage

• Government is relieved from all risk of loss or
  damage, exceptions
• When loss or damage is due to the fault or
  negligence of the Government.
• Government assumes responsibility during
  relocation of equipment.

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State and Local Taxes

• Federal, State and Local Taxes are not included
  in the contract price
• Contractor shall state taxes separately on its
  invoices
• The Government will pay taxes unless they provide
  evidence of exemption (FAR 52.229-1) State and
  Local Taxes (FAR 52.229-3) Federal, State and
  Local Taxes

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Dos Donts

• Dos
• Provide documentation reason for early
  termination
• Include the termination ceiling charge on
  purchase order
• Prepare for the continuance of the lease

• Donts
• Cancel the lease to exchange for a similar piece
  of equipment
• Delay in obtaining the appropriation of funds

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The Lease Document

• Mandatory items to include
• Cage Code
• Serial Number
• PO/Invoice/Delivery Order
• Term in plan
• Effective date
• LTOP or Operating Lease
• SIN

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PO/Invoice/Delivery Order Sample
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Contact Information

• Gary Haag
• gary.haag_at_gsa.gov
• [phone]
• Ryan Mathews
• ryan.mathews_at_gsa.gov
• [phone]
• Shannon Stanford
• shannon.stanford_at_gsa.gov
• [phone]