OVERVIEW

Texas Woman's 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.

Departments considering a lease purchase, lease with purchase option, or an installment purchase of equipment must consider the total contract cost versus the purchase price of the same equipment. When the total cost of the contract exceeds the total cost of the purchase by more than 40 percent, the contract will be denied. The final decision to enter into this type of contract rests with the Vice President for Finance and Administration.

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. These 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 Texas Woman's University.

When a contract falls under the Bond Review Board requirement, the requesting department presents the case to the Texas Bond Review Board for review and approval, which requires a representative of the department to appear in person before the Board to present the case. The department must provide the following information to Purchasing 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.

Purchasing must provide a copy of the terms and conditions under which the purchase will be made and an outline of the financial payment plan.

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 (TCPC); when these purchases require the approval of the Bond Review Board, they must first have the approval of the TCPC. 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.

PROCEDURE

As stated, when a requesting department determines that a lease purchase, lease with purchase option, or installment purchase is justified, it must evaluate the cost of the lease or rental of needed equipment versus the purchase cost of the equipment. Using the calculation method stated above, when the total cost of lease or rental exceeds the purchase price by more than 40 percent, the request will be denied.

If the requesting department determines that a lease purchase, lease with purchase option, or installment purchase is the most economical way to acquire the equipment, the department enters a requisition detailing the requirements and providing justification for why this type of purchase is preferable to an outright purchase.

Purchasing will review the request and the justification and process the requisition in the same manner as it would a requisition for the purchase of goods and services. Processing time depends on the fund source and the dollar amount. When a request requires the approval of the Texas Bond Review Board, time to process may be between 60 and 120 days. Competitive bidding is required not only for the equipment but also for the interest rates and financing of the equipment.

Some cases may require TWU to sign a vendor's contract. In these cases, Purchasing must have the contract reviewed by legal affairs and risk management prior to its execution. The time frame within which this can occur varies, depending on the complexity of the contract and whether or not Purchasing must send the contract for further review and approval. This time is in addition to the 60 to 120 days in cases of the Bond Review Board processing requirement. The contract cannot be fully executed with the vendor until these approvals have been secured and the approved copies have been received by Purchasing.