Overview
FAR 7.401 requires federal agencies to perform a comparative cost-benefit analysis to determine whether purchasing, renting, or leasing equipment is the most advantageous method for the Government. It establishes a mandatory framework of evaluation factors to ensure fiscal responsibility and operational efficiency in equipment acquisition.
Key Rules
- Mandatory Comparison: Agencies must compare, at a minimum, five acquisition methods: purchase, short-term rental/lease, long-term rental/lease, interagency acquisitions, and specific state/local government agreements.
- Required Evaluation Factors: The analysis must include the estimated period of use, cumulative payments versus net purchase price, logistical costs (transportation/installation), maintenance expenses, and the risk of technological obsolescence.
- Secondary Considerations: For complex or high-cost equipment, agencies should evaluate additional factors such as cancellation fees, trade-in values, warranties, and the feasibility of the Government providing its own servicing.
- Exemptions from Analysis: The requirement for a formal comparative analysis is waived during Stafford Act emergency/disaster declarations, situations involving the immediate protection of life or property, or when specifically authorized by other laws.
Practical Implications
- Documentation Requirements: Contracting Officers must include a formal "lease vs. purchase" justification in the contract file to demonstrate that the selected method offers the best value over the equipment's lifecycle.
- Lifecycle Costing: Agencies are discouraged from focusing solely on the initial "sticker price" and are instead forced to account for long-term ownership costs, such as maintenance and storage, which often make purchasing less attractive than leasing for specialized or rapidly evolving technology.