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Public Sector Leasing | Monthly Update |
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Public Sector Leasing | Monthly Update |
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Introduction Vendor Finance Operating Lease HP, Lease Rental and Cash Questions or Enquiries Asset Finance Services Public Sector Finance News Public Sector Leasing Market Current Year 2007-08 2006-07 2004-06 |
Public Sector Leasing Review: Tendering Process All Government requirements should be openly tendered either via OJEU (ref 1) (for requirements over circa £91k, £140k Local Authorities,) or through open advertising. Volumes in the first sector can easily be monitored (ref 2) and currently circa £69m of business is awarded annually. Business levels for tenders that only require open advertising is almost impossible to monitor though the introduction of www.supply2.gov.uk may over time prove to be a format from which information can be consolidated. Within the asset finance market the vast majority of tenders are handled by advisors and many sub OJEU contracts are advertised to a wide panel of interested financiers. While there is some anecdotal evidence that some requiring OJEU tenders may fall within this category the wider challenge to this approach may be its meeting of the EU advertising requirements (ref 3). There is also a third category that in theory should not exist, none tendering for finance. This can arise for a number of reasons, managed service agreements were imbedded lease requirements have not been recognised, financing specifically linked to equipment procurement or ignorance of the legal tendering requirements. Government Sectors The public sector naturally subdivides into six, Central Govt plus MOD, Public Corporations, Local Authorities plus schools, NHS, Quango’s, Higher Education. Monitoring of Invitations to Tender published in OJEU highlights a seemingly disproportionate use of leasing across the sector. Central Government/ Public Corporations/ Quango It is unlikely because of their cost of funds that leasing is a particularly attractive to this sector and this is reflected in the minimum number of invitations to tender. However the is an obligation to Finance Leasing of approximately £4.5 billion due to embedded commitments within PFI/PPP arrangements. Local Authorities Local Authorities dominate the tender market, predominantly with regard to the financing of vehicles and park maintenance equipment though leisure equipment, IT and general equipment have a significant contribution. Over 95% of these tenders are managed by advisors. Schools a subdivision within Local Authorities are rarely included in the LA’s tendering process. Individual schools are unlikely to require a commitment of a scale that would require a notice within an OJEU however there is little evidence of general advertising by schools for finance options. Given the number of suppliers and specialist financiers currently offering leasing facilities to schools (ref 4) it is likely that the use of leasing is widespread. The introduction of guidance for the classification of leases within the Prudential Code (ref 5) and the inability of schools to borrow without the permission of the Secretary of State does not seem to have affected the marketing focuses of the vendor lessors in this market. NHS Historically the use of OJEUs to publish tenders by the NHS has been minimal. The introduction of a framework agreement for leasing by PASA IN 2007 will have a further effect. Higher Education Historically only one or two tenders for this sector appear annually in the OJEU. As with the Schools sector the number of IT suppliers and specialist financiers targeting this market would indicate an appetite for finance not reflected in these tender figures. References
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