Equipment Lease Evaluation

Document Code No.: CON 7-3 (AP)
Department/Issuing Agency: Executive Administration/Purchasing Agency
Effective Date: June 1, 1990
Approved: /s/ Jesus Sanchez
Type of Action: New

Signed document (PDF, 1.02 MB)

 1.0 SUBJECT TITLE: Equipment Lease Evaluation

2.0 PURPOSE:

2.1 To provide an efficient, centralized process for the leasing of equipment by the County.

2.2 To procure equipment and to recognize economy, greater flexibility, and availability of equipment through a method other than outright purchase.

3.0 ORGANIZATIONS AFFECTED:

All County departments, offices, and agencies of King County.

4.0 REFERENCES:

4.1 King County Code, Chapter 2.96 - Centralized Purchasing Process.

4.1.1 King County Code, Chapter 2.96.010 - Administration of equipment lease and lease purchases.

4.1.2 King County Code, Chapter 2.96.020 - Conditions prerequisite to lease.

4.1.3 King County Code, Chapter 2.96.030 - Lease evaluation responsibility.

4.2 King County Charter 920.10 - .40 - Office of Property and Purchasing.

5.0 DEFINITIONS:

5.1 "Capital Lease" means a contract or instrument conveying property to another for a specified period or for a period determinable at the will of either the lessor or the lessee in consideration of rent or other compensation.

5.1.1 A lease is capital if it meets one of the following criteria:

(a) present value of lease payments is at least 90%;

(b) the lease will extend for at least 75% of the asset life;

(c) the asset can be purchased for a bargain price at the end of a lease term; or

(d) the asset automatically becomes County property at the end of the lease term.

5.2 "Asset" means an item of ownership having exchange value.

5.3 "Equipment" means anything kept, furnished or provided for a specific purpose.

6.0 POLICIES:

6.1 One or more of the following conditions must exist as a prerequisite to the lease of equipment:

6.1.1 Provides use of an asset not otherwise available; or

6.1.2 Meets the temporary use of equipment; or

6.1.3 Provides buying and servicing advantages not otherwise obtainable; or

6.1.4 Shifts the risks of ownership; or

6.1.5 Realizes an economic advantage through leasing.

6.2 The procedures for leasing are executed and managed primarily by the Purchasing Agency; however, the Director of the Department of Executive Administration is designated the responsible official for administration, evaluation and final approval of proposed equipment lease agreements and/or lease/purchase agreements for equipment.

7.0 PROCEDURES:

Action By: Requesting Agency

Action:

7.1 Determines specifications for equipment which may be obtained through a lease arrangement; formallynotifies the Purchasing Agency.

7.2 Performs a lease versus purchase cost analysis of the required equipment based on the present value and/or payback methods.

7.2.1 The requesting agency will seek advice and support from its assigned budget analyst.

Action By: County Executive

Action:

7.3 Approves the lease and provides the Council with a written explanation of why the lease is preferred when the cost benefit analysis indicates that a purchase rather than lease and/or lease purchase of equipment is in the best interest of the County and the net present value differential is greater than $5,000.

Action By: Purchasing Agency

Action:

7.4 Issues a purchase order for the lease using a purchase order number with an "L" prefix and suffix to advise Accounting Services/Office of Finance that the particular purchase order is a lease.

Action By: Requesting Agency

Action:

7.5 Notifies Facilities Management Division that the lease is capital in order to tag the equipment and possession of capital asset is taken.

7.6 Conducts an annual cost benefit analysis sixty days prior to the termination day for any lease considered for renewal.

8.0 RESPONSIBILITIES:

8.1 The Director of the Department of Executive Administration is designated the responsibility of administering or evaluating lease and/or lease purchase agreements for equipment.

8.2 The Purchasing Agency is designated by the Director of Executive Administration to carry out the execution and management of the equipment leasing program as part of the centralized purchasing process.

8.3 Department Directors, Division and Agency Managers are responsible for approving the lease of any single piece or group of similar equipment for the same department or identical organization with an annual cost of $500 or more.

8.4 Analysts from the Office of Financial Management are responsible for helping the requesting agencies perform the lease vs purchase cost analysis.

9.0 APPENDICES:

None