oversight

Air Force and Interior Can Benefit from Additional Guidance When Deciding Whether to Lease or Purchase Equipment

Published by the Government Accountability Office on 2012-02-07.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States Government Accountability Office
Washington, DC 20548




           February 7, 2012


           The Honorable Joseph I. Lieberman
           Chairman
           The Honorable Susan M. Collins
           Ranking Member
           Committee on Homeland Security and Governmental Affairs
           United States Senate

           Subject: Air Force and Interior Can Benefit from Additional Guidance When Deciding
           Whether to Lease or Purchase Equipment

           Federal agencies spend more than $200 billion per year, on average, to lease or purchase
           equipment, with purchases accounting for nearly all of this spending. 1 With agencies facing
           new fiscal austerity challenges, it is increasingly important that every dollar is spent cost
           effectively. The Federal Acquisition Regulation (FAR) provides that when agencies are
           seeking to obtain equipment, they should consider whether it is more economical to lease
           equipment rather than purchase it as a component of acquisition planning. This is known as
           a lease versus purchase analysis.

           You requested that we examine how this process is working. As agreed with your staff, we
           focused on one defense and one civilian agency, the Department of the Air Force (Air
           Force) and the Department of the Interior (Interior). We determined (1) the extent to which
           these agencies perform lease versus purchase analyses for equipment, and (2) the role the
           General Services Administration (GSA) plays in assisting agencies with making lease versus
           purchase decisions.

           We examined applicable federal regulations, guidelines, and policies for performing lease
           versus purchase analyses and making related decisions. We also selected and reviewed a
           nongeneralizable sample of 32 contracts involving eight equipment codes at the two
           agencies. We selected the equipment codes based on criteria such as suitability for leasing,
           but eliminated categories of equipment subject to specific acquisition regulations, such as
           fleet vehicles. We selected the two agencies based on our analysis of the 17 top spending
           agencies for fiscal years 2006 through 2010 that had leasing and purchasing obligations in
           each of the selected equipment codes—Air Force, which had among the lowest percentage
           of leasing obligations, and Interior, which had among the highest. We interviewed
           contracting officials at Air Force and Interior to discuss the circumstances surrounding the
           selected contracts, the extent of any lease versus purchase analyses that had been

           1
            During fiscal years 2006 through 2010, agencies annually spent, on average, about $200 billion to purchase
           equipment and almost $1 billion to lease equipment with rounding accounting for the difference between
           $201 billion and $200 billion.

           1                                  GAO-12-281R Equipment Lease versus Purchase Analysis
performed, and their experiences in applying federal regulations, guidelines, and policies
applicable to lease versus purchase analyses.

To determine GSA’s role in assisting agencies with lease versus purchase decisions, we
reviewed relevant federal regulations, guidelines, and policies and interviewed GSA officials
to determine their experience, if any, in assisting agencies in making these decisions. We
also interviewed Air Force and Interior contracting officials to determine their experience, if
any, in requesting GSA’s assistance and the nature of that experience. For our full scope
and methodology, see enclosure I.

We conducted this performance audit from May 2011 to January 2012 in accordance with
generally accepted government auditing standards. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions based on
our audit objectives.

Results in Brief

Contracting officials from Air Force and Interior generally did not perform lease versus
purchase analyses for selected contracts. Based on contract file reviews and discussions
with contracting officials, we found that analyses were not performed and that contracting
officials had not considered the alternative acquisition method for 24 of the 32 selected
contracts. For the 8 contracts with lease versus purchase analyses, 5 were documented in
the contract files and 3 were performed but were not documented, according to contracting
officials. In most cases, contract files did not contain basic information to make lease or
purchase decisions, such as the length of time the equipment would be used. Even files
containing documentation of analyses generally did not address the full range of criteria
specified in the FAR. For example, the analyses typically lacked a discussion of the financial
and operating advantages of alternate approaches that would help contracting officials
determine the appropriate acquisition method. Contracting officials noted that their decision
to lease or purchase equipment often depends on the nature of the requirement, such as a
short-term need for equipment, based on documents or other correspondence from the
requester. Further, these officials generally stated that while they are familiar with the FAR
guidance, they typically do not know how or when to perform the analyses and are not
provided training on how to do so.

GSA officials said they are able to assist agencies in making lease versus purchase
decisions, as discussed in the FAR, but could not identify any case when a federal agency
had requested this assistance and do not have current information on whom agencies can
contact at GSA. Air Force and Interior contracting officials stated they had not sought this
assistance and more than half were unaware that GSA could provide such assistance. The
two GSA offices listed in the FAR as the offices from which agencies can request assistance
in making lease versus purchase decisions no longer exist.

We are recommending that both the Air Force and Interior develop and provide guidance
and training to their contracting officials on performing lease versus purchase analyses and
that GSA take steps to update the FAR to identify the offices agencies should contact for
assistance in conducting these analyses.




2                                GAO-12-281R Equipment Lease versus Purchase Analysis
Background

The FAR provides that agencies should conduct acquisition planning and market research
to ensure, in part, that the government meets its needs using the most economical and
suitable approach. One component of acquisition planning is the decision on whether it is
more economical to lease rather than purchase equipment. The FAR provides guidance that
agencies should use when considering whether to lease or purchase equipment based on a
case-by-case evaluation of comparative costs and other factors, including, at a minimum,
the

         (1) estimated length of the period that the equipment is to be used and the extent of
         use in that period,
         (2) financial and operating advantages of alternative types and makes of equipment,
         (3) cumulative rental payments for the estimated period of use,
         (4) net purchase price,
         (5) transportation and installation costs,
         (6) maintenance and other service costs, and
         (7) potential obsolescence of the equipment because of imminent technological
         improvements. 2

When making the decision to lease or purchase equipment, the FAR notes that purchasing
is generally appropriate if the equipment is to be used beyond the point in time when the
cumulative leasing costs exceed the purchase costs. 3 A lease versus purchase analysis is
an analytical tool to enable agencies to compare costs and other factors. This process is
illustrated in figure 1.

Figure 1: Using a Lease versus Purchase Analysis to Inform an Acquisition Decision




The FAR also notes that agencies can request GSA’s assistance in making lease versus
purchase decisions. 4 Specifically, when assistance is requested by an agency, the FAR
provides that GSA will assist in lease versus purchase decisions by providing information




2
  FAR § 7.401(b) lists additional factors that should be considered as appropriate, depending on the type, cost,
complexity, and estimated period of use of the equipment, such as availability of purchase options, potential for
use of the equipment by other agencies after its use by the acquiring activity has ended, trade-in or salvage
value, imputed interest, and availability of a servicing capability, especially for highly complex equipment.
3
  The FAR does not distinguish between leasing and renting.
4
  FAR § 7.403.

3                                      GAO-12-281R Equipment Lease versus Purchase Analysis
such as pending price adjustments to the Federal Supply Schedules, recent or imminent
technological developments, new techniques, and industry or market trends. 5

In addition to the FAR, other acquisition and financial management policies provide
guidance to agencies on performing lease versus purchase analyses in making acquisition
decisions. For example, the Office of Management and Budget’s (OMB) Circular A-94
provides that whenever federal agencies need to acquire the use of a capital asset, such as
equipment, property, or other durable goods, they should do so in the way that is least
expensive for the government as a whole. 6 The circular provides that all leases of capital
assets for major acquisitions must be justified as preferable to direct government purchase
and ownership. 7 GSA also has guidelines for leasing items from its Federal Supply
Schedules. The GSA guidelines provide that once agencies have selected equipment from
one of its schedules, a determination needs to be made as to whether it is more
advantageous to lease or purchase the equipment. To make this determination, the
guidelines note that contracting officials should compare the purchase prices offered by
schedule vendors with the leasing terms offered by the third-party leasing companies listed
in the schedule. In addition, the Department of Defense’s (DOD) Federal Acquisition
Regulation Supplement (DFARS) provides further direction by providing, among other
things, that if the equipment will be leased for more than 60 days, the requiring activity must
prepare and provide the contracting officer with the justification supporting the decision to
lease. 8

GAO has previously noted that some agencies do not always take full advantage of
acquisition planning to develop a strong foundation for their acquisitions. 9 Beyond
challenges with acquisition planning, DOD’s Inspector General has reported that DOD
agencies did not always properly perform lease versus purchase analyses and identified
cases that may have involved unnecessary costs to the government and the taxpayer.
Specifically, in 1999 the DOD Inspector General found that DOD organizations did not
perform, or properly perform, lease versus purchase analyses prior to awarding over 500
contract actions. As a result, the Inspector General estimated that DOD incurred over
$6 million in unnecessary costs. 10 Further, the Inspector General’s report noted that
following its audit, all of the services, except the Air Force, sent their staff memorandums
instructing them to conduct lease versus purchase analyses before awarding new contracts.




5
  GSA's Federal Supply Schedule program, also known as the Multiple Award Schedule program, consists of
contracts awarded by GSA for similar or comparable goods and services, established with more than one
supplier at varying prices. FAR §§ 8.401 and 8.402.
6
  OMB Circular A-94 is generally applicable for (1) acquisitions of equipment, property, or other durable goods
that are leased to the federal government for a term of 3 or more years and (2) assets or a group of related
assets whose total fair market value exceeds $1 million.
7
  Under OMB Circular A-94, a lease represents a major acquisition if the total purchase price of the asset or
group of assets to be leased would exceed $500 million.
8
  DFARS § 207.401. DOD has additional guidance for conducting cost-effectiveness assessments in terms of
economic analyses for decision making (e.g., that all costs for both lease and purchase alternatives should be
handled in a consistent and equitable fashion) in DOD Instruction 7041.3, Economic Analysis for Decisionmaking
(Nov. 7, 1995), at enc. 3, attch. 2, Special Procedures for Leasing.
9
  GAO reported on how civilian agencies conduct acquisition planning for services contracts; see GAO,
Acquisition Planning: Opportunities to Build Strong Foundations for Better Services Contracts, GAO-11-672
(Washington, D.C.: Aug. 9, 2011).
10
   Department of Defense, Office of Inspector General, Contract Actions for Leased Equipment, DOD IG-99-195
(Arlington, Va.: June 30, 1999).

4                                     GAO-12-281R Equipment Lease versus Purchase Analysis
Contracting Officials at Air Force and Interior Did Not Perform Lease versus Purchase
Analyses for Most Selected Contracts

Although the FAR provides guidance that contracting officials should consider when
determining whether to lease or purchase, also known as a lease versus purchase analysis,
Air Force and Interior officials did not conduct such analyses for 24 of the 32 contracts we
reviewed. Five of the remaining 8 contracts had documented lease versus purchase
analyses, and contracting officials said they performed analyses for the 3 additional
contracts but did not document the results. 11 The extent of lease versus purchase analyses
for all 32 contracts we reviewed is shown in figure 2.

Figure 2: Proportion of Selected Contracts, by Type and by Agency, with Lease
versus Purchase Analyses




The 24 contract files we reviewed where lease versus purchase analyses were not
conducted did not contain sufficient information to allow the contracting official to perform an
analysis. Specifically, in most cases, neither the request from the activity in need of the
equipment nor other supporting documents, such as market research information, contained
sufficient details that would enable contracting officials to perform a lease versus purchase
analysis. Examples of cases where agencies leased or purchased equipment but did not
evaluate the alternative acquisition method include the following:

     •   An Air Force contract file for leasing medical equipment used for blood analysis
         contained information on the range of costs associated with leasing various makes of
         equipment for up to 5 years. The file did not contain any information, however,
         regarding purchasing such equipment, which could have been used to assess
         whether leasing or purchasing was the best option for the government.


11
  FAR subpart 7.4 does not specifically provide for documentation of the lease versus purchase analysis.
However, in certain circumstances, a written acquisition plan may be required by FAR Subpart 7.1, including
whether equipment will be acquired by lease or purchase and why. FAR § 7.105(b)(5).

5                                     GAO-12-281R Equipment Lease versus Purchase Analysis
    •   An Air Force contract file for purchasing medical equipment to assist with identifying
        foreign substances contained price quotes and justification documents supporting a
        purchase. The file did not contain any documentation that indicated that leasing rates
        were considered as part of an assessment of whether leasing or purchasing the
        equipment was the best option for the government.

    •   Interior purchased a sophisticated geological apparatus for almost $117,000 without
        conducting a lease versus purchase analysis. The agency also leased similar
        equipment for a 6-day scientific expedition, costing the agency about $53,300,
        without evaluating the comparative costs of purchasing the equipment. When asked
        about the different acquisition decisions for the same type of geological equipment,
        contracting officials noted that the scientists requesting the equipment for the 6-day
        expedition did not have sufficient training to set up and maintain the equipment.
        These officials told us that they made the decision to lease since the leasing contract
        included the cost of operation and maintenance during the expedition.

    •   An Interior contract file involved the lease of three forklifts for a few months at a cost
        of $6,000 each. The contracting official stated that she did not perform a lease
        versus purchase analysis or even consider purchasing forklifts or researching prices
        for forklifts to determine whether purchasing the forklifts would be the more
        advantageous acquisition method. The official cited a lack of storage space and
        insufficient demand outside of the few months of surge operations each year.
        According to this official, the demand for forklifts to support surge operations each
        year was consistent, although the actual number of forklifts required might vary each
        year. When we searched GSA schedules, we found forklifts matching the required
        specifications that could be purchased for approximately the same cost as leasing a
        forklift for a few months three or four times. We did not research the availability or
        costs of storage.

When Conducted, Lease versus Purchase Analyses Were Incomplete

Out of the 16 Air Force contract files we reviewed, 4 had a documented lease versus
purchase analysis. According to an Air Force contracting official, another contract was
supported by an undocumented analysis. All 5 of these contracts involved leases. We found
no Air Force purchase contract for which a leasing option was considered.

For the 16 Interior contract files we reviewed, only 3 contracts had evidence that lease
versus purchase analyses were performed. A contract for an aircraft purchase contained a
documented analysis, and according to Interior contracting officials, 2 other contracts, 1
lease and 1 purchase, were supported by analyses that were performed but not
documented.

The documents containing the lease versus purchase analyses at both the Air Force and
Interior varied. For example, lease versus purchase analyses were included in narrative
discussions in the source selection memorandums, acquisition strategies, and separate
lease versus purchase analysis memorandums. However, the documented lease versus
purchase analyses we reviewed, both at the Air Force and Interior, did not include an
assessment of the full range of criteria specified in the FAR. These analyses typically
included lease and purchase cost information, but not an assessment of

        •   the financial and operating advantages of alternate types and makes of
            equipment,


6                                 GAO-12-281R Equipment Lease versus Purchase Analysis
         •   the potential obsolescence of the equipment because of imminent technological
             improvements,
         •   availability of purchase options,
         •   trade-in or salvage value, and
         •   the potential for use of the equipment by other agencies after its use by the
             acquiring agency has ended. 12

For the three undocumented lease versus purchase analyses that contracting officials
informed us about, both at the Air Force and Interior, we were unable to determine the
criteria covered in the analyses and did not find any documented evidence in the contract
files that the alternative acquisition methods were considered. We did not find any evidence
in the contract files that the agency had both leasing and purchasing price information,
which contracting officials could have used in a cost comparison.

Contracting Officials Cite Need for Additional Guidance

The majority of the contracting officials we interviewed told us that their decisions to lease or
purchase equipment usually are based upon the nature of the equipment or correspondence
with the requiring activity and not the result of any case-by-case evaluation of comparative
costs and other factors as discussed in the FAR. Most stated that such analyses were not
necessary because the nature of each requirement fit a lease or purchase based on
information in the request documents submitted by the requesting officials. Contracting
officials stated that they contacted the requester to obtain additional information when
needed to understand the requirement. 13

Most of the contracting officials stated that they generally were aware of the lease versus
purchase provisions in the FAR and other guidance, but they did not know when or how to
perform these analyses. Further, most contracting officials we contacted stated that they
had not received any lease versus purchase analysis training, regardless of their level of
experience, and had no knowledge of this training being offered. Several contracting officers
said that existing guidance and policy documents are difficult to understand and they would
prefer a more detailed, comprehensive source of guidance for when and how to perform
lease versus purchase analyses. For example, contracting officials stated that existing
guidance, including the FAR and OMB circulars, are too general in nature and do not direct
agencies about when to perform more in-depth analyses. In addition, the contracting officials
stated that specialized training on when and how to perform lease versus purchase
analyses and online analytical tools would assist them in performing their work.

GSA Officials Cite Their Ability to Assist Agencies with Lease versus Purchase
Analyses, but Have Received No Requests

GSA officials stated that they can assist federal agencies in making lease versus purchase
decisions. Specifically, GSA officials said they have the expertise to assist federal agencies
with making lease versus purchase decisions and fulfilling other aspects of the role
discussed in the FAR, including providing information on industry or market trends. GSA
officials stated that they have the ability to perform lease versus purchase analyses and do
so as part of their normal business operations.

12
   The first two factors above are minimum factors that the FAR provides should be considered; the remaining
factors are additional factors that the FAR provides should be considered, as appropriate. FAR § 7.401.
13
   An Interior official explained that lease versus purchase analyses may be done by analysts who work in the
requesting offices, and that contracting officials should be able to access the documents. We did not find that this
was occurring based on our discussions with the Interior contracting officials.

7                                       GAO-12-281R Equipment Lease versus Purchase Analysis
GSA officials were unable to identify instances when another federal agency requested their
assistance in making lease versus purchase decisions. GSA officials stated, however, that
federal agency contracting officials generally seek other types of acquisition assistance after
having already made a decision to lease or purchase, including asking GSA to identify
products available from GSA’s schedule vendors. While such assistance can help agencies
in acquiring equipment from GSA’s contracts, the assistance does not help agencies with
making lease versus purchase decisions. Specifically, GSA’s ordering guidelines provide
that agencies’ contracting officers need to make a determination as to whether it is more
advantageous to lease or purchase equipment. Although the guidelines themselves do not
provide information on how to make such a determination, they state that OMB circular A-94
describes the economic analysis that is to be used in determining the economic impact of
leasing versus purchasing and provides guidance for analyzing the decision whether to
lease or purchase a requirement.

The Air Force and Interior contracting officials we contacted stated that they have not sought
out lease versus purchase assistance from GSA, nor did they know how to request this type
of assistance. Moreover, none of the contracting officials knew whom they would contact
within GSA for this lease versus purchase assistance. More than half of the officials were
unaware of the FAR subsection describing GSA’s assistance role. Further, while the FAR
mentions GSA’s role in assisting agencies with making lease versus purchase decisions, the
two GSA offices listed from which agencies may request this information no longer exist,
according to GSA officials. 14 In addition, GSA officials were unable to direct us to or provide
us with the current contact information for any existing GSA office that had assumed this
role.

Conclusions

With the federal government entering a time of increasing fiscal austerity, agencies and their
contracting officials need to ensure that they are making effective use of taxpayer dollars
and getting the best value when acquiring equipment. The FAR and other acquisition
guidance and policies provide that agencies should make cost-effective acquisition
decisions, in part, by performing lease versus purchase analyses. While contracting officers
told us their decisions to lease or purchase equipment were based on the best value to the
government, without performing lease versus purchase analyses to assist with acquisition
decision making, contracting officials may not have had sufficient information to make the
best acquisition decisions.

Although contracting officers told us they are generally familiar with the guidance on
performing lease versus purchase analyses, we found that they are generally not conducting
case-by-case evaluations using the factors described in the FAR and may benefit from
guidance and training on when and how to properly perform such analyses. Some
components within DOD have issued such guidance, but not the Air Force. Interior lacks
such guidance as well. While GSA may be able to provide agencies with assistance in
making lease versus purchase decisions, contracting officials may not be taking advantage
of this opportunity because they are not aware of whom to contact within GSA to request it.

Recommendations for Executive Action

To help ensure that Air Force and Interior contracting officials are performing lease versus
purchase analyses to inform and make cost-effective decisions when obtaining equipment,

14
  These GSA offices, the Center for Strategic Information Technology Analysis and the Office of Acquisition,
Federal Supply Service, are listed in FAR § 7.403(b).

8                                     GAO-12-281R Equipment Lease versus Purchase Analysis
we recommend that the Secretary of the Air Force and Secretary of the Interior develop and
provide additional guidance and training on how to perform lease versus purchase analyses
based on a case-by-case evaluation of the factors listed in the FAR.

We recommend that the Administrator of General Services take the necessary steps to have
FAR subpart 7.4 updated to reflect GSA’s current contact information so federal agencies
and their contracting officers have accurate information to use in requesting GSA’s
assistance in making lease versus purchase decisions.

Agency Comments

We provided a draft of this correspondence to the Air Force, Interior, and GSA for review
and comment. Interior informed us by e-mail that that the department concurred with our
recommendations. DOD, responding for the Air Force, and GSA provided written responses,
which are reprinted in enclosures II and III, respectively, in which they concurred with our
recommendations. DOD stated that the Air Force will reemphasize the lease versus
purchase guidance within FAR subpart 7.4. In addition, DOD will coordinate with the
Defense Acquisition University to assess its training curriculum to determine whether
available lease versus purchase training needs improvement. GSA responded that the
agency will immediately initiate a technical correction to update the FAR and will update its
website with current contact information for the GSA offices that provide leasing and
purchasing support.

                                            -----


We are sending copies of this report to the Secretary of Defense, Secretary of the Interior,
Secretary of the Air Force, and the Administrator of General Services. In addition, the report
is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-
4841 or woodsw@gao.gov. Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this report. Key contributors to this report are
listed in enclosure IV.




William T. Woods
Director, Acquisition and Sourcing Management

Enclosures - 4




9                                GAO-12-281R Equipment Lease versus Purchase Analysis
Enclosure I: Scope and Methodology


Our review addresses two objectives: (1) To what extent are selected agencies performing
lease versus purchase analyses for equipment? (2) What role does the General Services
Administration (GSA) play in assisting agencies in making lease versus purchase decisions?
We focused our review on the extent to which 2 of the top 17 obligating agencies in the
federal government—the Department of the Air Force (Air Force) and the Department of the
Interior (Interior)—performed lease versus purchase analyses for 32 selected contracts for
the fiscal years 2006-2010 period. For the purposes of this review, we limited our scope to
the eight equipment codes provided in table 1.

Table 1: Selected Equipment Codes


Equipment code title                                                       Equipment code

Aircraft and Airframe Structural Components                                      15

Construction Equipment                                                           38

Material Handling Equipment                                                      39

Maintenance and Repair Equipment                                                 49

Communication Equipment                                                          58

Lab Equipment                                                                    66

Training Aids and Devices                                                        69

Automated Data Processing Equipment                                              70


Source: 1998 FPDS-NG Product and Service Code Manual.




We selected the eight equipment codes by developing three sets of criteria to eliminate
equipment codes unsuitable for leasing or codes that lacked shared use across agencies:
(1) consumables or limited use items; (2) specialty use items and items subject to additional
procurement regulations (e.g., sophisticated military equipment), real property items, and
fleet vehicles and repair components (i.e., items unusable without companion items); and
(3) raw material items. After applying these criteria, we used Federal Procurement Data
System - Next Generation (FPDS-NG) procurement data from fiscal years 2006 through
2010 to identify equipment codes with high, sustained demand of at least
$500 million, on average on an annual basis, for leasing and purchasing. 15 We then
eliminated those equipment codes not shared by at least 13 agencies in the fiscal years
2006-2010 period to come up with a final list of 8 equipment codes.

We selected the 2 agencies by analyzing FPDS-NG procurement data from fiscal years
2006 through 2010 to identify the top 17 agencies in terms of annual equipment obligations.

15
     As identified through analysis of FPDS-NG data from fiscal years 2006 through 2010.

10                                                      GAO-12-281R Equipment Lease versus Purchase Analysis
From this list of 17, we identified 9 agencies with both annual leasing and purchasing
obligations within the eight equipment codes we selected from fiscal years 2006 through
2010 to ensure that findings from one agency could be applied to the other agency. From
the resulting list of 9 agencies, we selected one defense agency, the Air Force, and one
civilian agency, Interior. We selected the Air Force and Interior because, relative to the other
defense and civilian agencies, they were among the lowest—Air Force—and highest—
Interior—agencies based on their percentage of leasing obligations.

After identifying equipment codes and agencies, we selected 32 contracts, 16 contracts per
agency, to identify eight pairs of the same or similar items for each equipment code for each
agency. We identified the pairs by first selecting a leasing contract and then selecting a
purchasing contract because fewer leasing contracts existed compared to purchasing
contracts. By selecting pairs, we sought to identify the circumstances, if any, that led an
agency to purchase equipment in one situation and lease the same or similar equipment in
another situation. The contracts we selected included those from nine different Air Force
commands and six Interior bureaus.

To assess the extent to which agencies perform lease versus purchase analyses and GSA’s
role assisting agencies with lease versus purchase decisions, we reviewed relevant federal
regulations, guidelines, and policies, including the Federal Acquisition Regulation to identify
how and when lease versus purchase analyses should be performed. We then developed a
data collection instrument to review the 32 selected contracts and assess the extent to
which lease versus purchase analyses were documented. To the extent possible, we
supplemented the contract reviews by interviewing Air Force and Interior contracting officials
responsible for or familiar with the contracts to determine if an analysis had been performed
regardless of contract documentation and the specific circumstances surrounding each
procurement.

To determine GSA’s role in assisting agencies in making lease versus purchase decisions,
we reviewed relevant federal regulations, guidelines, and policies defining GSA’s role. We
also met with officials from multiple offices within GSA—the Assisted Acquisition Services
Division; the Office of Travel, Motor Vehicle, and Card Services; the Office of
Governmentwide Acquisition Contracts; the Office of Information Technology Acquisition
Group; and the Office of Acquisition Management—to interview officials about their
experience, if any, in providing this lease versus purchase assistance to other agencies. In
addition, we interviewed Air Force and Interior contracting officials responsible for or familiar
with the contracts we selected to determine the extent to which they were familiar with
GSA’s assistance role, whether they sought GSA’s assistance when making lease versus
purchase decisions, and if they sought such assistance, the outcome of those requests.

In regard to data reliability, we relied on computer-processed data from FPDS-NG to
determine the contracting organizations to visit and select our nonstatistical sample for our
contract file review. We mitigated any data reliability problems that might exist with FPDS-
NG data by using other data sources, such as the Electronic Data Access (EDA) and the
actual contract file documents, to corroborate and supplement the FPDS-NG data. 16 We
also oversampled these contract files with the knowledge that we would drop some of the
sample files when we determined that the contract file data differed from the FPDS-NG data
used to initially select the files. We based our findings solely on the information we found
within the contract file documents and interviews with contracting officials and not on the


16
  The Department of Defense’s (DOD) EDA is a web-based system that provides secure online access, storage,
and retrieval of contracts and contract modifications to authorized users throughout DOD.

11                                    GAO-12-281R Equipment Lease versus Purchase Analysis
information obtained via FPDS-NG or EDA. We determined that the data we collected were
sufficiently reliable to meet the objectives of this engagement.

We conducted this performance audit from May 2011 to January 2012 in accordance with
generally accepted government auditing standards. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions based on
our audit objectives.




12                               GAO-12-281R Equipment Lease versus Purchase Analysis
Enclosure II: Comments from the Department of Defense




13                          GAO-12-281R Equipment Lease versus Purchase Analysis
14   GAO-12-281R Equipment Lease versus Purchase Analysis
Enclosure III: Comments from the General Services Administration




15                           GAO-12-281R Equipment Lease versus Purchase Analysis
Enclosure IV: GAO Contact and Staff Acknowledgments


GAO Contact

William T. Woods, (202) 512-4841 or woodsw@gao.gov

Staff Acknowledgments

In addition to the contact named above, key contributors to this report were John Neumann,
Assistant Director; Marie Ahearn; Jessica Drucker; Laura Greifner; Julia Kennon; and J.
Andrew Walker.




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16                              GAO-12-281R Equipment Lease versus Purchase Analysis
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