Sign In
  • Question

    If the price of the reagents (consumables) includes the use of the equipment, is it still considered a Lease? I asked the end user to complete a Lease or Purchase Analysis/determination IAW SECNAVIST 7320.10A. Do I still have the end user do a Lease or Purchase Analysis?


    Answer

    Lease is not defined in FAR Part 2 or any other part.  The Merriam-Webster dictionary defines a lease as a contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent.  In Red River Waste Solutions, Inc. B-414367, dated 21 Mar 2017, the GAO determined “where a mixed transaction includes the delivery of (both) goods or services to the government, in determining whether the GAO had bid protest jurisdiction, the GAO looked at what is the “main objective” of the mixed transaction in determining which is the principal purpose of the contract: the delivery of the goods or the services to the Government.  FAR 2.101 defines acquisition as the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. 
     
     
     
    Based on the question and background information provided, the purchase of consumables which includes the lease of medical equipment to the government using appropriated funds would be considered an acquisition in accordance with the definition of FAR 2.101.  Also, this acquisition sounds similar to a mixed transaction where the GAO would look at the “main objective” to determine the principal purpose of the contract.  Normally a lease or rental involves the transfer of possession or contract of tangible personal property (medical equipment in this case) for a fixed term.  At the end of the term of the lease, the personal property is then returned to the leaser (vendor), which is how you described your acquisition.  It sounds as though the consumables serve as a convenient method of tying the fee charged the government for the use of equipment to the amount of consumables expended each time a test procedure is performed by government medical personnel.  However, the method of payment doesn’t change the fact the equipment is being leased by the government.  In your acquisition, the vendor is transferring possession of the leased medical equipment to the government to test fluids and in exchange, the assumption is, the Government is paying a fee built into the payment for the consumables utilized each time the test procedure is performed by government personnel.  In other words, there has to be consideration provided by the government to the vendor for the use of the leased medical equipment.  Based on the information provided, it appears that the primary purpose of the contract is to provide the medical equipment necessary to perform the fluid testing and the consumables are actually secondary to furnishing the equipment.  However, if it’s unclear what constitutes the principal purpose of the acquisition, another consideration is which component accounts for the greatest percentage of the total contract value.  Finally, another potential consideration is it commercial and is it customary in the commercial marketplace for vendors to include the equipment fee in the price of this consumable.  If that is the case, then you may want to make this a commercial acquisition and use FAR Part 12 procedures. 
     
       
     
    Bottom line: if the principal purpose of the contract is for the use of the leased medical equipment by government personnel, I agree that the requirements in FAR 7.4 and DFARS 207.4 would apply to your situation.  However, not having all of the facts particular to your contract, program and situation, I highly recommend you consult your Contracting Officer and legal office for guidance.

    Open full Question Details