When acquiring equipment, the University requires a lease versus buy analysis for all equipment costing $100,000 and greater, and recommends a lease versus buy analysis for all equipment costing less than $100,000, whether the expenditure is for an individual item or a bulk purchase.
Exclusions
Purchases of goods, services or professional services between the University of Minnesota and University of Minnesota Physicians shall not require review and approval from Purchasing or from the Board of Regents, but shall instead be consistent with the
Master Agreement for the Purchase of Goods and Services Between the University of Minnesota and University of Minnesota Physicians. The Master Agreement does not apply to lease of real property from one party to the other, or to sponsored research activities and related subcontractor relationships.
As a public institution, the University must demonstrate prudent use of the funds entrusted to it by its various constituencies. This policy is designed to promote stewardship of the University's resources and to protect the interests of the University's funding sources.
The Office of Management and Budget (OMB) Circular A-110 states that "Where appropriate, an analysis of lease and purchase alternatives should be made to determine which would be the most economical and practical procurement for the Federal Government."
On sponsored projects, due to the impact of the indirect cost rate on the leasing alternative, the net present value of this option would normally be expected to be greater than the cost of an outright purchase. It is, however, the responsibility of the individual or department procuring the item to determine the most cost beneficial method.
- Computers/Telecommunications Equipment
- This equipment category includes computers, telecommunications and peripheral computing equipment. Computer equipment includes software purchased as a package with computer hardware, freight and installation costs. Examples of computer equipment include personal computers; mainframes; servers; etc. Examples of telecommunications equipment include routers; hubs; switches; etc. For purposes of this policy, computers and telecommunications equipment includes items capitalized because they have a useful life of greater than one year and cost $2,500 or more, and items that may fall below the capitalization level.
- Office Equipment
- Furnishings, devices and equipment including items used to furnish a building that are not part of the building itself such as desks, chairs, and office dividers; and devices used in the performance of office or accounting activities such as copiers, word processing equipment, fax machines, mailing equipment, etc. For purposes of this policy, office equipment includes items capitalized because they have a useful life of greater than one year and cost $2,500 or more, and items that may fall below the capitalization level.
- Lab and Farm Equipment
- Lab equipment is equipment and instrumentation used in scientific and medical activities. Examples of lab equipment include: lasers; nuclear instruments; laboratory equipment; measuring, recording and testing instruments; medical, surgical, and veterinary equipment; ophthalmic equipment; patient monitoring equipment; optical equipment; microscopes; telescopes; etc.
Farm equipment is defined as devices used for farming including tractors; combines; harrows; cultivators; feed mills; farrowing pans; etc.
For purposes of this policy, lab and farm equipment includes items capitalized because they have a useful life of greater than one year and cost $2,500 or more, and items that may fall below the capitalization level.
- Master Lease Contracts
- Competitively bid contracts which allow departments to obtain lease financing for computers and telecommunications equipment. These contracts provide leasing terms and conditions favorable to the University.
- U-Wide Contracts
- Competitively bid contracts established by Purchasing Services for purchasing goods and services. These contracts are available to all University departments and allow departments to purchase goods and services without going through the bid process.
- Accounting Services
- Assist in performing complex lease versus buy analysis and answer questions on the financial data, as needed. Review lease versus buy calculations for all proposed acquisitions of $100,000 and greater.
- Asset Management
- Provide the discount rate for lease versus buy analysis, as needed. Review and update the discount rate at the beginning of each quarter for use during that quarter. Update the rates as needed when rates change significantly.
- Departments
- Consult with Purchasing Services to obtain information necessary to evaluate leasing and buying options. Justify equipment acquisition method if the decision is not the most economical one for the University.
If the source of funding for equipment is sponsored funds and the proposal budget will indicate that the equipment is to be leased, the Principle Investigator, in conjunction with departmental administrative staff, Accounting Services and Purchasing, should conduct a lease versus buy analysis to determine if leasing is the most economical and prudent use of sponsored funds. If the recommendation to lease or buy is different at acquisition time than what was included in the proposal, the department should contact its grant administrator regarding agency allowability of the change.
- Purchasing Services
- Assist departments in obtaining competitive bids on equipment and performing the lease versus buy analysis. Obtain approval from the Board of Regents for leases and purchases costing $250,000 and greater. Ensure that procedures to lease or buy comply with applicable purchasing policies.
- Amended:
- December 2005 - Added new appendix - Computer Equipment Master Lease.
- Amended:
- February 2003 - Updated Related Information.
- Amended:
- August 2001 - Updated Related Information Section.
- Amended:
- September 1999 - Added Lease vs Buy Calculator to Related Information.
- Effective:
- June, 1999
- Effective:
- July 1999
-
To obtain a copy of a historical policy,
e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.
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