Product leasing gains ground in fed market

Information technology leasing a popular strategy in the commercial market for many years is emerging as an option for agencies faced with budget constraints and rapidly changing technology.

To date IT leasing has been used sparingly if at all in the federal sector. In the commercial market leasing has been chiefly associated with mainframes. Leasing and remarketing represents a large market in the private sector worth $21.4 billion in 1994 according to the Computer Dealers and Lessors Association Washington D.C. But in recent weeks leasing vehicles offering equipment ranging from PBXs to notebook computers have surfaced in the federal market.

The General Services Administration's Federal Supply Service (FSS) last month approved the first leasing arrangement under a new program that aims to make leasing an option on Schedule 70 contracts. In that arrangement Lucent Technologies Inc. is offering leasing as an option for all the products carried on its B/C and Schedule 58 pacts. Lucent carries a range of gear including PBXs telephone sets and data access products.

In addition the Census Bureau last year awarded Comark Government & Education Sales Inc. (CGES) an estimated $50 million notebook contract that includes a leasing option. Leasing equipment makes sense for Census which will equip thousands of temporary employees for the 2000 census.

"There's an increasing level of interest in the federal market " said consultant and PC sales veteran Robert Guerra. He said leasing makes sense for agencies that need to meet the automation needs of major programs conducted on a short-term basis.

Leasing was once considered "taboo" in the federal market amid fears that unfavorable pricing would result said Phil McGovern marketing staff director at Lucent. But now federal customers are expressing interest in leasing because the practice reduces up-front costs by spreading payments out over the terms of the lease. But there is a technology incentive as well.

"Leasing gives [agencies] the liberty to upgrade technology and not be locked into the technology they would have purchased " McGovern said.

Kim Gibson schedule manager at Lucent said one federal customer has already inquired about leasing a PBX. She said large systems such as PBXs will likely attract the most attention in terms of leasing. Under Lucent's leasing program an agency will construct a blanket purchasing agreement through which it will be able to lease equipment off Lucent's B/C and Schedule 58 pacts.

As for the Census pact 314 notebooks have been leased and 1 751 have been sold as of December. The contract was awarded in September.

Alan Bechara vice president of federal operations at CGES said the tally is not bad for a contract still in its infancy. He added that CGES plans to modify its GSA schedule to provide a leasing option.

"I view the Census contract as a leg up on somebody else" in terms of leasing Bechara said.

The only thing blocking greater use of leasing in the federal government is the lack of vendor programs government and industry executives said.

"We want to offer the same type of package [that is] available commercially to the government " said Bill Gormley assistant commissioner of acquisition at FSS. But Gormley said FSS has received few responses to its leasing solicitation thus far.

"It's a case where government is waiting on industry " Gormley said noting that the government is usually viewed as the party lagging behind.