Agencies Mull GSA Leasing Options

Agencies Mull GSA Leasing Options

Leasing on the General Services Administration schedule will rise as government agencies look for ways to make year 2000 fixes to their computer software, government and industry officials said.

Spending on leasing through GSA likely will reach $200 million next year, a little more than a year after leasing began, said Alan Bechara, vice president and chief operating officer of Comark Federal Systems, Chantilly, Va.

So far GSA has 21 firms that can lease through the schedule and more are expressing interest, said Jim Bowdren, who oversees leasing on the schedule as deputy director of the ADP Acquisition Center at GSA.

"Leasing will become a differentiator," Bechara said. The company that can offer leasing is likely to get picked over the company that doesn't, he said.

Comark photo Alan Bechara, vice president and chief operating officer of Comark Federal Systems

Such flexibility will be important as agencies grapple with the year 2000 software conversion problem with no promise of extra funding.

The Clinton administration now estimates it will cost federal agencies at least $3.8 billion to make the necessary repairs by December 1999. The administration's earlier estimate was $2.3 billion.

But "nobody really knows what the year 2000 is going to cost," Bechara said. With leasing, agencies can obtain information technology without having to make a large up-front investment, said Norm Berthaut, vice president of the market research firm Input of Vienna, Va.

Lease agreements also can include provisions for updating the technology so agency officials don't have to worry as much about maintenance costs or what to do with the equipment when it becomes obsolete.

Agencies are looking at leasing as a service that contractors can provide as part of an overall solution that also includes outright purchasing of IT equipment and services, Bowdren said.

Leasing opportunities on the horizon include the GSA Seat Management contract to allow agencies to outsource their desktop management, Bechara said. A request for proposals on the project went out in early October, and it could be worth $9 billion to the winners, according to Input. An award to multiple winners is expected in early 1998.

Leasing is going to be "a terribly important way to procure information technology," especially as dollars for equipment purchases get squeezed, said Bobbi Terkowitz, a spokeswoman for Vion Corp., Washington.

Terkowitz said more agencies are inquiring about leasing services but none so far have signed on with the 40-person company, which offers leasing through the GSA schedule.

Interest is especially high among agencies looking to outsource IT services, said Paul Rector, director of the GSA schedule for Electronic Data Systems Corp. of Plano, Texas.

He estimated that the company has received leasing-related inquiries for work that could reach $80 million to $100 million, but added that completed deals have only reached about $5 million.

Agencies will migrate toward leasing as officials learn more about what is available and how leasing will work. "Agencies are trying to make sure they get a good deal," he said.

GSA is encouraging short-term leases of up to three years to avoid problems the government ran into in the 1980s when agencies had long-term leases on IT equipment. In the 1980s, lease payments paid for equipment several times over, Bowdren said.

One criteria GSA sets is that the total of the lease payments cannot exceed the price of the equipment, he said. "Our objective is not to pay for it over and over but to pay for it once," he said.

In addition to the year 2000 problem, another factor pressuring agencies to consider leasing is shrinking budgets for capital expenditures such as spending for equipment, Berthaut said. Leasing is paid for out of operating budgets, he said.

When deciding to lease, agencies are looking at factors such as the size of the investment, the use of the hardware after its life cycle, budget pressures, and whether the use of the product will be short term or long term, Berthaut said.

With technology advancing so rapidly, agencies need to deploy systems as quickly as possible, Rector said. When an agency has to buy a system outright, it might have to make its buys in phases over several years because of budget concerns. But with leasing, an agency can put the entire system in place at one time, Rector said.

His company likely would not have won a five-year, $20 million contract to deliver laptops to the U.S. Census Bureau in 1996 if it could not offer the agency leasing, he said.

About 30 percent or 1,000 of the laptops Comark has provided to Census have been leased, he said.

Maintenance concerns were a consideration when Census decided to lease some laptops rather than buy them, said Alba Sanchez, a senior contracting officer with the agency.

Most of the laptops will be used for collecting data in the field and have a useful life of one to three years, she said. Warranties often run out after a year, and Census found it had to create a system for maintaining spare parts and making re
placements. "It became a logistical problem," she said.

But with leasing, coverage for repairs and maintenance is tied to the length of the lease, she said. Repairs become the responsibility of the contractor and not the agency, she said.

Technology upgrades also are a plus and were built into the lease agreement, Sanchez said. After one year, older laptops were swapped for newer, more powerful models, but the price paid by Census stayed the same, she said.