Uni Link Finance

1. Leasing Opportunities for ICT Procurements NGfL Briefing for Schools 22 January 2002 Ron Fawcett Procurement Services Manager Dorset County Council UniLink Finance

2. Frequently asked question : Is it best to Lease or Buy ? If sufficient funds are available for outright purchase of all current requirements without compromising your preferred specification then outright purchase will provide best value Where funds available are limited then leasing is a way of spreading the cost of a project over several financial years UniLink Finance

3. Background Why Dorset has appointed a Lease Agent? DCC has been debt free authority Latterly moving to more leases Need to manage:- Impact upon borrowing approvals Leasing process Scarce skills Lease agent (as business partner) UniLink Finance

4. Background Role and responsibility of the Lease Agent Key requirements:- Total independence Act as Purchase Agent Conduit for final purchase (if required) PFM carried out tender process UniLink Finance Ltd - to March ’04 Mandated DCC agent: £3m in 01/02 (so far) UniLink Finance

5. Advantages of the County’s Leasing Facilities Safe - conforms to all regulations and is managed from start to finish Certainty - all costs known at the outset and options for the end of lease are assured UniLink will act as conduit for school to acquire title Upgrades possible Leasing market regularly tested by UniLink Possible to include software UniLink Finance

6. Disadvantages of dealing directly with Lessors/Suppliers True cost not disclosed Documentation not cleared with Council Harsh return conditions and possible tax penalties Cost of upgrading hidden - and expensive Locked into using one supplier On return, sensitive data must be wiped UniLink Finance

7. What can be included in an ICT equipment lease? The following is not a definitive list, merely a guide: Desktop computers Laptop/Notebook computers Servers Network hardware Cabling Upgrades Printers Scanners Digital cameras Computer furniture Storage/Recharging trolleys Wireless Network Access points PCMCIA network cards Building and associated work (provided essential for leased equipment) Software(subject to it being required for the computers included in the lease arrangement and acceptance of the Lessor) UniLink Finance

8. The PFM Leasing Process (1) School decides resource requirements PFM advises school of likely lease cost School completes lease proposal form (not committed) PFM goes to tender (if necessary for resources only) School decides - lease or not PFM awards contract / PFM or school orders Supplier bills school / school pays School sends copy invoice to PFM UniLink Finance

9. The PFM Leasing Process (2) PFM aggregates schools’ purchases PFM sends supplier’s invoices to UniLink UniLink arranges lease Lease company pays DCC DCC credits schools’ budgets (within 3 months) Lease company bills DCC / DCC pays (Annually or Quarterly) PFM arrange recharge to school (Ann/Qtly.) UniLink Finance

10. The PFM Lease Process (3) UniLink:- Review performance of lease throughout Represent school with leasing companies Manage any additional leases Manage end of lease process Act as conduit for ‘final’ purchase PFM manages relationship with UniLink Included in PFM procurement service UniLink Finance

11. Advantages Of Dorset County Council’s Leasing Facility • The facility is safe and produces the lowest whole life costs available in the market. The total payments for the equipment are certain when the lease is incepted and hence the true cost of borrowing is known. Thereby total transparency is achieved both on a cost basis and in the terms and conditions that apply to the use of the equipment. • The school or any individual will be able to buy any assets at the end of the lease term. We at UniLink will buy the asset from the selected lessor for a nominal price and sell to the school or individual at the same nominal price. Thus there are no return condition penalties. • The leasing facility conforms with the current legislation regarding operating leases • The equipment can be upgraded throughout the lease with a new lease incepted on the upgrade only – i.e. again with certainty of cost. Furthermore such upgrade options will enable the school to consider alternative suppliers options thereby achieving the best price available. • The county through UniLink will regularly test the whole market to ensure the terms available are the most competitive • In most circumstances software installations can be included in the lease facility • The facility will enable the school to negotiate the best purchase price with the supplier of its choice without fear of being locked in to the suppliers financing package. • The facility will be easy to administer, with a single point of contact i.e. Procurement and Facilities Management (PFM) • The school will be secure in the knowledge that the legal and commercial aspects of the facility have been fully analysed and approved by the Council’s financial and legal teams, Procurement and Facilities Management (PFM) and UniLink, the Council’s independent advisor. The school can also be certain that the selected lessor will be a reputable financial institution UniLink Finance

12. Drawbacks Of Dealing Directly With Suppliers/funders • Headline rentals may appear attractive, but renewal terms are rarely disclosed, hence the true cost is unknown. Also the cost of acquiring the equipment is likely to be prohibitive. • The legal documentation may not be reviewed by the Council’s financial and legal teams with each school having to consider agreements on a deal by deal basis. Many agreements are generally biased in the supplier’s/funder’s favour and are best reviewed by experienced hands. • Many simple agreements will not highlight the school’s exposure to costs associated with:- • Tax written down value penalties • Extension rental terms or buy out options • The testing and replacement of missing or damaged parts • Collection or re-delivery • Refurbishment (refer to WEEE regulations below) • Any upgrade of equipment is expensive. In many cases the general terms of any upgrade from the funder/lessor allow for a certain percentage of the original cost to be upgraded at various intervals throughout the term of the lease. However, at the date of the upgrade although the school may only be required to pay the original rentals the new term of the lease reverts to the original selected term. The transaction then becomes very expensive and in many cases the financing costs can double. • Concluding transactions with certain suppliers automatically locks the school into that company for upgrades thus creating opportunities for the company to increase its prices. • Where equipment is returned, schools will be required to erase sensitive data and maybe charged additional costs by the suppliers/funders to comply with European Commission waste electrical and electronic equipment directive (The WEEE regulations). These regulations seek to increase recycling and recovery of waste equipment (including IT). The regulations were adopted by the European Commission in June 2000 and the directive is expected to become European law in June 2002 with implementation in member states 18 months later. This potential cost to schools will be provided for in most lease agreements but is not usually referred to directly. Documentation will often simply state that the equipment shall upon return be refurbished by the lessee in accordance with all applicable laws and regulations. In reality such refurbishment costs (as itemised above) could well be significant. UniLink Finance