Lease Purchase, Lease with Purchase Option, and Installment Purchases of Equipment
Policy Number: 82
Processing of contracts for lease purchase, lease with purchase option or installment purchases
- Date Reviewed:
- November 2012
- Responsible Office:
- Procurement Services; Office of Legal Affairs
- Responsible Executive:
- Senior Vice President, Finance and Business Services; Vice President & Chief Legal Officer
I. POLICY AND GENERAL STATEMENT
The University of Texas Health Science Center at Houston ("university") will process contracts for lease purchase, lease with purchase option or installment purchases only when all requirements have been met for compliance with state rules and regulations and with the Texas Bond Review Board.
These contracts should not be used when the total contract will exceed $250,000 or when state-appropriated funds are used. The same rules and regulations that govern the purchase of goods and services govern lease purchases, lease with purchase options and installment purchases. Requirements for competitive bidding and for the authority to obligate institutional funds are the same for these types of contracts as they are for the purchase of goods and services.
Contracts for lease purchase, lease with purchase option or installment purchases may exceed 12 months duration or cross fiscal years only if a "funding-out" clause is included in the contract that protects the university by allowing for cancellation of the contract should funds not be available the following fiscal year. These contracts may exceed the biennium budget time frame; however, in such instances, a waiver of excess obligations will be required for appropriated funds.
Contracts are subject to the review and approval of the Texas Bond Review Board when the contract period has a stated term of longer than five years or has an initial principal amount of greater than $250,000. The review and approval by the Texas Bond Review Board applies to all fund sources held by the university.
When a contract falls under the Texas Bond Review Board requirement, the requesting department presents the case to the Texas Bond Review Board (“Board”) for review and approval, which may require a representative of the department to appear in person before the Board to present the case. The department must provide the following information to Procurement Services for review prior to meeting with the Board:
- a complete description of the project in which the equipment will be used;
- a business plan that includes a detailed justification for this type of purchase, a description of the source of funds, the estimate for the total contract, the amount allowed for the down payment, and estimated percent of interest and monthly payment;
- complete specifications for the equipment to be purchased; and
- a sole source justification for the equipment when a sole source is justified.
Procurement Services will provide a copy of the terms and conditions under which the purchase will be made and an outline of the financial payment plan to the Board.
Lease purchases, leases with purchase option and installment purchases to be paid from state funds must be processed by the Texas Comptroller of Public Accounts; when these purchases require the approval of the Texas Bond Review Board, they must first have the approval of the Texas Comptroller of Public Accounts. It is the responsibility of the requesting department to encumber, on an annual fiscal year basis, the funds necessary to cover the payment obligations for lease purchases, leases with purchase options and installment purchases for that year.
For detailed procedures, refer to page 16 of the Purchasing Procedures.
Click here to access Capital Asset Management’s website: https://inside.uthouston.edu/finance/capital-assets-management.
|Procurement Services (procurement questions)||713-500-4700|
|Office of Legal Affairs (contracting questions)||713-500-3268|