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Chapter 11 - IT Procurement Planning and Strategic Sourcing

11.7 Other considerations affecting the IT procurement planning process

11.7.1 Lease vs. buy analysis

Public bodies may acquire IT equipment by lease or purchase. The decision to lease should be the result of a careful financial analysis of all factors involved, especially the total cost of ownership to the Commonwealth for the expected period of use. Purchase costs are usually lower than lease costs if equipment is used for an appreciable portion of its useful life. One major disadvantage of a purchase is that the public body is "locked into" the acquisition; whereas, leasing provides a measure of flexibility. Lease vs. buy cost analyses are based on the "contract or program life" of the items being purchased. "Contract or program life" is the anticipated life cycle of the requirement for which the equipment is used, less any reasonable estimated length of time when a lower cost substitute capability becomes available. When the analysis indicates leasing is the least costly acquisition method, public bodies may enter into a lease contract. The terms of such contract should be equal to the predicted "contract or program life."

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