New GSA terms may end lease moratorium

Agencies can once again enter into leasing agreements with vendors under the General Services Administration's information technology schedule contracts following a brief moratorium on the practice.

GSA issued new terms April 22 for IT schedule contracts that emphasize that agencies cannot obligate funds for multiyear leases using money that has not been appropriated by Congress.

The new wording will allow agencies to resume leasing IT equipment using GSA's Federal Supply Service Schedule 70 contracts once vendors agree to the new language, said GSA spokeswoman Deborah Ruiz. The 60-day moratorium, imposed April 5 when GSA and industry officials could not agree on new terms, is being lifted on a case-by-case basis.

The new terms and conditions were sent to vendors April 22. Once a vendor agrees to the new terms and sends them back to GSA, the moratorium will be lifted for that particular company, Ruiz said.

The new terms give agencies two options: All leases expire by the end of the fiscal year, or a cancellation clause is added that allows the agency to get out of the contract if funds are not appropriated. Vendors can choose either or both options.

The new terms demonstrate a classic negotiation, which involves some give and take, said Larry Allen, executive director of the Coalition for Government Procurement, a Washington, D.C. industry group.

Allen said the coalition was pleased that GSA dealt with this issue aggressively, sending out the proposed modifications quickly — only 17 days after the moratorium was put into effect.

The changes essentially create multiyear leases that are renewed annually, he said.

At the request of industry representatives, GSA included language saying that leases would continue if funds are appropriated and there is a legitimate ongoing need for the product, he said.

Although representatives from most vendors did not want to speak about the matter publicly, they said that although the new terms are less flexible, that would not stop them from entering into leases with federal agencies.

"We're not too thrilled about the changes," said one company official, who spoke on the condition of anonymity. The new terms are "really much more restrictive in terms of being able to go in and negotiate [and] having some flexibility to be able to negotiate a deal that makes sense for the vendor and the customer," the vendor said.

Other vendors said they were still negotiating with GSA, although it is not clear what could result from the talks.

Leasing has been a boon for the schedule contracts and was on pace for a record-setting year. Fiscal 2002 first-quarter numbers exceeded the previous first-quarter high in fiscal 2000 by 67 percent.

Leasing enables agencies to spread costs across several years and makes it easier for customers to trade in equipment for newer models.

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Leasing details

The General Services Administration has given vendors two new leasing options. They are:

Option 1 : Leases automatically expire Sept. 30, the end of the fiscal year.

Option 2: Leases contain a cancellation clause that allows the agency to cancel a lease if funds are not available.