UniLink Finance

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Leasing Opportunities for ICT Procurements NGfL
Briefing for Schools 22 January 2002
Ron Fawcett Procurement Services Manager Dorset
County Council
UniLink Finance
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Frequently asked question
Is it best to Lease or Buy ?

If sufficient funds are available for outright


purchase of all current
requirements without compromising your preferred
specification then outright purchase will provide
best value
Where funds available are limited then leasing is
a way of spreading the cost of a project over
several financial years
UniLink Finance
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Background Why Dorset has appointed a Lease Agent?

DCC has been debt free authority

Latterly moving to more leases

Need to manage-

Impact upon borrowing approvals

Leasing process

Scarce skills

Lease agent (as business partner)
UniLink Finance
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Background Role and responsibility of the Lease
Agent

Key requirements-

Total independence

Act as Purchase Agent

Conduit for final purchase (if required)

PFM carried out tender process

UniLink Finance Ltd - to March 04

Mandated DCC agent 3m in 01/02 (so far)
UniLink Finance
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Advantages of the Countys Leasing Facilities

Safe - conforms to all regulations and is
managed from start to finish

Certainty - all costs known at the outset and
options
for the end of lease are assured

UniLink will act as conduit for school to acquire
title

Upgrades possible

Leasing market regularly tested by UniLink

Possible to include software
UniLink Finance
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Disadvantages of dealing directly
with Lessors/Suppliers

True cost not disclosed

Documentation not cleared with Council

Harsh return conditions and possible tax penalties

Cost of upgrading hidden - and expensive

Locked into using one supplier

On return, sensitive data must be wiped
UniLink Finance
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What can be included in an ICT equipment lease?
The following is not a definitive list, merely a
guide
Desktop computers Laptop/Notebook
computers Servers Network hardware Cabling Upgra
des Printers Scanners Digital cameras Computer
furniture Storage/Recharging trolleys Wireless
Network Access points PCMCIA network
cards Building and associated work (provided
essential for leased equipment) Software
(subject to it being required for the computers
included in the
lease arrangement and acceptance of the Lessor)
UniLink Finance
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The PFM Leasing Process (1)

School decides resource requirements

PFM advises school of likely lease cost

School completes lease proposal form (not
committed)

PFM goes to tender (if necessary for resources
only)

School decides - lease or not

PFM awards contract / PFM or school orders

Supplier bills school / school pays

School sends copy invoice to PFM
UniLink Finance
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The PFM Leasing Process (2)

PFM aggregates schools purchases

PFM sends suppliers invoices to UniLink

UniLink arranges lease

Lease company pays DCC

DCC credits schools budgets (within 3 months)

Lease company bills DCC / DCC pays (Annually or
Quarterly)

PFM arrange recharge to school (Ann/Qtly.)
UniLink Finance
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The PFM Lease Process (3)

UniLink-

Review performance of lease throughout

Represent school with leasing companies

Manage any additional leases

Manage end of lease process

Act as conduit for final purchase

PFM manages relationship with UniLink

Included in PFM procurement service
UniLink Finance
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Advantages Of Dorset County Councils Leasing
Facility

• The facility is safe and produces the lowest
  whole life costs available in the market. The
  total payments for the equipment are certain when
  the lease is incepted and hence the true cost of
  borrowing is known. Thereby total transparency is
  achieved both on a cost basis and in the terms
  and conditions that apply to the use of the
  equipment.
• The school or any individual will be able to buy
  any assets at the end of the lease term. We at
  UniLink will buy the asset from the selected
  lessor for a nominal price and sell to the school
  or individual at the same nominal price. Thus
  there are no return condition penalties.
• The leasing facility conforms with the current
  legislation regarding operating leases
• The equipment can be upgraded throughout the
  lease with a new lease incepted on the upgrade
  only i.e. again with certainty of cost.
  Furthermore such upgrade options will enable the
  school to consider alternative suppliers options
  thereby achieving the best price available.
• The county through UniLink will regularly test
  the whole market to ensure the terms available
  are the most competitive
• In most circumstances software installations can
  be included in the lease facility
• The facility will enable the school to negotiate
  the best purchase price with the supplier of its
  choice without fear of being locked in to the
  suppliers financing package.
• The facility will be easy to administer, with a
  single point of contact i.e. Procurement and
  Facilities Management (PFM)
• The school will be secure in the knowledge that
  the legal and commercial aspects of the facility
  have been fully analysed and approved by the
  Councils financial and legal teams, Procurement
  and Facilities Management (PFM) and UniLink, the
  Councils independent advisor. The school can
  also be certain that the selected lessor will be
  a reputable financial institution

UniLink Finance
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Drawbacks Of Dealing Directly With
Suppliers/funders

• Headline rentals may appear attractive, but
  renewal terms are rarely disclosed, hence the
  true cost is unknown. Also the cost of acquiring
  the equipment is likely to be prohibitive.
• The legal documentation may not be reviewed by
  the Councils financial and legal teams with each
  school having to consider agreements on a deal by
  deal basis. Many agreements are generally biased
  in the suppliers/funders favour and are best
  reviewed by experienced hands.
• Many simple agreements will not highlight the
  schools exposure to costs associated with-
• Tax written down value penalties
• Extension rental terms or buy out options
• The testing and replacement of missing or damaged
  parts
• Collection or re-delivery
• Refurbishment (refer to WEEE regulations below)
• Any upgrade of equipment is expensive. In many
  cases the general terms of any upgrade from the
  funder/lessor allow for a certain percentage of
  the original cost to be upgraded at various
  intervals throughout the term of the lease.
  However, at the date of the upgrade although the
  school may only be required to pay the original
  rentals the new term of the lease reverts to the
  original selected term. The transaction then
  becomes very expensive and in many cases the
  financing costs can double.
• Concluding transactions with certain suppliers
  automatically locks the school into that company
  for upgrades thus creating opportunities for the
  company to increase its prices.
• Where equipment is returned, schools will be
  required to erase sensitive data and maybe
  charged additional costs by the suppliers/funders
  to comply with European Commission waste
  electrical and electronic equipment directive
  (The WEEE regulations). These regulations seek to
  increase recycling and recovery of waste
  equipment (including IT). The regulations were
  adopted by the European Commission in June 2000
  and the directive is expected to become European
  law in June 2002 with implementation in member
  states 18 months later. This potential cost to
  schools will be provided for in most lease
  agreements but is not usually referred to
  directly. Documentation will often simply state
  that the equipment shall upon return be
  refurbished by the lessee in accordance with all
  applicable laws and regulations. In reality such
  refurbishment costs (as itemised above) could
  well be significant.

UniLink Finance