Leasing Opportunities
for ICT Procurements
NGfL Briefing for Schools
22 January 2002
Ron Fawcett
Procurement Services Manager
Dorset County Council
UniLink Finance
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
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
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
Advantages of the County’s 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
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UniLink will act as conduit for school to acquire title
Upgrades possible
Leasing market regularly tested by UniLink
Possible to include software
UniLink Finance
Disadvantages of dealing directly with
Lessors/Suppliers
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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
What can be included in an ICT equipment lease?
The following is not a definitive list, merely a guide:
Desktop computers
Servers
Upgrades
Laptop/Notebook computers
Network hardware
Printers
Computer furniture
Scanners
Cabling
Digital cameras
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
The PFM Leasing Process (1)
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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
The PFM Leasing Process (2)
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PFM aggregates schools’ purchases
PFM sends supplier’s 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
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
Advantages Of Dorset County Council’s Leasing Facility
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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.
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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.
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The leasing facility conforms with the current legislation regarding operating leases
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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.
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The county through UniLink will regularly test the whole market to ensure the terms available are the most
competitive
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In most circumstances software installations can be included in the lease facility
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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.
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The facility will be easy to administer, with a single point of contact i.e. Procurement and Facilities
Management (PFM)
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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 Council’s financial and legal teams, Procurement and Facilities
Management (PFM) and UniLink, the Council’s independent advisor. The school can also be certain that
the selected lessor will be a reputable financial institution
UniLink Finance
Drawbacks Of Dealing Directly With Suppliers/funders
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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.
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The legal documentation may not be reviewed by the Council’s financial and legal teams with each school having to
consider agreements on a deal by deal basis. Many agreements are generally biased in the supplier’s/funder’s favour
and are best reviewed by experienced hands.
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Many simple agreements will not highlight the school’s exposure to costs associated with:–
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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)
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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.
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Concluding transactions with certain suppliers automatically locks the school into that company for upgrades thus
creating opportunities for the company to increase its prices.
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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