Best Practices in Leasing Schedule 36

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

2. 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 & Don’ts The Lease Document Table of Contents

3. 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

5. 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

6. 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

9. 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

15. 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

17. 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

18. 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.

20. 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

21. Do’s Provide documentation reason for early termination Include the termination ceiling charge on purchase order Prepare for the continuance of the lease Don’ts Cancel the lease to exchange for a similar piece of equipment Delay in obtaining the appropriation of funds Dos & Don’ts

22. 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

23. PO/Invoice/Delivery Order Sample

24. Contact Information • Gary Haag • gary.haag@gsa.gov • (703) 605-2786 • Ryan Mathews • ryan.mathews@gsa.gov • (215) 446-5793 • Shannon Stanford • shannon.stanford@gsa.gov • (215) 446-5058